As the world's most influential central bank The Federal Reserve's latest interest rate decision this week will undoubtedly be the focus of global market attention. However, looking at the economic calendar of central banks, the Fed will clearly not be the only highlight in the next two days…
Currently, industry experts widely expect the Federal Reserve to announce another 25 basis point interest rate cut when its two-day policy meeting concludes at 2:00 AM Beijing time on Thursday. Hours before the Fed's announcement (9:45 PM Beijing time on Wednesday), the Bank of Canada will also hold its policy meeting and announce its interest rate decision. The European Central Bank's Governing Council and the Bank of Japan will also hold two-day meetings on Wednesday, but their final decisions will be announced on Thursday.
Industry insiders have noted that it is extremely rare for the four major central banks to hold meetings simultaneously. Analysis by the Dow Jones Market Data team indicates that this is at least the first time since the beginning of 2021 that policymakers from these four central banks have discussed interest rates on the same day.
Even three of them holding meetings simultaneously is rare. In late July of this year, the Federal Reserve, the Bank of Japan, and the Bank of Canada held meetings on the same day, but this was only the fourth time since the beginning of 2021—there is another one in January 2025, and two in 2021.
Although these four central banks each hold eight monetary policy meetings annually, the specific dates often differ. More commonly, two central bank meetings overlap in timing.
Undoubtedly, simultaneous meetings by major central banks could have spillover effects on global markets. Historically, more central banks cutting interest rates together have typically eased global monetary conditions—especially when the Federal Reserve is involved. Changes in the federal funds rate affect the value of the US dollar, the global reserve currency. A weaker dollar reduces the price competitiveness of US goods overseas. Globally, 54% of trade invoices are issued in US dollars.
"Sometimes, when economies move in tandem, this convergence can lead to significant market volatility as central banks act in unison," wrote Seamus Smyth, chief economist at Virtus Investment Partners, in an email.
However, he also admitted that this time, there were no signs of a synchronized shift in the global economy.
Central banks around the world are actually struggling to address different issues. As mentioned above, although the Federal Reserve is shrouded in data uncertainty due to the government shutdown, the industry generally expects Fed Chairman Powell to announce an interest rate cut this week to revive the weak US job market.
In Europe, policymakers are expected to hold rates steady for the third consecutive meeting, following eight rate cuts by the European Central Bank. Currently, inflation in the European services sector remains stubbornly at around 3%, indicating that inflation dynamics have not yet fully normalized.
Wells Fargo Mike Schumacher, head of macro strategy, said that similar to the Federal Reserve, the Bank of Canada may cut interest rates for the second consecutive meeting this week, "although it will be a difficult decision." Strong employment data and stubborn inflation may force the bank to pause its rate-cutting pace in the near future.
In Japan, expectations for a Bank of Japan interest rate hike this month have cooled significantly due to political pressure and risks. Newly appointed Prime Minister Sanae Takaichi's statement last year that a rate hike would be "foolish" has made investors wary. Goldman Sachs ... The report stated that its baseline expectation is that the Bank of Japan will raise interest rates in January next year.
These differing priorities mean that central banks are unlikely to act in unison. Some central banks prioritize economic support, while others focus more on inflation.
"Nevertheless, given the possibility of further rate cuts by the Federal Reserve, coupled with strong corporate earnings, this should help support risk assets," BNP Paribas wrote in a research report.
(Article source: CLS)
