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US Fed Funds Target Rate 5.25-5.5% (consensus 5.25-5.5%) in Mar-24

• The FOMC has decided to keep the Federal Funds target rate unchanged at 5.25-5.5%, reflecting solid economic growth and a strong labour market amid easing but still elevated inflation levels.
• Despite recent disinflationary progress, the Committee does not yet see enough progress to alter course. A tight policy setting is needed to effectively address inflation risks.
• The FOMC emphasizes a flexible, data-driven approach to future policy decisions. It is prepared to maintain or adjust the current level of policy restraint based on incoming economic data and the evolving outlook, particularly regarding inflation and labour market conditions.

Japan Policy Rate 0.0% (consensus 0.0%) in Mar-24

• The Bank of Japan has raised its policy rate to 0.0%, ending the negative interest rate policy in anticipation of achieving its 2% price stability target sustainably.
• This policy shift reflects the BOJ's confidence in Japan's economic recovery, underpinned by improved corporate profits, likely continued wage increases, and the formation of a more solid virtuous cycle between wages and prices.
• Future BOJ policy decisions will hinge on economic activity and price developments, global economic conditions, and the trajectory of inflation expectations and wage growth, with a continued focus on achieving sustainable price stability.

Australia RBA Cash Rate Target 4.35% (consensus 4.35%) in Mar-24

• The RBA's decision to maintain the policy rate at 4.35% reflects moderating headline inflation but ongoing high services inflation, complicating the balance between controlling price levels and supporting economic growth.
• Economic uncertainties, including the sustainability of productivity growth, global inflation trends, and geopolitical risks, are critical in shaping the RBA's forward-looking monetary policy stance.
• The RBA emphasizes its commitment to returning inflation to its target range. Future policy decisions will be highly data-driven, taking into account the evolving landscape of domestic demand, labour market conditions, and global economic trends.

ECB Calmly Awaits News

• The ECB unanimously maintained its policy rates and did not even discuss cuts despite this meeting being dovishly priced as starting a cutting cycle until recently.
• April is effectively ruled out, barring a crisis, with weakening wages needed to justify a June start. Resilient services inflation may mean wage costs are not benign enough.
• Although we believe the ECB expects to cut in June, we still expect resilience to delay that first move to September. A high neutral rate would also limit and slow cuts.

By Philip Rush