JSW Corporation: Central bank meetings will dominate market sentiment this week as both the US Federal Reserve and the Bank of Japan convene on the same days to set monetary policy in their respective countries.
Although the prospect of an increase in US interest rates this month has receded, global investors will still be poring over the minutiae of the statement that usually accompanies the decision for clues as to when the world’s most powerful central bank will raise the cost of borrowing which has remained static since it last raised rates in December of 2015.
Disappointing economic data on retail sales, a worse-than-expected August jobs report and a surprise dip in US industrial production are expected to tie the Fed’s hands this month but the odds on a December hike remain 50:50.
JSW Corporation says it sees the Fed holding fire despite seemingly more hawkish rhetoric from various fed officials in recent weeks. The firm says it expects more in the way of meaningful developments at the forthcoming Bank of Japan meeting at which the central bank is expected to ramp up its QE program and potentially take interest rates further into negative territory.
“Interestingly, data released last Friday showed a surprise jump in core US inflation but, in our view, we think the Fed is more prepared to tolerate higher inflation in favor of keeping economic growth ticking over but they’re fast running out of excuses for not hiking the cost of borrowing especially with all the hawkish rhetoric from the various officials,” said Vivian Wang, Chief Economist at JSW Corporation.

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