The Federal Reserve kept interest rates unchanged and continued to shrink its balance sheet as planned.
The Bank of England maintained its benchmark interest rate at 5 for the fourth time in a row25% unchanged.
Money markets are pricing in the ECB's first rate cut in April.
The Bank of Japan announced a plan to purchase Japanese government bonds.
Bank of Korea Governor: Interest rate cut may be postponed.
Brazil's central bank cut its benchmark interest rate by 50 basis points to 1125%
[Global Central Bank Dynamics].
At 3 a.m. Beijing time on February 1, the Federal Reserve announced its latest interest rate decision, and the target range of the federal ** interest rate remained at 525-5.5% unchanged, continue to reduce the balance sheet as previously planned. The policy statement showed that the Fed pointed to a steady expansion in economic activity; Job growth has slowed but remains strong, and the unemployment rate has remained low. Inflation has slowed over the past year, but remains elevated, and inflation risks need to remain highly monitored, although risks to achieving employment and inflation targets are becoming more balanced.
Fed Chair Jerome Powell said at a press conference that the economy is making good progress, inflation has eased, and the policy rate has clearly moved into restrictive territory. But at the same time, the labor market remains tight, inflation is still above target, and it is hoped that inflation data will continue to decline in the second half of the year, and evidence of a sustained decline in inflation is needed. Powell acknowledged that policy rates may have peaked and that it might be appropriate to start cutting rates sometime this year.
Fed's Goolsbee said that the labor market remains strong and will alleviate the Fed's concerns about employment targets; The weakness in total hours worked in January's employment data suggests that the report is not as strong as the headline suggests; If there is a positive** shock to the economic system, there will be no longer a need to wait for interest rate cuts.
The Bank of England maintained its benchmark interest rate at 5 for the fourth time in a row25% unchanged, in line with market expectations. Bank of England Governor Bailey believes more evidence is needed before cutting rates; UK inflation is expected to return to the 2% target "temporarily" in the second quarter.
BoE Chief Economist Peel said that while there are signs that interest rates may have peaked, they are still some way from the first rate cut. Policy needs to "remain restrictive until the persistent inflation is squeezed out of the system."
Eurozone money markets have fully priced in the ECB's first rate cut of 25 basis points in April 2024, with the ECB expected to cut rates by 149 basis points in 2024.
ECB** Last week's speech at a glance:
ECB President Christine Lagarde said she would work to achieve 2% inflation; All ECB policymakers** agree that the next step will be to cut interest rates.
ECB Vice President Guindos said that the economic outlook for the eurozone has deteriorated since December last year, and economic growth this year may be weaker than the ECB**. Guindos doesn't see a risk that the ECB will cut rates too late.
ECB Governing Council member Kazaks said that interest rates are likely to be cut this year and that more information on the labor market is needed before cutting rates.
ECB Governing Council Vujcic said that there is not much difference between a rate cut in April or June, preferring to cut rates in 25 basis points.
ECB Governing Council member Centeno, said inflation is trending towards 2%; If inflation continues on the same trajectory in the coming months, the ECB's next decision is expected to be a rate cut; If this happens, the rate normalization cycle can begin.
The Bank of Japan released a summary of the opinions of the members of the January monetary policy meeting, showing that one member believes that it is necessary to continue to patiently implement easing measures; One member argued that an end to negative interest rate policy would be considered if the inflation target was imminently achieved; One member believed that the conditions for ending the negative interest rate policy were increasing.
The Bank of Japan proposes to buy Japanese government bonds with a remaining maturity of 3 to 5 years for 425 billion yen, Japanese government bonds with a remaining maturity of 5 to 10 years for 475 billion yen, 75 billion yen for Japanese government bonds with a remaining maturity of more than 25 years, and 60 billion yen for direct purchase of inflation-indexed bonds.
The minutes of the Bank of Korea meeting showed that a member said that restrictive policy needs to be maintained until it is determined that inflationary pressures will ease. Another member said that when implementing a monetary policy pivot, priority should be given to ensuring that inflationary pressures ease and inflation expectations remain stable; The impact of real estate project finance (PF) risk appears to remain limited. Governor Rhee Chang-yong said that if the Fed delays the rate cut, the Bank of Korea may delay the rate cut; Monetary policy needs to remain restrictive for a long time.
