Central banks to take centre stage today – Rabobank

According to analysts at Rabobank, central bank policies are the main theme the coming day(s), with central bank meetings and rate decisions coming out in Turkey, Poland, Canada and Japan.

Key Quotes

“Turkey’s central bank (CBRT) will meet today and our FX strategist Piotr Matys expects the CBRT to keep its rates unchanged and thus remain in tight monetary policy stance as inflation is still in double digits, while the chance of further pressure on the Lira could induce central bank governor Cetinkaya to hike rates rather than cut them.”

“On the Polish central bank’s rate expected rate decision today, Piotr notes that “Governor Glapinski will reiterate his dovish stance of rates staying at the record low of 1.50% perhaps until 2019 as it is unlikely that inflation will significantly exceed the 2.5% target in a sustainable way over the policy horizon. Glapinski is also likely to argue that the economy is so well balanced that the central bank has no reasons to adjust interest rates.”

“Across the Atlantic, our market strategist Christian Lawrence expects the Bank of Canada to leave its rates on hold at 1.25% at its meeting today, but to increase rates by 25 bps at the next meeting on April 18th. This however will likely be the last hike this year (conditional on our Fed call of only two hikes this year) as rising debt service costs for households have weakened domestic demand in the second half of the year, while macro-prudential policies might start to take a toll on the housing market.”

“Looking across the Pacific, Bank of Japan (BoJ) will hold its monetary policy meeting on 8 and 9 March. We still BoJ Governor Haruhiko Kuroda to maintain QQE, despite other major central banks’ eyeing an exit of ultra-loose monetary policy. As we highlighted in our recent Monthly Outlook, Kuroda’s recent re-appointment as BoJ Governor along with his dovish new deputies Masayoshi Amamiya and Masazumi Wakatabe signals a vote of confidence for Kuroda and his policies. In addition, inflation in Japan (0.9% y-o-y in January) is still far below BoJ’s target rate of 2% and will likely remain below target for the foreseeable future, especially if market turmoil induces safe have demand for the Yen. Finally, Kuroda has elaborated on his previous remarks that BoJ will start thinking about how to exit QQE around 2019 Namely, Kuroda stated that “I said that we would be discussing how to move forward with exit. I never said we would be exiting immediately in fiscal 2019”.”