(Reuters) – It’s set to be a busy week for investors with fewer than six meetings of developed economy central banks this week, including the Federal Reserve on Wednesday, the Bank of England (BOE) on Thursday and the central bank of Japan (BOJ) Friday.

Market Outlook Overview:

FED: AN AGGRESSIVE BREAK

Investors are unanimous on the decision that the Fed will take on Wednesday: the money markets estimate that a pause in rate increases is 99% likely.

Uncertainty, however, surrounds the message that will accompany the central bank’s decision, while inflation in the United States remains persistent despite first signs of easing in the labor market.

In fact, money markets believe that a further increase could take place before the central bank reaches its terminal rate. A Reuters survey showed that nearly 20% of economists surveyed predicted at least one further rate hike before the end of the year.

“The November decision will be tight, but we continue to forecast a final increase of 25 basis points: (…) the strength of economic activity leaves the door open to a re-acceleration of inflation”, write the strategists from Bank of America.

“This reacceleration is not our assumption, but we think the Fed will prefer to err on the side of caution.”

As such, the September dot plot, published on Wednesday, will give indications on the positioning of the board of governors, but should remain biased in favor of further monetary tightening.

“The ‘dot plot’ will retain the possibility of an additional increase, because removing it would risk being interpreted as a clearly accommodating turn and confusing the Fed’s message,” estimate the economists at Kepler Chevreux.

BOE: THE PEAK APPROACHES

Markets are less certain of the outcome of the BOE meeting, which will largely depend on inflation figures for August, published on Wednesday.

The consensus expects underlying inflation to fall to 6.8%, from 6.9% the previous month, but a downward surprise could justify a pause in an unprecedentedly rapid rate hike cycle. previous.

The rebound in oil prices and wage pressures nevertheless make this prospect unlikely.

Barclays, whose base case scenario is a further 25 basis point rate hike, expects the decision “to be accompanied by a message that we are close to, if not precisely at, the end of the cycle of rate increases, but that rates will remain restrictive for a long time.

BOJ: CLARIFYING UNCERTAINTIES

The BoJ meeting will close a week full of monetary policy events on Friday.

The central bank is expected to maintain its short-term interest rate target at -0.1% but markets will seek to clarify Governor Kazuo Ueda’s comments from last week, which appeared to suggest a rate hike in upcoming meetings of the BoJ.

MUFG, which believes that these comments were aimed at supporting the yen whose weakness worries the Japanese government, notes that “the market’s attention will focus on the governor’s message on the rate outlook and his level of discomfort with the current weakness of the yen.

(Written by Corentin Chappron, edited by Blandine Hénault)

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