Markets are eying the interest rate decisions of two of the largest central banks in the world, the US Federal Reserve and the United Kingdom’s Bank of England.
At the US side, the US Federal Reserve is expected to leave its interest rate unchanged at 1.25 percent with no policy changes thus having little or no effect on the financial markets. On the other hand, the main market mover is the forward guidance for the pace of the future interest rate hikes, which is expected to accelerate with the upcoming pick for the next chair of the Federal Reserve as well as the strong economic and labor market growth.
On Thursday the US President Donald Trump will announce his pick for the next Federal Reserve chair, with the odds favoring the Jerome Powell who’s a member of the Federal Reserve's board.
Jerome Powell has more hawkish view compared to the current Federal Reserve Chairwomen Janet Yellen, wherein the light of prevailing positive economic sentiment he might speed up the pace of the future interest rate hikes and is the main reason of the recent strength of the US Dollar.
Meanwhile, across the Atlantic the Bank of England is highly expected to raise its interest rate at its upcoming meeting on Thursday. The Bank of England is expected to raise its interest rate to 0.5 percent, which will be its first hike in 10 years following its last cut in August 2016 to provide more stimulus to the economy after Brexit vote.
Meanwhile, the interest rate hike, which could accelerate the pace of any following rate hikes, is raising concerns among the British public as it could increase the borrowing cost for households thus slowing down the economic and inflation growth.
However, several reached papers issued by the Bank of England and other research institutions indicate such a small hike could only have minor effects on the economic and inflation growth over the coming two to three of years.