Caution pervades at four of world’s top central banks
It is a sign of the caution that permeates the global economic outlook when four of the world’s top central banks, all due to meet within days of each other, are almost unanimously expected to make no change to their extraordinary stimulus programs.
While the U.S. Federal Reserve, Bank of England, Swiss National Bank and the Bank of Japan are all dealing with varying amounts or shortages of inflation, none are expected to act ahead of one of the biggest risk events of 2016.
Britain’s referendum on whether to remain in or leave the European Union has been creeping from the back to the front of investors’ minds. During the last full week of campaigning before the June 23 vote, it may dominate most discussion.
Janet Yellen’s Fed has spent most of the past month or so dropping hints that a summer rate hike was on the way. However, disappointing May hiring data and a UK vote that is too close in the polls to have confidence in the outcome have toned down her message, making a rate rise on June 15 now highly unlikely.
That leaves financial markets stuck in a holding pattern with renewed fears about global growth pushing against safety nets that central banks have built up over the years, according to Valentin Marinov, head of G10 FX strategy at CA-CIB.
So a packed week of data releases for the world’s largest economy, including retail sales, housing starts, building permits as well as inflation, will at best be able to help build the case for a Fed rise as soon as July, rather than September.
“Weak labour market data have messed up the carefully-prepared script for the Fed’s next rate move. An interest rate rise at the meeting next week is off the table,” wrote Christoph Balz, economist at Commerzbank, in a note.
“However … the U.S. labour market recovery is not over yet and a rate hike at the meeting in July is therefore still on the agenda.”
A recent Reuters poll showed four-fifths of a sample of 90 economists expect a rate rise in either July or September, with most leaning toward the latter month, and with many saying a hiring rebound could seal an earlier move.
June jobs data won’t be released until early July. But for the most part, the economy has been performing well: an analysis of key economic releases since the last Fed meeting shows 70 percent have come in at or above Reuters poll forecasts.
“It is a sign of the caution that permeates the global economic outlook when four of the world’s top central banks, all due to meet within days of each other, are almost unanimously expected to make no change to their extraordinary stimulus programs.”
thats because nothing has been fixed..the cuts just got a band aid put on them..nothing has healed..