Tackling the Tides: Central Banks Navigate Rate Cut Expectations Amid Heavy Economic Calendar

Keeping up with the central banks

The economic calendar for the week is heavy. The US will announce its latest CPI update on Tuesday and the Fed will announce its latest policy verdict on Wednesday, then the Swiss National Bank (SNB), the European Central Bank (ECB) and the Bank of England (BoE) will give their last verdict for this year on Thursday. All four major central banks are expected to keep their interest rates steady at the current levels, but we will closely scrutinize how they address the rate cut expectations that have been ahead of their skis since the end of October. Chances are that the accompanying statements will attempt to cool down the doves.

Activity on Fed funds futures asses nearly 75% chance for May rate cut, and around 42% chance for a March cut. The game will be played on this field. Either a sufficiently dovish Fed will boost earlier rate cut expectations, or – more reasonably – Powell will reiterate that the battle against inflation is on the right track, but the rates will remain high for a prolonged period until the Fed is convinced that the inflation battle is won. If that's the case, we could see the US dollar extend recovery against major peers and the major pairs slip into bearish consolidation zone before the holiday season.

Ipek Ozkardeskaya

Ipek Ozkardeskaya provides market analysis on FX, leading market indices, individual stocks, oil, commodities, bonds and interest rates.

She has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked in HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist in Swissquote Bank. She worked as Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020.

She is passionate about the interaction between the economy and financial markets. She has been observing and analyzing a wide variety of relationships between the economic fundamentals and market behaviour over the past decade. She has been privileged to live and to work in the world's most exciting financial hubs including Geneva, London and Shanghai.

She has a Bachelor's Degree in Economics and a Master's Degree in Financial Engineering and Risk Management from the University of Lausanne (HEC Lausanne), Switzerland.

Topics

federal reserve bank of england economic calendar european central bank interest rates powell us dollar swiss national bank Central Banks rate cut expectations policy verdict inflation battle holiday season Fed funds futures major currency pairs bearish consolidation zone CPI Update rate cut probabilities