Week Ahead: FOMC, ECB, BoJ Decisions Feature

We've just published our Global Week Ahead outlook - some key highlights of next week's schedule:

• WEDNESDAY: FOMC Decision: The Fed will hike by 25 basis points and maintain its tightening bias at the July meeting (decision on Wednesday July 26). Chair Powell is likely to suggest that a follow-up hike is possible at the next meeting in September, but will emphasize that no decision has yet been made, and will depend on the substantial inflation and jobs data in the interim. That messaging would retain the optionality to hike at consecutive meetings if the next two inflation prints between now and then warrant a (likely final) hike. The market impact of this messaging is likely to be modestly hawkish.
• THURSDAY / FRIDAY: ECB Decision / France, Spain and Germany flash inflation: The ECB will almost certainly hike its policy rates by 25 basis points at the July meeting on Thursday July 27 (markets price 95+% implied probability of this outcome). The key focus is the messaging surrounding the path for interest rates at the September meeting (and beyond). Eurosystem sources last month told MNI's Policy Team that consensus is building that before deciding on its next move after a July hike, the Governing Council must see the slew of economic data due through early September.
• That includes inflation data for both July and August, the first indications of which come on Friday July 28 with France, Spain and Germany reporting flash readings. Pricing pressures are expected to continue to fall across most countries in July ,as in June. Energy prices should continue to act as a drag for most countries, with services prices potentially remaining stubborn.
• FRIDAY: BoJ decision: The BoJ will issue its latest monetary policy decision on Friday. The typical release window opens at 11:30 Tokyo/03:30 London, with no fixed time given. Rhetoric from BoJ Governor Ueda had already seen hawkish expectations moderate, with a Reuters poll noting that over 75% of respondents expect no movement in the Bank’s YCC band.A duo of dovish newswire source reports then saw the bulk of any lingering speculatory positions geared towards a YCC tweak unwound, as the reports played down the likelihood of a YCC tweak this time out. The Japanese 10-Year swap spread (a proxy for YCC speculation) moved to the lowest closing level seen since August ’22 as a result.Ueda has previously noted that some monetary policy decisions need to include an element of surprise, although it seems unlikely that this meeting will provide such a step, even with the major Y/Y CPI metrics running at/just off multi-decade highs.