Analysts at TD Securities explained the fourth coming major Central Bank
meetings and outlooks.
"The FOMC next meets on December 16. Barring a
significant surprise on the data front, a rate hike by the Fed then is very much
in play. At the October meeting, the FOMC played down the risks emanating from
abroad, while recent comments by Yellen have reinforced the view that the Fed is
prepared to follow-through with its intention to hike rates this year. The US
rates market seems to be taking this to heart, as the 2-year yield has risen to
0.85%, a new high for this year and matching the February 2011 highs. Some argue
against a December hike on technical grounds, given the proximity to the end of
the year. However, the Fed has taken action in the month of December. It hiked
rates in December 2004 and December 2005, for example, and it cut rates in
December 2001 and December 1995.
The European Central Bank next meets on
December 3. Hopes are running high for more monetary stimulus to be announced
after Draghi planted the seeds of expectations in his press conference following
the last ECB meeting. Although the odds of the bank taking action are high, we
caution against getting too confident about it. First, it is not clear that a
consensus has been forged. Second, the recent economic data suggests that, on
balance, the expansion continues apace. Core inflation is running at 1.0%
year-over-year, which, while soft, is not signaling a deflationary spiral. In
short, the economic outlook does not seem consistent with the sense of urgency
that Draghi seemed to express at the October ECB meeting.
The Bank of
Japan next meets on November 19. It left policy on hold last week, which
disappointed many who had anticipated an expansion of its asset purchase plan.
Contrary to what some refer to as a "technical” definition, officials do not
appear to regard what Japan is experiencing as a recession. Still, continued
weakness in Q4 and the risk that headline inflation continues to soften will
likely keep speculation running high for addition monetary easing either late
this year or early next. While Governor Kuroda offered assurances that further
easing will be delivered if necessary, we think markets may be overestimating
the odds of it happening imminently. "
