We begin the final week before Christmas and judging by the economic calendar the holidays are half here already. Not much to look forward to early this week, with the exception of the Bank of Japan interest rate decision, although this is widely expected to lead to no immediate pivot in monetary policy. The Federal Reserve shift last week surprised many, prompting reactions from both the ECB and Bank of England. Central banks are being very transparent about their intentions and the BoJ will be no different.
Monetary policy in Japan is unique in that it has maintained negative interest rates since 2016 with the use of yield curve control. This policy is now being phased out, and it is expected that interest rates will finally be allowed to rise sometime next year, dependent on inflation rates maintaining sustainable levels.
It has been a good week for stock indices, with the Dow Jones Industrial Average breaking its previous all-time high on Wednesday and continuing to gain ground for the remainder of the week to close at 37,305 on Friday. The event stole the spotlight somewhat from other indices, with the German DAX breaking into new territory last week and even the French CAC 40, which recorded its highest ever close on Friday. The S&P 500 is now also within a stone’s throw away of its own previous record set back in the early days of 2022. With the return of monetary easing supposedly right around the corner, one wonders how many and how long previous records will stand.
