Fed's Bold Rate Cut Raises Stakes for BoE and BoJ

Both the Bank of England (BoE) and Bank of Japan (BoJ) are not expected to cut interest rates at their respective meetings today and tomorrow.

The US Federal Reserve just chose to cut its own rate by 50 basis points. So, how might the BoE and BoJ decisions be affected?

Bank of America projects the BoE will leave its Bank Rate at 5.0%, with the pound potentially gaining. However, gains could be capped if policymakers lean dovish. Additionally, a currency strategy note from HSBC says that the sharp appreciation of the British pound against the U.S. dollar may be nearing its limits.

Masamichi Adachi, chief Japan economist at UBS Securities, cautioned that if the BoJ raises rates Friday, just days after the Fed's rate cut, “markets would likely face increased turbulence.”