Key Takeaways
- Central banks including the Fed, BOE, and BOJ are set to make crucial interest rate decisions this week.
- The BOJ may raise rates to strengthen the yen, while the Fed is expected to signal a rate cut in September.
- Bitcoin's recent rally could be partly driven by expectations of an easing monetary policy cycle.
Bank of Japan
The Bank of Japan (BOJ) will be the first among the three major central banks to announce its decision, which will be on Wednesday (Tuesday evening in the U.S.). Analysts are divided on whether the BOJ will raise its policy rate from the current 0%-0.1% or merely signal that a hike is imminent. Japan’s inflation has remained above the bank’s 2% target, and despite a recent rally, the yen is still hovering near multi-decade lows against the U.S. dollar. Tighter monetary policy might help boost Japan’s sluggish consumption by strengthening the yen and reducing import prices for essentials like gasoline and food.
Federal Reserve
The Federal Reserve’s decision will follow on Wednesday afternoon. Although there is no expectation for the Fed to cut rates for the first time since 2020, it is widely anticipated that the central bank will indicate a rate cut in mid-September. Current odds for a September rate cut are at 100%, with a 12% chance of a more substantial 50 basis point cut.
Bank of England
Early Thursday afternoon, the Bank of England (BOE) will reveal its policy decision. Economists and market analysts are split roughly 50/50 on whether the BOE will ease rates for the first time in several years. Even if the BOE decides to cut rates, it is expected to proceed cautiously, emphasizing that a series of rate cuts is not imminent.
