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This week’s expected monetary policy decisions are Federal Reserve, Bank of Japan, and Bank of England.
Expected Policy Action Summary
The Federal Reserve, the Bank of Japan (BOJ), and the Bank of England (BOE) have scheduled public release of their most recent policy decisions this week. While the activities of every bank are expected to differ, there is great interest in how these choices would affect the global financial scene.
Bank of Japan: Will they hint of future increases or raise interest rates?
The Bank of Japan will make its first announcement on Wednesday, Tuesday night in the United States. Regarding whether the Bank of Japan (BOJ) will raise its policy rate from the current range of 0% to 0.1%, or if it will only indicate that a rate increase is probably to come soon, analysts have different views. The yen is still weak in relation to the U.S. dollar, even if Japan’s inflation has regularly exceeded the bank’s 2% target. Recent rally notwithstanding. The Wall Street Journal claims that in order to boost consumer spending, the Bank of Japan (BOJ) is under discussion tightening its monetary policy. This would mean boosting the yen and cutting the costs related to crucial imports including food and gasoline.
The Federal Reserve is expected to keep its present interest rates while indicating future rate reduction possibility.
Based on the U.S. time zone, the Federal Reserve will make its announcement Wednesday afternoon. Although most analysts agree the Federal Reserve will maintain its present policy rate, they also point out a possible drop in interest rates at its next meeting in mid-September. The CME FedWatch tool indicates a 100% certainty of a September interest rate drop. A 50 basis point drop has a 12% probability—twice the usual 25 basis point drop.
According to the Bank of England, policy easing actions have a 50% chance of being carried out.
Early afternoon on Thursday, the Bank of England will reveal its choice based on local time in the United Kingdom. Regarding whether the Bank of England (BOE) will carry out policy actions to boost the economy for the first time in several years, both economists and rate markets split equally. Should the Bank of England (BOE) decide to lower interest rates, it is expected that they would follow a sensible approach and inform the financial markets that more rate cuts ought not be expected in the near future.
Effects Regarding Bitcoin and High-Risk Assets
Unless something unanticipated occurs, such the Federal Reserve stating that a rate cut in September is not guaranteed, the immediate impact of these central bank decisions on Bitcoin and other high-risk assets may be negligible. With the exception of the BOJ, a move towards loosening monetary policy by significant central banks in the future could benefit risk assets including Bitcoin. The European Central Bank already lowered its policy rate earlier this year; the Bank of Canada has lately cut two times.
Usually supporting high-risk investments, loose monetary policies help to explain the notable 56% rise in Bitcoin’s value this year mostly due to the demand created by American spot ETFs. This movement, however, might also reflect the expectation of the market for a change toward a more flexible monetary policy after a period of tightening.
The financial community will closely check any signals of future policy directions and their effects on world markets as these central banks declare their choices.
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