Investors, be prepared for an onslaught of economic news this week.
The U.S. Federal Reserve, the Reserve Bank of India (RBI) and the Bank of Japan (BOJ) will be holding important policy meetings over the next few days. Kicking the week off will be the Reserve Bank of India’s policy meeting on Tuesday, while the Federal Reserve will announce its policy decision on Wednesday. The Japanese central bank holds its meeting on Thursday.
What can you expect from these meetings?
Federal Reserve: The central bank is widely expected to continue its $85-billion-a-month asset purchasing programme. No ‘tapering’ or winding-down of that stimulus is expected to be announced. Watch out also for several other bits of data that will be released during the week: industrial production, retail sales and producer and consumer price indices for September, all of which will provide insight on how monetary policy will shape up going ahead.
RBI: India’s central bank is expected to hike the benchmark repo rate – the rate at which it lends to commercial banks – by 25 basis points to try and contain inflation. (100 basis points make one percentage point.) Hiking the repo rate in theory, increases the cost of borrowing within the financial system, which should, in theory, reduce demand and prices. India’s wholesale price index, a widely tracked measure of inflation, rose 6.46% in September from a year ago, higher than expected. The consumer price index, a measure of retail inflation, also jumped to 9.84%, compared with 9.52% the previous month. If the RBI does hike the repo rate, it will be the second such increase following a rate hike in October by newly-installed governor, Dr Raghuram G. Rajan.
BOJ: The BOJ is widely expected to leave monetary policy on hold. In a recent report, the bank noted that economic recovery was underway in eight of Japan’s nine regions. A mix of a sales tax hike and a 5 trillion yen stimulus plan from the government and unprecedented monetary easing by the central bank (in the form of bond buying, which increases money supply within the economy and higher price inflation) seem to be having the desired effect of stimulating a moribund economy.
For more economic indicators, keep an eye out for jobs, household spending, retail sales and industrial production data releases for last month, which will be released during this week as well.