Three Major Rates Decisions in One Oeek

<p>● Rising yields may affect the BOJ's decision to control
the yield curve.</p><p>● Market expectations and current yields give a high
probability of the U.S. Fed key rate pause.</p><p>● The slowing U.K. annual inflation is the main reason
for continuing the pause.</p><p>The
week's main news will be the meetings of the Bank of Japan, Bank of England, and the U.S. Federal Reserve on monetary policy and
possible changes in the key rate. It is important to understand what
macroeconomic indicators the central banks pay attention to.</p><p>Until the decision, the Bank of Japan
has all eyes on 10-year bond yields.</p><p>The recent rise in global interest rates has the
BOJ thinking about new yield curve control (YCC) measures that may be announced
at the end of the 30 – 31 October policy meeting. The Bank of Japan (BOJ) uses
YCC to support the economy to keep the 10-year Japanese government bond (JGB)
yield at around 0%. In July, it raised the effective yield cap from 0.5% to
1.0% to allow long-term rates to rise further, reflecting higher inflation.
Meanwhile, rising U.S. bond yields are dragging Japanese peers higher, making
it harder for the BOJ to keep the country's interest rates low, with 10-year
bond yields approaching the 1% limit set in July. </p><p>The growing economic gap between Japan and the
rest of the world puts severe pressure on the Japanese yen and increases
imported inflation. Given the uncertainty over global growth and labour market
conditions, the BOJ will likely abandon measures to move away from ultra-soft
policy. But things could change dramatically if the 10-year JGB yield rises to
around 0.9% at the beginning of the week. The BOJ may have to take action, said Kar Yong Ang, Octa analyst.</p><p>The Fed is expected to keep rates
unchanged at its November meeting.</p><p>A week before the decision, the odds that the
Fed will raise interest rates on 1 November appear to have decreased. It
happens partly because long-term bond yields have risen slightly—10-year yields
are now at 4.86%, up from 4.5% when the Fed last met to set policy. Besides, as
assessed by the <a href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html" target="_blank" rel="follow">CME FedWatch Tool</a>, market expectations currently
give a 98% probability of keeping the rate on 1 November. </p><p>In addition, recent economic data suggest that
inflation is generally declining, although not back to the 2% target. The
latest employment data signal a slowdown in wage growth, which the Fed hoped
for in a possible pause,
said Octa analyst, Kar Yong Ang. Given all the
factors, he added that if the U.S. Fed keeps the rate on hold, the U.S. dollar
may show weakness in the short term.</p><p>The Bank of England is likely to extend
its pause in November.</p><p>The Bank of England (BOE) will weigh up the
latest data on wage growth and inflation before deciding what to do next with
the bank rate, with the interest rate decision itself due on 2 November. Last
month, the BOE made the surprise decision to leave borrowing costs unchanged at
5.25% for the first time in nearly two years.</p><p>According to the latest Consumer Prices Index
(CPI) data from the <a href="https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/latest" target="_blank" rel="follow">Office for National Statistics (ONS)</a> released on 18
October, the price growth in the U.K. was 6.7% year-over-year (YoY) in
September vs 6.7% YoY and 6.8% YoY two months earlier. In terms of months, it
was 0.5% Month-over-Month (MoM) vs 0.3% MoM and −0.4% MoM in September–August.</p><p>After falling last month, annual inflation
remained unchanged in September, and it is moving further away from the area of
the peak levels reached in October 2022 (11.1% yoy). The idea of slowing
inflation is the main argument in favour of extending the pause for another
month, said Octa analyst, Kar
Yong Ang. He added that if the rate remains
unchanged, we may see a local weakening of the national currency.</p><p>Decisions on monetary policy and key central
bank rates aim to regulate the economy in the long term. If monetary policy is
tightened, the exchange rate tends to appreciate. If it is loosened, the
exchange rate tends to weaken. All three upcoming meetings have a soft, dovish
tone. Use this information wisely.</p><p>About Octa</p><p><a href="https://www.octafx.com/?utm_source=media&amp;utm_medium=pr&amp;utm_campaign=rates_digest23&amp;utm_content=ww_fx" target="_blank" rel="follow">Octa</a> is an international broker that has been providing
online trading services worldwide since 2011. It offers commission-free access
to financial markets and various services already utilised by clients from 180
countries with more than 42 million <a href="https://www.octafx.com/?utm_source=media&amp;utm_medium=pr&amp;utm_campaign=rates_digest23&amp;utm_content=XX">trading </a>accounts. Free educational webinars, articles, and
analytical tools they provide help clients reach their investment goals.</p><p>The company is involved in a
comprehensive network of charitable and humanitarian initiatives, including the
improvement of educational infrastructure and short-notice relief projects
supporting local communities.</p><p>Octa has also won over 60 awards
since its foundation, including the 'Best Educational Broker 2023' award from
Global Forex Awards and the 'Best Global Broker Asia 2022' award from
International Business Magazine.</p>

This article was written by FL Contributors at www.forexlive.com.