The week ahead marks an unusually busy one in terms of global central bank activity.

And what central banks have to say about the economic outlook is particularly prevalent in the wake of:

1) the emergency monetary policy measures adopted in response to COVID-19; and
2) increased attention over the past month in global bond markets, where yields are beginning to rise.

Generally speaking, the central banks of major advanced economies are skilled in the art of subtle communication, which means no big changes are likely.

But even small shifts in tone and outlook can prompt an outsized market reaction, so it helps to be aware of what the general expectations are.

Starting on the domestic front, the RBA will today release the minutes from its March meeting (11:30am EST).

At that meeting (on March 2), the central bank reiterated that it plans to keep benchmark interest rates on hold until 2024.

Now, CBA reckons markets will be focused on what details (if any) the RBA provides about its yield curve control (YCC) program on three-year government debt.

“We anticipate the target being removed due to ongoing improvements in the economy,” CBA economist Belinda Allen said.

However, “there is a risk that the RBA chose to continue to target the April 2024 bond until it matures”.

As a result, any possible clues as to the bank’s thought process will be “watched closely” with the release of the minutes, Allen said.

Central banks — the main event

The big event of the week is on Wednesday night, when the central bank for the world’s reserve currency — the US Fed — meets for its next policy meeting.

Earlier this month, Fed chair Jerome Powell reiterated that the bank isn’t worried about rising inflation and intends to maintain support measures for the economy.

As a measure of how Powell’s comments can move markets, bond yields rose and the US Nasdaq index fell sharply in response.

Again, no major changes are expected from the Fed this week.

“Nevertheless, the FOMC is likely to acknowledge that the economic outlook has improved and we expect to see an upward revision to (GDP projections),” Allen said.

In particular, the Fed “dot plot” will be a key point of focus.

To provide a gauge to the market of future interest rate expectations, each of the Fed’s 12 committee members is allocated a ‘dot’ to indicate when they think rates will rise next.

If more committee members bring their date forward compared to the last dot plot (in December), that could signal a slightly more hawkish lean than what the market expected.

However, economists surveyed by Bloomberg forecast that the median dot plot will show the Fed doesn’t see rates rising through to the end of 2023.


On Thursday during Asian trade, the Bank of Japan will be on deck, with no change expected to its current policy settings.

Among advanced economies, the BoJ has the most dovish policy mix with a YCC program aimed at keeping 10-year bond yields at zero per cent. It also employs negative interest rates of -0.1 per cent.

CBA said BoJ governor Haruhiko Kuroda has “hinted strongly” that the bank has no plans to widen the target for 10-year bond yields into a trading range (rather than a specific figure).

However, “the BoJ is likely to increase the flexibility of its ETF purchases to enhance effectiveness and sustainability”, CBA analyst Kevin Xie said.

And rounding things out on Thursday night, the Bank of England will also provide an update on policy settings and further stimulus.

No changes to the current settings are likely, Allen said, although the bank does expect inflation to rise quickly towards two per cent in the June quarter.

“At the current buying pace, the £150bn of additional UK government bond purchases announced in November 2020 will be complete at the start of November 2021,” Allen said.