CENTRAL BANKS

Late last week, Japan’s central bank, the Bank of Japan (BOJ), met and did increase the size of their quantitative easing program, though they did not take interest rates further into negative territory. The next BOJ meeting is the same day as the September FOMC meeting (September 21, 2016), and between now and then the Japanese government is expected to enact fiscal policy to help the Japanese economy escape deflation. The Bank of England (BOE) meets this week and is expected to cut rates to aid the U.K.’s post-Brexit economy. The BOE meets again on September 15, 2016, a week before the next FOMC meeting. The European Central Bank next meets on September 8, 2016, and is currently in a “wait and see” mode, but is leaning toward more easing following the Brexit vote on June 23, 2016, and the results of the European bank stress tests that were released last Friday, July 29.

While the Fed, the BOJ, the BOE, and the ECB all have set meeting schedules and are generally loathe to surprise markets, China’s central bank, the People’s Bank of China (PBOC) does not have a set meeting schedule and its decisions often catch the market off guard. Any action by the PBOC to tighten policy or to dramatically alter the value of the Chinese yuan would make a September Fed rate hike highly unlikely. The global imbalances that buffeted financial markets in early 2016 were mainly the result of discord between the markets and central banks and among the central banks themselves. Six months later, the discord has dissipated somewhat, and that has led to fewer global imbalances, looser financial conditions in the U.S., and less financial market volatility. Any central bank driven unwinding of this 6-month old regime may keep the Fed on hold in September and beyond.

TIMELINE: CENTRAL BANKS

• August 4, 2016: Bank of England Meeting

• August 17, 2016: Minutes of the July 28 – 29, 2016 FOMC meeting released

• August 26, 2016: Fed Chair Yellen speech in Jackson Hole, WY

• September 7, 2016: Fed releases Beige Book

• September 8, 2016: European Central Bank Meeting

• September 15, 2016: Bank of England Meeting