Next week, the global market will welcome the "central bank super week", with central banks from multiple countries such as USA, Japan, and the United Kingdom taking the stage. However, this time the spotlight may be stolen from the Federal Reserve by the Bank of Japan.

Currently, the market generally predicts that as employment growth tends to be moderate, the Federal Reserve will suggest the possibility of interest rate cuts, while the Bank of Japan may raise interest rates while reducing its balance sheet, possibly stealing the spotlight from the Federal Reserve.

The Bank of England may make its first interest rate cut in four years, despite signs of persistent domestic inflationary pressure. Investors still believe that the possibility of a rate cut by the Bank of England is 50%, with a predicted 25 basis point reduction in interest rates.

Regarding other central banks, Chile will cut interest rates for the ninth consecutive time, reducing its rate to 5.5%; Pakistan's central bank is expected to reduce its benchmark interest rate to 19.5%; and it seems that the Colombian central bank has also locked in a 50 basis point interest rate cut.

Bank of Japan: May raise interest rates while reducing the balance sheet

On Wednesday next week, the Bank of Japan's policy meeting resolution will undoubtedly become the focus of the entire market.

Japanese authorities have stated that the details of the monthly bond purchase reduction plan will be announced at this meeting, which is the first step in quantitative tightening. The market generally expects the purchase amount to be reduced from 6 trillion yen to 5 trillion yen, and ultimately halved within two years.

There is also the possibility of raising interest rates, but only about 30% of economists consider this to be the basic scenario. Some analysts point out that there are still differences within the Bank of Japan on interest rate hikes in July. The main viewpoints are divided into two camps:

Some officials have proposed to "wait and see" in July until consumer spending data shows significant improvement before making a decision, which can also avoid presenting a tough central bank image to the public;

Other officials believe that the current inflation is basically in line with expectations, and they maintain an open attitude towards raising interest rates in July. Considering that there are many uncertainties in the future, they may miss the opportunity to raise interest rates.

In recent weeks, the yen has continued to rise, becoming the "storm eye" of the global market. Some analysts warn that if the interest rate hike fails, especially if the central bank's bond-buying plan is not reduced as expected, arbitrage trades to short the yen may make a comeback.

Federal Reserve: May release a signal for interest rate cuts, but will take action in September

At this Thursday's interest rate resolution meeting, as high interest rates may endanger the slowing job market, the Federal Reserve may release a signal for interest rate cuts.

Federal Reserve officials have kept rates at their highest levels in over 20 years for a year. The expected outcome of next week's meeting is that rates will remain unchanged, but a signal for interest rate cuts may be released, with action being taken in September.

Some analysts indicate that the Federal Reserve is more likely to launch its first interest rate cut in September, since there is a process to go through to initiate interest rate cuts. Firstly, the wording in the statement will need to be adjusted at next week's meeting, then there will be a slight adjustment in the risk management attitude at the Jackson Hole meeting in August.

A series of recent data releases have sent out optimistic signals, with economic growth remaining strong while price increases slow down. However, the Federal Reserve hopes to gain more guarantees, with inflation dropping to the target level of 2%.

The decrease in price pressure, coupled with the increase in unemployment, has made the two major goals of the Federal Reserve - full employment and price stability - more balanced. Officials hope to curb inflation, but they do not want to cause excessive harm to the labor market by maintaining high interest rates over the long-term.

This makes the non-farm report to be released next Friday and other labor market data more noteworthy. The July non-farm employment report may show a continued slowdown in hiring, with an additional 0.178 million employees, which is a healthy but more moderate pace. The unemployment rate has risen every month in the past three months, and is expected to remain at 4.1%. The job opening and labor turnover data to be released on Tuesday will also receive close attention.

Editor/ping