According to DB's Jim Reid, "this could be a landmark week in markets as the last global holdout on negative rates looks set to be removed as the BoJ likely hikes rates from -0.1% tomorrow." That will likely overshadow the FOMC that concludes on Wednesday that will have its own signalling intrigue given recent strong inflation. We also have the RBA meeting tomorrow and the SNB and BoE meetings on Thursday to close out a big week for global central bankers with many EM countries also deciding on policy. We’ll preview the main meetings in more depth below but outside of this we have the global flash PMIs on Thursday as well as inflation reports in Japan (Thursday) and the UK (Wednesday). US housing data also permeates through the week as you'll see in the full global day-by-day week ahead at the end as usual.
Let’s go into detail now, starting with the BoJ tomorrow. We’ve had negative base rates now for 8 years which if is the longest run ever seen for any country in the history of mankind. In fact it is doubtful that pre-historic man was as generous as to charge negative interest rates on lending money prior to this! It also might be one of the longest global runs without any interest rate hikes given the 17 year run that could end tomorrow. So, as Reid puts it, a landmark event.
DB's Chief Japan economist expects the central bank to revise its policy and abandon both NIRP and the multi-tiered current account structure and set rates on all excess reserves at 0.1%. He also sees both the yield curve control (YCC) and the inflation-overshooting commitment ending, replaced by a benchmark for the pace of the bank’s JGB purchasing activity. The house view forecast of 50bps of hikes through 2025 is more hawkish than the market but risks are still tilted to the upside. On Friday, the Japan Trade Union Confederation (Rengo) announced the first tally of the results of this year's shunto spring wage negotiation. The wage increase rate, including the seniority-based wage hike, is 5.28%, which was significantly higher than expected. This year will probably see the highest wage settlements since 1991 which given Japan’s recent history is an incredible turnaround. This wage data news has firmed up expectations for tomorrow.
With regards to the FOMC which concludes on Wednesday, DB economists expect only minor revisions to the meeting statement that saw an overhaul last meeting. With regards to the SEP, the growth and unemployment forecasts are unlikely to change but the 2024 inflation forecasts potentially could; elsewhere, expect the Fed to revise up their 2024 core PCE inflation forecast by a tenth to 2.5%, although they see meaningful risks that it gets revised up even higher to 2.6%. In our economists' view, a 2.5% core PCE reading would allow just enough wiggle room to keep the 2024 fed funds rate at 4.6% (75bps of cuts). However, if core PCE inflation were revised up to 2.6%, it would likely entail the Fed moving their base case back to 50bps of cuts, as this would essentially reflect the same forecasts as the September 2023 SEP.
Beyond 2024, DB expect officials to build in less policy easing due to a higher r-star. If two of the eight officials currently at 2.5% move up by 25bps, then the long-run median forecast would edge up to 2.6%. This could be justified by a one-tenth upgrade to the long-run growth forecast. After all this information is released the presser from Powell will of course be heavily scrutinised, especially on how Powell sees recent inflation data. Powell should also provide an update on discussions around QT but it is unlikely they are ready yet to release updated guidance.
One additional global highlight this week might be a big fall in UK inflation on Wednesday, suggesting that headline CPI will slow to 3.4% (vs 4% in January) and core to 4.5% (5.1%). Elsewhere there is plenty of ECB speaker appearances including President Lagarde on Wednesday. They are all highlighted in the day-by-day guide at the end.
Courtesy of DB, here is a day-by-day calendar of events
Monday March 18
Tuesday March 19
Wednesday March 20
Thursday March 21
Friday March 22
Finally, looking at just the US, Goldman notes that the key economic data releases this week are the Philadelphia Fed manufacturing index and existing home sales reports on Thursday. The March FOMC meeting is on Wednesday. The post-meeting statement will be released at 2:00 PM ET, followed by Chair Powell’s press conference at 2:30 PM. There are several speaking engagements from Fed officials this week, including Chair Powell, Vice Chair for Supervision Barr, and President Bostic.
Monday, March 18
Tuesday, March 19
Wednesday, March 20
Thursday, March 21
Friday, March 22
Source: DB, Goldman, BofA