Will the BoE follow the lead of the Fed or BoJ?

At a time when a majority of central banks are expected to cut interest rates, the Bank of Japan has opted to hike rate to 0.25%, signalling that Japan is still struggling with high price pressures. It was a time when Japan welcomed inflation with open arms as it has a long history of weak growth cycles and pressure from deflation. Supply shocks resulting from the Covid-19 pandemic and then geopolitical shocks from the Russia-Ukraine and Israel-Palestine wars were seen as blessings as those shocks brought in upward price pressure. The BoJ took the decision to maintain a low interest rate environment, thinking that it would be able to harness the temporary spike in inflation and at the same time foster the inflation it has long sought in order help its economic growth.? But now high price levels have become a problem and the BoJ has taken a stance to hike rates from its sub-zero level to levels unseen in 15 years. It has also unveiled plans to taper its massive bond purchase. The ninja is currently trading at 149.87.

Yesterday, CPI data indicated that inflation for the Eurozone remains stubbornly above the 2% ECB target. Core CPI and CPI were at 2.9% and 2.6% respectively. It is a disappointment for ECB policymakers who were awaiting for signs that inflation is easing as latest data are actually making it more challenging for their September policy decision. Today, the economic calendar features manufacturing PMI data for Spain, Italy, France, and the Eurozone, Italian monthly unemployment rate and Eurozone unemployment rate. After having hit a low of 1.0802, the fibre has recouped some of its losses and is currently trading at 1.0833.

The Bank of England is expected to cut interest rates from 5.25% to? 5.0% at its Monetary Policy Committee today as UK inflation has reached the 2% target, pointing towards 2% in both May and June. The cable was trading at 1.2830 at the time of writing.

The Federal Reserve left the federal funds rate untouched in the context of the FOMC citing?further progress needed to attain the 2% inflation objective. The committee highlighted the resilience of the US economy and tight labour market. Meanwhile, the US central bank will continue to reduce its balance sheet and maintain its data dependent outlook regarding monetary policy.?Fed chairman Powell also hinted at the possibility of the rate cut in September as inflation continues to subside, during the post FOMC press conference. Manufacturing PMI? and jobless claims are due today. The greenback is currently trading at 104.06 against peers.