Central Banks Set for Key Decisions This Week

A series of significant central bank meetings will unfold this week, as investors anticipate potential interest rate changes.

The Federal Reserve's much-anticipated two-day meeting starts on Tuesday, with expectations high for a rate cut. While a quarter-point reduction is seen as most likely, some traders are predicting a half-point cut.

Following the Fed, Brazil’s central bank will meet on Tuesday and Wednesday, with expectations of a potential rate hike due to strong economic data. The Bank of England, Norges Bank, and South Africa’s Reserve Bank will announce their decisions on Thursday, while the Bank of Japan will conclude its meeting on Friday.

John Bilton of J.P. Morgan Asset Management suggests that this week marks the beginning of a rate-cutting phase, potentially spurring a prolonged cycle without a recession. "We have the ingredients for a cutting cycle, but it’s unusual not to be associated with a recession," he said.

The Fed’s current target rate stands at 5.25% to 5.5%, with debate over whether to implement a 25 or 50 basis point cut. Economists are divided, with some calling for a larger cut as a precautionary measure.

In Brazil, stronger-than-expected economic data may prompt a rate hike, while the Bank of England is likely to hold rates steady. South Africa’s Reserve Bank is expected to cut rates, and Norway’s Norges Bank is anticipated to keep rates unchanged. The Bank of Japan is not expected to raise rates this week, though some forecasts suggest an increase by year-end.