October meetings of the Fed, ECB and Bank of Japan must maintain fees

Othe central banks of the USA, Europe and Japan prepare their meetings next week with the prospect of maintaining interest rates or the possibility of postponing an increase until December, while that of Canada may increase them.

Most analysts heard by the Spanish news agency EFE do not foresee changes to the meeting next week of the European Central Bank (ECB), to be held on Wednesday and Thursday, nor at the meeting of Tuesday and Wednesday of the United States Federal Reserve (Fed).

However, there is a possibility that the ECB will increase the rates on December 17 and the Fed on the 9th of next month to contain inflation.

In the case of the Bank of Japan (BoJ), which meets from Thursday to Friday, it is also not expected to increase rates, although it is very likely to do so on 18 December.

In a context where the increase in energy costs following the war in Iran has been fuelling inflation and reducing the purchasing power of households and corporate profits, weakening demand, the ECB faces a difficult dilemma, analysts point out.

While further increases in interest rates may help to contain general inflationary pressures, they also pose a risk of weakening economic growth, according to Morningstar experts.

France's budgetary problems are causing an increase in its risk premium, exceeding 170 basis points, a level that has not been in place for 15 years.

Investors demand greater compensation due to the high level of French public debt, persistent fiscal deficits and political uncertainty in view of the presidential elections next year.

The 10-year bond yield exceeded 5% this week, a level that had not been in over 24 years.

DWS also does not foresee an increase in interest rates by the ECB next Thursday, while ING economists consider that turbulence in French debt and its contagion to other countries are equivalent to an increase in interest rates of 50 basis points.

The ECB initiated a cycle of interest rate rises in July 2022, raising the deposit rate from -0.50% to 4% through 10 consecutive increases.

From June 2024, it reduced interest rates on eight occasions, placing the reference rate again at 2%, before those responsible for monetary policy resumed the increases in June 2026, raising it to 2.50%, predicting, according to the UBS, a further increase of 0.25% in December, which would put the interest rate on deposits at 2.75%.

The increase in bond yields in October has already had the same impact on growth and inflation as an additional increase in rates of 0.25%, with Germany reaching 3.6%, French reaching 5%, Spanish reaching 4.2% intradays in the October 1 session and American reaching 5.3% on 05.

In the case of the USA, the proximity of the mid-term elections and the need to assess the impact on the market of the last increase to 3.75%-4% would be some of the most relevant arguments for postponing the decision to increase rates again.

For its part, BoJ is preparing to maintain interest rates by 1.25%, interrupting the sequence of increases that led to the price of money to a maximum of more than three decades.

On the other hand, in the Bank of Canada, analysts, including KPMG, expect the rate to rise from 2.25% to 2.50%, after the governor of the institution, Tiff Macklem, has warned of the increased risk of widespread and prolonged inflation.