Fed, ECB and Bank of Japan: three monetary policy decisions expected this week

Three successive appointments

The week of October 26 concentrates several monetary policy appointments. The American Federal Reserve must communicate on Wednesday, October 28, before the European Central Bank on Thursday and the Bank of Japan on Friday. This schedule, detailed by the Journal du Coin, places markets before a succession of announcements rather than an isolated event. Decisions remain to come: current rate levels must not be presented as results of meetings that have not yet taken place.

Each institution examines its own economy, its inflation and its financial conditions. They can therefore announce different orientations, even when their meetings follow one another. Their statements also have an international dimension: yield gaps between currencies intervene in investors' arbitrages. The relevant comparison is on decisions actually taken and on what was expected beforehand. An announcement in line with expectations does not necessarily have the same effect as an unexpected change, even of small magnitude.

The message beyond the rate

In the United States, attention focuses notably on indications that the Fed will give for future meetings. The scenario of maintenance described in market expectations remains a forecast. It does not allow affirming that the central bank has committed to a quarter of stability. Press conferences bring clarifications on risks followed and data needed for next decisions. Their reading completes the communiqué, without turning a conditional opening into a firm promise.

Inflation and growth also occupy the American calendar. Economic publications can shift rate expectations between two meetings, as they modify the assessment of demand and price pressures. A statistic must however be compared to its reference period, to its possible revisions and to the available consensus. A high figure in absolute value is not necessarily a surprise for markets if they had already anticipated it. The same reasoning applies to a central bank decision.

Possible effects on cryptos

For cryptoassets, these appointments pass mainly through financing conditions, the dollar and risk appetite. Higher rates make certain remunerated placements more attractive and can increase the cost of positions financed by borrowing. Conversely, an anticipation of easing can modify these arbitrages. These are economic mechanisms, not a rule guaranteeing a rise or fall of bitcoin after each conference. Already taken positions and other market news remain decisive.

Japan also deserves attention due to yen-funded strategies. When investors borrow in a cheap currency to buy more remunerative assets, a rise in its cost or value can complicate their position. The unwinding of such structures can affect several markets. It does not however allow predicting the result of the Japanese meeting. Until the announcements of October 28, 29 and 30, effective decisions and market scenarios must remain clearly separated.