It’s a big week for central bank rate decisions
Federal Reserve Chair Jerome Powell announces interest rates will remain unchanged during a news conference at the Federal Reserves’ William McChesney Martin Building in Washington, D.C., on June 12, 2024.
Kevin Dietsch | Getty Images
A flurry of major central banks will hold monetary policy meetings this week, with investors bracing for interest rate moves in either direction.
The Federal Reserve’s highly anticipated two-day meeting, which gets underway on Tuesday, is poised to take center stage.
The U.S. central bank is widely expected to join others around the world in starting its own rate-cutting cycle. The only remaining question appears to be by how much the Fed will reduce rates.
Traders currently see a quarter-point cut as the most likely outcome, although as many as 41% anticipate a half-point move, according to the CME’s FedWatch Tool.
Elsewhere, Brazil’s central bank is scheduled to hold its next policy meeting across Tuesday and Wednesday. The Bank of England, Norway’s Norges Bank and South Africa’s Reserve Bank will all follow on Thursday.
A busy week of central bank meetings will be rounded off when the Bank of Japan delivers its latest rate decision at the conclusion of its two-day meeting on Friday.
“We’re entering a cutting phase,” John Bilton, global head of multi-asset strategy at J.P. Morgan Asset Management, told CNBC’s “Squawk Box Europe” on Thursday.
Speaking ahead of the European Central Bank’s most recent quarter-point rate cut, Bilton said the Fed was also set to cut interest rates by 25 basis points this week, with the Bank of England “likely getting in on the party” after the U.K. economy stagnated for a second consecutive month in July.
“We have all the ingredients for the beginning of a fairly extended cutting cycle but one that is probably not associated with a recession — and that’s an unusual set-up,” Bilton told CNBC’s “Squawk Box Europe.”
“It means that we get a lot of volatility to my mind in terms of price discovery around those who believe that actually the Fed [is] late, the ECB [is] late, this is a recession and those, like me, that believe that we don’t have the imbalances in the economy, and this will actually spur further upside.”
Fed decision
Policymakers at the Fed have laid the groundwork for interest rate cuts in recent weeks. Currently, the Fed’s target rate is sitting at 5.25% to 5.5%.
Some economists have argued the Fed should deliver a 50 basis point rate cut in September, accusing the central bank of having previously gone “too far, too fast” with monetary policy tightening.
Others have described such a move as one that would be “very dangerous” for markets, pushing instead for the central bank to deliver a 25 basis point rate cut.
“We are more likely 25 but [would] love to see 50,” David Volpe, deputy chief investment officer at Emerald Asset Management, told CNBC’s “Squawk Box Europe” on Friday.
“And the reason you do 50 next week would be as more or less a safety mechanism. You have seven weeks between…