Brazil's central bank cut its benchmark interest rate by 50 basis points to 1125%, in line with market expectations.
Chile's central bank cut its benchmark interest rate by 100 basis points to 725%, in line with market expectations.
Colombia's central bank cut its policy rate from 13% to 1275%。
Nabiullina, Governor of the Central Bank of Russia, said that in the past two years, the share of BRICS countries in Russia's foreign trade structure has doubled, and the yuan accounts for more than one-third of Russia's foreign trade settlement payments.
Bank Indonesia Governor Perry Wajiyo said Indonesia will use local currency settlements with India and Saudi Arabia in cross-border** and investments.
[Market Watch].
Goldman Sachs pushed back expectations for the timing of the Fed's first rate cut to May, having previously expected March action. The FOMC is still expected to cut rates five times in 2024. According to the Fed's arrangement, the FOMC will next hold its next policy meeting on March 19-20, followed by another meeting on April 30-May 1.
According to the CITIC Research Report, the Fed's statement at this meeting has undergone major changes, indicating that the Fed's policy stance may have been adjusted. Powell's speech was generally hawkish and did not consider a rate cut in March to be the baseline scenario. CITIC** maintained its previous judgment that the current round of Fed interest rate hikes has ended, and the timing of the first interest rate cut may be around the middle of the year, and the balance sheet reduction may begin to decelerate after March, and the balance sheet reduction will end in the middle of the year to the third quarter, but it is necessary to pay attention to the disruption that the unexpected weakening of the labor market may bring to the policy process. It is expected that the U.S. dollar index and U.S. Treasury interest rates will remain **, and in the short term, the bearish factors for U.S. bonds have basically landed, and U.S. stocks need to pay attention to the recent earnings report.
CICC Research Report said that the core message of the Fed this time is that it will cut interest rates but does not want the market to expect it too early. Therefore, looking at the Fed's sharply revised meeting statement and Powell's statement at the post-meeting press conference, it can be seen that the Fed is preparing and paving the way for interest rate cuts, but it does not want the market to run too much, so it is constantly "pouring cold water" on the expectation of interest rate cuts in March. The expectation of a rate cut in March is a bit reluctant, after all, the current U.S. fundamentals do not support a rate cut too quickly and too early, but it is still possible to cut interest rates in advance.
Jin Kenzaki, head of Société Générale's Japan research department, said the BOJ is expected to lift negative interest rates and yield curve control in March, despite "low confidence" in achieving the 2%** target in a sustainable and stable manner. At the same time, the Bank of Japan is likely to say that it will continue to implement zero interest rates and quantitative easing until it is confident that it will achieve its inflation target. The BOJ is likely to raise its fiscal 2027 CPI forecast, which excludes fresh food and energy, to 2% and declare "sufficient confidence" in achieving this target, before raising the policy rate from 0% to 025%。
[Focus of the week].
Monday. 08:00 Fed Chairman Jerome Powell's interview with "60 Minutes" airs.
Tuesday. 11:30 RBA announces interest rate decision and monetary policy statement.
12:30 RBA Governor Bullock holds a monetary policy press conference.
Wednesday. 01:00 2024 FOMC member and Cleveland Fed President Mester speaks on the economic outlook.
02:00 Bank of Canada Governor Macklem speaks.
15:00 The Bank of Thailand announces its interest rate decision.
16:30 Riksbank releases the minutes of its January monetary policy meeting.
16:40 Bank of England Deputy Governor Briden speaks.
18:30 Riksbank President Tedten speaks.
Thursday. 12:30 Reserve Bank of India (RBI) announces interest rate decision.
17:00 ECB releases economic communiqué.
Friday. 01:05 2024 FOMC member and Richmond Fed President Barkin speaks.
03:00 The Bank of Mexico announces its interest rate decision.
06:30 RBA Governor Bullock attends a parliamentary hearing.
Editor: Wang Shurui.
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