It's going to be a huge Thursday morning for markets

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Fresh from the excitement of today’s Australian inflation report, markets now find themselves in a holding pattern before two key monetary policy decisions in the early hours of Thursday.

First, at 5am AEDT, the US Federal Reserve will deliver its October FOMC policy decision, followed soon after, at 7am AEDT, by the Reserve Bank of New Zealand’s (RBNZ) rate decision.

With both central banks expected to keep monetary policy settings unchanged, all attention is likely to be on the accompanying policy statements.

The focus for the FOMC will be on the tone towards domestic economic conditions, particularly surrounding the inflation outlook, along with any concerns – as demonstrated in September – towards deteriorating economic conditions offshore.

Here is what the FOMC said towards the domestic economy in its September statement:

“Information received since the Federal Open Market Committee met in July suggests that economic activity is expanding at a moderate pace. Household spending and business fixed investment have been increasing moderately, and the housing sector has improved further; however, net exports have been soft. The labor market continued to improve, with solid job gains and declining unemployment. On balance, labor market indicators show that underutilization of labor resources has diminished since early this year. Inflation has continued to run below the Committee’s longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation moved lower; survey-based measures of longer-term inflation expectations have remained stable.”

And the key phrase in the September minutes on external economic developments, particularly China:

“Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term.”

As for the RBNZ, it’s likely that most attention will be on how they describe the current level of the New Zealand dollar, and any forward guidance offered on the outlook for interest rates.

Here’s RBNZ governor Graeme Wheeler had to say on the kiwi after they last met on September 10:

“While the lower exchange rate supports the export and import-competing sectors, further depreciation is appropriate, given the sharpness of the decline in New Zealand’s export commodity prices.”

And his view for domestic interest rates:

“At this stage, some further easing in the overnight cash rate (OCR) seems likely. This will depend on the emerging flow of economic data.”

Any major changes to these paragraphs from either the FOMC or RBNZ are likely to be market moving.

Business Insider will have full coverage of both rate decisions as soon as they are announced.

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