Central Bank Meetings Featured

The US dominated the news stream at the start of 2020. The spasm in the US-Iran confrontation has quickly subsided. The much-heralded US-China Phase 1 trade deal has been signed. The US has completed the ratification process of the US Mexico Canada Free-Trade Agreement. The early signs from the economic entrails suggest the world’s largest economy continues to enjoy a record-long, even if not robust, expansion.

The focus shifts elsewhere in the week ahead, for which the US sees a relatively light calendar of economic reports in a holiday-shortened week. Then again, the recent employment, trade, inflation, and retail sales data offer valuable insight. The course is set, and the Fed seems inclined to look beyond the near-term economic fluctuations, ensuring that the meeting at the end of the month is as close to a non-event as an FOMC meeting and a Powell press conference can be.  

There are four central bank meetings to note, and none are likely to do anything, so the words are more important than the actions. The Bank of Japan begins with Governor Kuroda holding at the conclusion of the two-day meeting on January 21.Under the yield-curve control initiative, it puts the deposit minus 10 bp and targets the 10-year yield at zero =/+ 20 bp. Global tensions have eased, and the yen has weakened to the lower end of where it has been in the past six months. Prime Minister Abe’s fiscal support (~$122 billion) and preparation for the Olympics may also help the BOJ's efforts to support the economy.  

The BOJ will provide updated forecasts. In October, it anticipated growth of 0.7% in FY20 and 1.0% in FY21. Core inflation, which excludes the price of fresh food, was forecast to rise by 1.1% in FY20 and 1.5% in FY21. The forecast seems optimistic. The Bloomberg economists' survey found median forecasts for 2020 growth at 0.5% and 0.7% in 2021. Japan has not reported core CPI above 1% since April 2015. The tax increase will the optics, but the BOJ and investors know better.  

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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