The BOE and the FOMC will both meet this week. The BOE will announce their rate decision on Thursday at 7:00 AM ET. Meanwhile the FOMC will report its decision on Wednesday at 2 PM ET.

Both central banks are expected to keep rates unchanged, but traders will be eyeing the expectations for rate cuts going forward.

For the Bank of England, they are likely to shift more toward lower interest rates from their highest level in nearly 16 years after holding off the temptation to shift policy. A shift in inflation concerns has eased leading to the change in stance.

That shift comes after a period where BoE officials, including Governor Andrew Bailey, were skeptical about the need for rate cuts, emphasizing the risks of strong wage growth. However, recent data showing weaker-than-expected inflation, wages, and economic growth suggest it may be time for the BoE to ease its tight grip on borrowing costs, The most recent UK CPI inflation came in at 4.0% which is still comfortably above the 2% target but is down sharply from the peak near 11% and is expected to continue its trend to the downside in 2024.

Nevertheless, there still is no chance for a hike on February 1, but there may be a shift toward no policy members voting for a hike (for a change). At the last meeting the vote was 3-0-6 with Jonathan Haskell, Catherine Mann and Megan Greene all voting for a 25 basis point hike. Will there be a shift this month? Traders will be eyeing the vote count with more of a focus this month.

Economists forecast a cut before mid-2024, with financial markets anticipating reductions beginning as early as May.

The MPC is also expected to modify its language, potentially moving away from suggesting further rate hikes if inflation pressures rise and softening the narrative around the necessity for maintaining "restrictive" rates.

Despite inflation reaching a 41-year high of 11.1% in October 2022, it's now expected to fall back to the BoE's 2% target soon, thanks to decreasing gas prices.

For the FOMC, the Fed dot plot released in December saw the Fed moving the rate to 4.6% from the current rate of 5.25% -5.5%. This meeting there will be no "central tendencies" or "dot plot" - just the statement and the press conference with Fed Chair Powell. That will be the market's focus this month.

The FOMC statement is anticipated to subtly shift towards a softer stance on rate hikes, possibly hinting at future cuts. Powell is likely to suggest rate adjustments, if any, would be gradual, while also acknowledging discussions on the Fed's balance sheet runoff . Despite core inflation rising less than expected at 2.9% in December, the U.S. economy's GDP remains healthy at 3.3% GDP growth in the fourth quarter. That may keep the Fed more cautious on policy adjustments despite the rising real interest rates which could restrict growth going forward. .

No decisions on the balance sheet runoff pace are expected at this meeting, but it's a topic of active discussion, with potential adjustments speculated to start between March and June. This meeting highlights the Fed's balancing act between controlling inflation and supporting economic growth, with markets keenly waiting for any indications of future monetary policy directions.