October 05, 2014

Central Banks Watch: BoE, RBA and BoJ to Set Rates; FOMC Minutes to Be Released

  By October 5, 2014 10:40 BST

Many currencies are down because of the dollar rally.Reuters

Rate decisions by the Bank of Japan, Bank of England and the Reserve Bank of Australia and the release of minutes of the last FOMC meeting are the major G10 central bank events in the upcoming week, while rate setting meetings in Indonesia and Poland will also be keenly watched.

None of the developed market economies in the list are likely to alter the key rates this time and so are the emerging market ones.

The FOMC minutes and the policy statements by the G10 apex banks will be the most watched in the forex market for interest rate cues and exchange rate outlook.

The dollar rally in recent months will most likely be a common topic of discussion for almost all the central banks scheduled to announce their credit policies this week.

The big jump in the dollar will affect emerging markets as the cost of local assets will increase for a foreigner who makes payment in dollars, triggering imported inflation in most such countries.

At the same time, the fall in currencies like the Australian dollar is likely to help offset the impact of the drop in the prices of commodities, traders say.

The BoJ will decide the rates at 3:00pm on Tuesday and the RBA half an hour later. The BoJ rate now is 0.1% and that of the RBA 2.5%.

Both the announcements will follow press conferences by the heads of the banks.

The fact that the yen is trading at a six-year low and the Aussie dollar at an eight-month low will provide the respective central banks some cushion as a stronger domestic currency could weaken their export outlook.

The BoE will set rates on 9 October and the consensus is for keeping the rate at 0.5%.
Indonesia is expected to keep the main rate at 7.5% on Tuesday while Poland may leave it at 2.5% on Wednesday.

If the FOMC minutes due on 8 October add up to the jobs data on Friday, the greenback will move up further.

Speeches by former Fed Chair Ben Bernanke at various events from 7 September to 9 September in and around Bangalore will also be watched.