Week Ahead: Three Central Banks Meet Ahead Of U.S. Jobs Report
XM Group | Jan 28, 2022 09:19AM ET
BoE set for action
The Bank of England will likely forge ahead with tightening monetary policy when it concludes its meeting on Thursday. Inflation is scorching hot, the labor market is strong, and the Omicron wave didn’t leave any scars on the economy according to the latest business surveys.
Therefore, markets have almost fully priced in a quarter-point rate increase, which would lift the Bank Rate to 0.5%. That’s the level which policymakers previously indicated as the threshold to begin shrinking the balance sheet. This means the BoE will no longer reinvest the bonds it holds when they mature, essentially draining liquidity out of the market.
Yet the economy is booming and the central bank all but confirmed that rates will be raised with some force this year. At the moment, the loonie is driven entirely by risk sentiment, suffering alongside equity markets. But over time, it will likely realign itself with Canada’s strong economic fundamentals and roaring oil prices.
OPEC will meet on Wednesday and is expected to stick to its plan of gradual production increases, something that could give oil prices the green light to keep grinding higher.
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