The most highly anticipated week of the year and quite possibly the most pivotal moment in monetary policy history is finally here – as central banks from Washington to Frankfurt to London and beyond prepare to deliver their final interest rate decisions of 2023.
This week is all about the macroeconomics with 60% of the world's major central banks set to announce interest rate decisions in a whirlwind 60-hour window.
This 60-hour sequence of global monetary policy setting will ultimately determine the tone for the rest of the year and 2024 as central banks grapple with the mantra of higher for longer against a backdrop of unease at just how rapidly global inflation is falling faster than expected.
Taking front and centre stage will undoubtedly be the closely watched trio of central banks known as “The Big 3” – kicking off with the Federal Reserve on Wednesday, followed on Thursday by the European Central Bank and The Bank of England.
Earlier this month, traders quickly latched onto comments by Federal Reserve Governor Christopher Waller – one of the central banks most influential voices – signalled that interest rates were unlikely to rise further and could be cut if inflation continued to slow.
Waller's comments sent Gold prices skyrocketing to an all-time record high of $2,152 an ounce, surpassing the precious metals previous all-time high of $2,075 an ounce that had been recorded only two days earlier.
The big question now is which one of the Big 3 Central Banks will be first to cut interest rates?
The Fed is widely expected to keep its benchmark rate at the highest level in two decades as policymakers assess the lagged impact of their aggressive series of interest hikes since early 2022.
As FOMC policymakers gather on Tuesday to begin two-days of deliberations, they’ll have fresh U.S Consumer Price Inflation data in hand.
Market consensus points toward a further easing of inflation to 3.1% year on year in November, down from 3.2% in the prior month. This outcome will ultimately reinforce traders’ optimism that interest rates have peaked and the Federal Reserve will start cutting interest rates next year.
Elsewhere, President Christine Lagarde will almost certainly try to temper market expectations that price in a quarter-point European Central Bank rate cut in April.
While The Bank of England who is widely expected to keep rates on hold for a third straight meeting – may follow the same path as the ECB and deliver a warning that the fight against inflation is far from over.
With the UK economy facing stagnation at best next year, traders have already begun pricing in that the Monetary Policy Committee will start cutting rates – now at a 15-year high of 5.25% – in June.
Regardless of the outcome, each and every one of these macro-events is guaranteed to move the markets significantly – presenting massive opportunities to capitalize on!
Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:
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