MNI Global Week Ahead March 15 - 19: Central Banks In Focus

Key Things to Watch:

• Wednesday, March 17 - FOMC policy decision
  • The Fed will likely repeat that it remains far from meeting employment and inflation goals and that it will be some time before it starts winding down QE,
  • Investors looking for an "Operation Twist"-style switch to longer-dated bond buying to cap Bond yield are likely to be disappointed, former officials have told MNI,
  • The FOMC could raise the rates it pays on excess reserves and overnight repurchase agreements to support short-end rates as the Treasury releases over a trillion dollars in reserves into the financial system.
• Thursday, March 18 - BOE policy decision
  • For the BOE's Thursday meeting markets expect unanimous votes for both the total target stock of QE and the rate decision. However, there is disagreement about how the MPC will respond to the fixed income sell-off. There has been very little commentary from MPC members about the sell-off (in contrast to other central banks).
  • This could potentially see an announcement that the pace of purchases could be reduced (in contrast to the pickup in purchase pace announced by the ECB last week).
  • Some analysts expect the MPC could warn that the tightening of financial conditions has been "unwarranted", potentially setting up an announcement of an increase in the target stock of QE in May or the summer. Others think that the MPC will point to the better economic outlook, extra stimulus from the Budget and progress being made on the vaccination front and not sound too concerned about the increase in yields.
• Friday, March 19 - BOJ Policy Decision
  • The Bank of Japan looks set to formalize the trading band currently tolerated for 10-year JGBs.
  • The BOJ will also likely clarify its stance on purchases of Exchange Traded Funds at the March meeting, as it prepares to tweak and not radically overhaul its strategy when policymakers finally lay out the conclusions of the policy review set up in November.
  • Main policy settings are expected to be left unchanged.