This week, the three major central banks will hold policy meetings, and the outcomes are expected to vary.
Bank of Japan
First up is the Bank of Japan, which will announce its decision on Wednesday (Tuesday night US time). Analysts are divided on whether the Bank of Japan will raise interest rates from the current 0%-0.1% or hint at a hike. Japan's inflation rate has been above the central bank's 2% target, and while the yen has strengthened recently, it remains near historic lows against the dollar.
The Bank of Japan believes that tighter monetary policy could stimulate consumption in Japan because higher interest rates would make the yen stronger, making key imports like gasoline and food cheaper.
Fed
Next up is the Federal Reserve, which will announce its decision on Wednesday afternoon (US time). Few expect the Fed to cut the federal funds rate for the first time since 2020, but most expect the Fed to hint at a rate cut at its next meeting in mid-September.
According to CME FedWatch data from the Chicago Mercantile Exchange, there is now a 100% chance of a rate cut in September, while the probability of a 50 basis point cut (rather than the usual 25 basis points) is 12%.
Bank of England
Finally, there is the Bank of England, which will announce its policy decision early Thursday afternoon. Economists and markets are almost evenly split on whether the Bank of England will ease policy for the first time. Even if the Bank of England does cut rates, it is expected to be very cautious, suggesting to the market not to expect a series of easing policies.
What does this mean for Bitcoin?
Unless something unexpected happens, such as the Federal Reserve signaling that a September rate cut is not a sure thing, this week’s central bank news may not have much of an impact on Bitcoin (BTC) prices.
But in the long run, except for the Bank of Japan, other major central banks are likely to gradually cut interest rates. This has become a new normal. In addition to the Federal Reserve and the Bank of England, the European Central Bank also cut interest rates earlier this summer, and the Bank of Canada has also cut interest rates twice in the past few months.
Generally speaking, loose monetary policy is good for risk assets like Bitcoin. While Bitcoin is up 56% year to date, largely due to demand for U.S. spot ETFs, some of the gains may be due to market expectations that Western monetary policy will shift from a multi-year tightening trend to an easing cycle.
Finally, there are still many things that are not written down, such as specific opportunities and specific decisions. These things are often not something that can be summarized in one article.
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