With the September FOMC and BOJ monetary policy meeting both approaching, the market consensus is for a 25bp rate hike by each institution, with the focus expected to be on the policy direction and nuance of officials' comments after the decisions. Market participants are likely to assess both central banks as leaning somewhat dovish.
The FOMC is expected to meet on September 15-16, followed by the BOJ monetary policy meeting on September 17-18, with a 25bp rate hike at both meetings widely regarded as the market consensus. Under these circumstances, comments indicating the pace of subsequent rate hikes and their terminal point will be given more weight than the decisions themselves.
While the nuance of the statements and press conferences can influence market direction, it is also important to bear in mind that market participants can be swayed by the atmosphere at the time more than by the facts themselves. Both the FRB and BOJ are considered capable of raising rates, but some observers believe the outcome is unlikely to lead to an acceleration in the pace of hikes.
There is speculation that the FRB faces a growing need to maintain confidence in its commitment to curb inflation. Against the backdrop of fiscal and debt issues as a factor behind the rise in long-term interest rates, developments in BEI are drawing attention. Some observers have also pointed to rising BEI as a result of heightened tensions in the Middle East and higher oil prices.