OPINION
Market Rating Before FOMC MeetingJan 31
Critical Week in Markets: Eye Will Be on Central Banks Decisions
Financial markets are focused on the decision to be made this week by the central banks of developed and developing countries caught between economic growth and inflation.
In an environment where recession risks are extremely alive, the central banks' decision on the balance of controlling inflationary pressures at the expense of further cooling the economies will be decisive in the pricing of international assets. The monetary authorities of more than 20 countries, especially the central banks of developed countries such as the USA, England, and Japan, will announce their interest rate decisions this week.
In an environment where recession risks are extremely alive, the central banks' decision on the balance of controlling inflationary pressures at the expense of further cooling the economies will be decisive in the pricing of international assets. The monetary authorities of more than 20 countries, especially the central banks of developed countries such as the USA, England, and Japan, will announce their interest rate decisions this week.
FED Steering the Global Policies
The most critical development of the week is the interest rate decision to be announced by the US Federal Reserve (FED) on Wednesday. Markets are almost certain that the FED will push the federal fund target to the %3-%3.25 range with another 75 basis points of monetary tightening. At this point, the headline consumer inflation, which was %8.3 in the world's largest economy, despite the market's expectation of %8.1 in August, was an important driver.
In addition, the Economic Projections Report to be published by the Bank is also of great importance. The report will reflect the Federal Open Market Committee's (FOMC) 3-year forecasts of the gross domestic product (GDP), interest rates, inflation, and unemployment.
The most critical development of the week is the interest rate decision to be announced by the US Federal Reserve (FED) on Wednesday. Markets are almost certain that the FED will push the federal fund target to the %3-%3.25 range with another 75 basis points of monetary tightening. At this point, the headline consumer inflation, which was %8.3 in the world's largest economy, despite the market's expectation of %8.1 in August, was an important driver.
In addition, the Economic Projections Report to be published by the Bank is also of great importance. The report will reflect the Federal Open Market Committee's (FOMC) 3-year forecasts of the gross domestic product (GDP), interest rates, inflation, and unemployment.
BoJ Against Yen Freefall
The freefall of the Japanese yen has been at the top of the agenda in Asian markets recently. After the yen fell to a 24-year low against the dollar as a result of the Bank of Japan's (BoJ) monetary policy divergence with the FED, in Asian markets all eyes will be on the BoJ's monetary policy decision at 06:00 on Thursday.
The BoJ's announcement in the recent weeks that it will increase its purchases of Japanese government bonds (JGB) revealed that the bank is still far from the monetary tightening path. However, it is quite possible that the bank will harden its communication tone in this period when speculations of direct foreign exchange intervention are increasing. The BOJ currently has a policy interest rate of minus %0.10.
The freefall of the Japanese yen has been at the top of the agenda in Asian markets recently. After the yen fell to a 24-year low against the dollar as a result of the Bank of Japan's (BoJ) monetary policy divergence with the FED, in Asian markets all eyes will be on the BoJ's monetary policy decision at 06:00 on Thursday.
The BoJ's announcement in the recent weeks that it will increase its purchases of Japanese government bonds (JGB) revealed that the bank is still far from the monetary tightening path. However, it is quite possible that the bank will harden its communication tone in this period when speculations of direct foreign exchange intervention are increasing. The BOJ currently has a policy interest rate of minus %0.10.
BoE: Recession or Inflation?
The Bank of England's (BoE) Monetary Policy Committee (MPC), which has the highest recession risks among the G-20 countries, will announce its interest rate decision on Thursday.
For the British economy, which seems inevitable to enter a recession in the last quarter in the face of the energy crisis, cabinet reshuffle, and weak pound, the BoE is expected to pull the benchmark interest rate to %2.25, with a 50 basis point policy tightening at the September meeting, by facing a little more recession in order not to import inflation.
As of the same hour, the decision of the Central Bank of the Republic of Turkey (CBRT) will also be followed closely. Surprisingly, at the August meeting, the CBRT cut the policy interest rate by 100 basis points to %13, claiming that financial conditions should be supportive in terms of maintaining the upward trend in industrial production and employment.
It is foreseen that this meeting will be skipped in order to prevent consumer inflation, which has exceeded %80 domestically and renewed its peak in 20 years, from reaching a more dramatic level. However, there is also a risk of further loosening of monetary policy due to political pressures on the Centre.
The Bank of England's (BoE) Monetary Policy Committee (MPC), which has the highest recession risks among the G-20 countries, will announce its interest rate decision on Thursday.
For the British economy, which seems inevitable to enter a recession in the last quarter in the face of the energy crisis, cabinet reshuffle, and weak pound, the BoE is expected to pull the benchmark interest rate to %2.25, with a 50 basis point policy tightening at the September meeting, by facing a little more recession in order not to import inflation.
As of the same hour, the decision of the Central Bank of the Republic of Turkey (CBRT) will also be followed closely. Surprisingly, at the August meeting, the CBRT cut the policy interest rate by 100 basis points to %13, claiming that financial conditions should be supportive in terms of maintaining the upward trend in industrial production and employment.
It is foreseen that this meeting will be skipped in order to prevent consumer inflation, which has exceeded %80 domestically and renewed its peak in 20 years, from reaching a more dramatic level. However, there is also a risk of further loosening of monetary policy due to political pressures on the Centre.
