Inflation and post Covid pressures are forcing central banks into hiking up interest rates. This moves assets, especially currencies. Check below dates for these important events and contact us to assist you in trading them.
TUESDAY JUNE 7 RESERVE BANK OF AUSTRALIA
Tuesday – RBA interest rate decision
On 3 May, the Reserve Bank of Australia raised the official cash rate for the first time in more than 11 years, lifting it from 0.1% to 0.35%. The long overdue move, carried out less than three weeks before Australia’s federal election on 21 May in a show of the RBA’s independence, was a response to concerns over rising prices. The bank also raised its inflation forecasts, and reduced its GDP estimates.
Of course, the RBA wouldn’t have found itself in the awkward position of raising rates in an election month if it hadn’t procrastinated earlier in the year, when it claimed that inflation was transitory. It was clear by then that inflationary pressures were likely to stick around. At the risk of sounding too critical, it should be pointed out that the RBA wasn’t the only central bank that dragged its heels. However, their counterparts at the Reserve Bank of New Zealand recognised sooner than most that all was not as it seemed.
The RBNZ started its hiking cycle back in October last year, and has been upping rates steadily since then. Since raising its cash rate from 0.25% to 0.5% in October, the RBNZ has raised rates four more times to get to the current level of 2%, with the prospect of another half-point hike in July.
The current differential of 165 basis points between cash rates in Australia and New Zealand is set to be narrowed when the RBA meets on Tuesday. After the May increase, another hike seems almost nailed-on. The question is how big it will be. The most likely outcomes are either a 50-basis-point rise, taking the cash rate to 0.85%, or a 65-basis-point rise, which would round the cash rate up to 1%.
Australia’s economy held up well in Q1, supporting the case for rate rises. In Q1, the country’s GDP grew by a better-than-expected 0.8% compared to the previous quarter, and 3.3% compared to the same quarter a year ago. Unemployment is at 3.9%
THURSDAY JUNE 9 EUROPEAN CENTRAL BANK
WEDNESDAY JUNE 15 FEDERAL RESERVE
Eurozone inflation accelerated to a new record of 8.1% in the year to May, up from 7.4% in the previous month, increasing the pressure on the European Central Bank to raise interest rates at its July meeting. In Spain the consumer price index is up 8.5%, in Germany CPI is up 8.7% and in the Baltic states CPI is running even higher, with Lithuania at 16.8% and Estonia at 18.8%.
The ECB, reluctant to raise rates from their current sub-zero level, has been dragged kicking and screaming to this point. The bank’s previously stated position that it had no intention of raising rates this year always seemed destined to be called into question. Even before Russia’s invasion of Ukraine, inflation was on the rise. The upcoming June meeting presents an opportunity for the ECB to outline a path towards a quarter-point – or perhaps even a half-point – rate rise in July, and another rate hike in September. Markets have already priced in 90 basis points of rate rises this year.
A move on Thursday seems unlikely, given that ECB president Christine Lagarde has hinted at a July move. Instead, the focus of Thursday’s meeting will be on whether a move to a 0% interest rate is possible by September. It will be a difficult path for the ECB to navigate. If policymakers signal an aggressive approach to monetary tightening, bond spreads in heavily indebted eurozone countries like Greece and Italy could rise to problematic levels.
WEDNESDAY JUNE 15 FEDERAL RESERVE
Fed minutes show strong backing for 0.50% hikes in June, July
Most Federal Reserve officials agreed at their gathering this month that the central bank needed to tighten in half-point steps over the next couple of meetings, continuing an aggressive set of moves that would leave policy makers with flexibility to shift gears later if needed.
“Most participants judged that 50 basis-point increases in the target range would likely be appropriate at the next couple of meetings,” minutes of the Fed’s May 3-4 meeting released Wednesday in Washington showed. “Many participants judged that expediting the removal of policy accommodation would leave the committee well positioned later this year to assess the effects of policy firming and the extent to which economic developments warranted policy adjustments.”
THURSDAY JUNE 16 SWISS NATIONAL BANK
SNB Chair Jordan: We are moving into an unpleasant phase for monetary policy 5/25/2022
SNB Chair Thomas Jordan said in an interview on Wednesday that "we are moving into an unpleasant phase for monetary policy, reported Reuters.
Global monetary policy is moving for the first time since 2008 in a tightening direction, he added in the interview with Bilanz magazine, and the SNB will have to take into account the sharp rise of global inflation on Switzerland when deciding on monetary policy next month.
THURSDAY JUNE 16 BANK OF ENGLAND
Recession Threat Has Markets Doubting BOE on Rates
A clash is brewing between markets and the Bank of England.
As a recession looms over the economy, the central bank has signaled it’s wary of tipping the UK over the edge by moving too aggressively. But money market traders are holding tight to bets for a rapid tightening.
It’s putting a spotlight on the challenge facing BOE officials, who say they’re treading a fine line to keep the economy on track. But with inflation running so hot, investors argue that policy makers don’t have the luxury of being cautious and need to risk crashing the economy to stop price pressures from spiraling out of control.
“There is a dichotomy between BOE guidance and rate-market pricing,” said Imogen Bachra, a rates strategist at NatWest Markets Plc. “The market perceives the BOE to lack credibility.”
FRIDAY JUNE 17 BANK OF JAPAN
Bank of Japan must maintain easy policy until wages rise more: deputy governor Wakatabe
THE Bank of Japan must maintain massive monetary stimulus as inflation has yet to sustainably achieve its 2 per cent target, deputy governor Masazumi Wakatabe said on Wednesday, stressing the need to create an environment in which wages can rise faster.
Wakatabe also said monetary policy was not the right tool to deal with Japan’s recent cost-push inflation, which was driven mostly by soaring fuel costs rather than strong demand.
“Since rises in energy and food prices are mainly caused by cost-push factors from abroad, it is desirable to respond to them through measures other than monetary policy,” Wakatabe said in a speech.
“Possible options include fiscal policy and energy policy to reduce Japan’s dependence on petroleum and natural gas,” said Wakatabe, a former academic seen as a proponent of aggressive monetary easing.
Analysts expect rising fuel and raw material costs to keep Japan’s core consumer inflation, which hit 2.1 per cent in April, around the central bank’s 2 per cent target for most of this year.
But Wakatabe said Japan has yet to achieve the BOJ’s price target in a sustainable manner, adding that price rises must be backed by higher wages and heightening inflation expectations.