Quick thoughts on the Fed and BOJ from Goldman Sachs

Goldman Sachs on the Fed and BOJ

Key focus this week with be on the FOMC and on the Bank of Japan Monetary Policy Meeting.

Our US economists see recent economic data and the public comments from Fed officials as consistent with only modest changes to the FOMC statement, and we think the committee will upgrade its discussion of the labor market and measures of inflation expectations, but change little else. We continue to see a 25% chance that the committee will raise the funds rate in September and a 40% chance that it will do so in December.

For the BOJ Monetary Policy Meeting scheduled for July 28-29, our Japan economists see a 60% probability of easing. We see additional easing measures as uncertain, and cannot deny any possibilities except for the implementation of helicopter money. That said, we believe that they will center on (1) increased ETF purchases (to around ¥6 tn/year, from ¥3.3 tn currently), and (2) A further 10bp cut on the deposit rate; and a 10bp cut in the rate on the loan support program.

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