Due to the possibility that inflation has peaked, the Australian Federal Reserve has raised interest rates with a dove like approach. The Federal Reserve of Australia has raised the cash interest rate by 25 basis points to 3.6%, the highest level since May 2012. This move is in line with widespread market expectations, and Governor Lowe has issued a dove leaning assessment, indicating that inflation may have peaked. Lowe stated that the Federal Reserve of Australia will closely monitor upcoming data when assessing when and how far interest rates must rise. At the same time, he stated that "monthly CPI indicators indicate that inflation has peaked," and added that "recent data indicates that the cyclical risk of price and wage chasing each other is relatively low. Based on this, the Federal Reserve of Australia seems to be approaching the peak of interest rates, and the market views this comment as a dove signal. After the announcement, the 10-year treasury bond bond interest rate fell by -8.2 basis points, and the Australian dollar was sold off.

Tomorrow, the Bank of Canada meets. After raising interest rates by 25 basis points to raise them to 4.50% (the highest level since 2007), Governor McLehm announced a "conditional pause" in January. The recent data is mixed, with inflation still high, but price pressure has slowed down and there are some signs of growth recovery. People will anxiously wait for Friday's employment and wage data to find more clues about the economy and how they can adapt to inflation. Other reports that will increase the outlook for the Bank of Canada's interest rate path include IVE PMI, Trade (Wednesday), and Capacity Utilization (Friday).

However, the Federal Reserve is still in the spotlight, and Federal Reserve Chairman Powell's monetary policy report to Congress was first submitted to the Senate Banking Committee today and then to the House Finance Committee tomorrow. Friday is the Bank of Canada and the Bank of Japan.

Due to the market waiting for Federal Reserve Chairman Powell, there has been almost no change in federal fund futures. The implied interest rate is still expected to increase by 25 basis points to the middle rate of 4.875% at the FOMC meeting on March 21-22, with a possibility of a 50 basis point increase of approximately 25% to 30%. We believe that a 25 basis point increase on February 1st is unlikely to change. Futures continue to point towards a peak of 5.4% in July. Importantly, the market shows that interest rates of 5.4% have been maintained until November, reflecting the Fed's slogan of "maintaining high levels for the long term". We do not expect the chairman to disclose any information, especially as he does not have key non farm employment data, which will be released on Friday and there is no CPI data (released on March 14th). We expect him to emphasize that there is still more work to be done and that interest rates will not be lowered this year. He will want to retain all options instead of executing FOMC's decision in advance.

In Japan, the Bank of Japan meeting (Thursday, Friday) became the focus. This will be the last meeting chaired by Governor Kuroda. It is expected that this meeting will not change policies, with the policy interest rate maintained at -0.1% and YCC maintained at 0.5%. We do not expect Mr. Kuroda to send any policy signals to prevent obstructing the next policy leader, most likely Mr. Ueda, who has already stated at the nomination hearing that he will maintain a relaxed stance. However, the national CPI has risen at a rate of 4% as inflation rates rise. The economy is also recovering, and there may be a policy shift later this year. The following economic data includes the current account (Wednesday), GDP (Thursday), as well as household expenditure and PPI (Friday).

Andrea Pichidi

Market analyst