Citi Expectations for FOMC & BoE - FJElite
A central bank gauntlet meets a geopolitical inflection this week: the BoJ (Tue), the FOMC’s first decision under Chair Warsh (Wed), and the BoE (Thu) coincide with the likely signing of the US/lran deal on Fri. Our economists look for the BoJ to hike 25bp to 1.00%, with Asada’s vote the key signal for forward pricing. Hawkish tweaks from the FOMC beyond a hold could be potentially countered by a dovish Warsh. In the UK, CPI and labor market data pre-MPC should be more influential for the vote split and July expectations than change expectations of a hold. The simultaneous Makerfield by- election should also reinforce cautious MPC communication.
FOMCOur economists expect the removal of the Fed's "easing bias" from the statement and 2026 median "dot" should show no cuts. This could be countered by a dovish Warsh who could keep the door open for further rate cuts. We retain our base case of 3x25bp cuts starting September.
BoE Average wage trends are expected to ease towards 4.0% vs 4.1% prior for headline, and 3.2% vs 3.4% prior (ex-bonus). U/e rate should remain unch. at 5%. How the committee assess the latest inflation and labor reports beyond an expected hold will be important. Our rates strategists expect vote split at 7-2 with Greene most likely joining Pill in dissenting, 6-3 would be a surprise to markets.