Key Economic Indicators To Watch This Week: Fed Eases, BoE Holds, BoJ Delays

Markets will closely watch decisions from the Federal Reserve, Bank of England (BoE), and Bank of Japan (BoJ), as well as fresh data on Eurozone inflation.

Fed To Cut Rates Again

The Federal Reserve’s Federal Open Market Committee (FOMC) is widely expected to reduce the benchmark interest rate by 25 basis points (bps).

However, the tone of the decision could signal a more measured pace of easing going forward.

Market probabilities place a 93% chance of a Fed rate cut this week, driven by the central bank’s effort to shift to a less restrictive stance.

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Analysts note that if the Fed were strongly opposed to easing, more vocal dissent would have emerged during the pre-blackout period when market odds of a rate cut were closer to 75%.

Pantheon Macroeconomics analysts said, “We expect the new dot plot to show that the median FOMC participant now anticipates 75 basis points total easing in 2025, a bit less than the 100 bps projected in September.”

“Beyond the uncertainty around where the economy‘s neutral interest rate lies, much of the recent data have also swung towards encouraging a more gradual approach.”

BoE, BoJ Rate Cuts Unlikely

The BoE is expected to hold interest rates steady at its next meeting as policymakers grapple with rising inflation alongside economic weakness.

Lindsay James from Quilter Investor told CCN that while there could be a slight uptick in the coming months, risks like higher national insurance contributions and potential wage growth slowdown could dampen progress.

Rabobank analysts project the BoE’s first rate cut will come in February 2025, followed by a series of four 25-bps reductions.

Meanwhile, the Bank of Japan—meeting on Thursday this week—will likely hold off on a rate hike until January, with recent data showing progress toward 2% inflation but weak spots like stagnant real wages.

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The yen’s weakening is less of a concern, leading the BoJ to take a more cautious approach.

The pace of future hikes may slow, with the next one expected in July 2025 and a terminal rate of 1% by spring 2026.

Eurozone Inflation Data in Focus

Investors will also pay close attention to fresh Eurozone inflation data, due shortly after the European Central Bank’s (ECB) recent decision to lower its key interest rates by 25 bps.

Market forecasts suggest November’s inflation rate will rise to 2.3% from 2.0% in October, aligning with the ECB’s 2% target for consumer price inflation.

Following a recent dip in inflation, the ECB anticipates a further price slowdown and stresses the need for restrictive rates to maintain price stability.

The ECB said  the disinflation process is progressing, with inflation projections of 2.4% in 2024, 2.1% in 2025, 1.9% in 2026, and 2.1% in 2027.