February Is the Longest Month for Central Bank Watchers – Bloomberg

The shortest month may prove the longest one for financial markets this year.

February lacks a single scheduled opportunity for the Federal Reserve, European Central Bank or Bank of Japan to reset monetary policy, in part because some policy makers decided last year to meet less frequently.

That leaves investors to navigate any new threat to the global economy on their own after central bankers helped to limit losses in the worst January for stocks since 2009.

Equities recovered from a deeper sell-off as the Fed hinted it may be slower to raise interest rates, the ECB signaled more stimulus is on the way and the Bank of Japan embraced negative rates for the first time.

Unless central banks spring surprise action this month, investors are prey to any further slide in commodities or ructions emanating from China, beset by deteriorating growth and a lack of clarity on policy makers' intentions.

"February is like an air pocket as no major central bank is scheduled to hold a meeting," said Kazuhiko Ogata, chief Japan economist at Credit Agricole SA in Tokyo. "That creates a risk of further wild ups-and-downs in global markets."

MSCI World Index

Central bankers may be less unhappy about the break, which is also shared by the Bank of Canada and Swiss National Bank. The Bank of England still convenes its officials this Thursday. The People's Bank of China doesn't have scheduled policy meetings, leaving it out as a wild card — though its actions have sometimes roiled global stock markets rather than helped them.

For one, the gap will give them more time to ascertain just how their economies will be affected by the recent slide in stocks and commodities, as well as China's economic slowdown. Between now and March, if market convulsions subside, focus could turn to underlying signs of stability in the top economies. Fed officials said last Wednesday they are "closely monitoring global economic and financial developments."

Leaving investors to their own devices for a few weeks could also be in order given that some central bankers themselves have questioned the potency of even more monetary stimulus. They also argue that it's not their job to prop up asset markets — even if they have the reputation for doing so.

Scrapping Meetings

Policy makers themselves are the reason for the fewer gatherings this month. The ECB last year decided to meet every six weeks rather than monthly, while the BOJ cut its gatherings to eight from 14. That brought both closer in line with the Fed, whose Open Market Committee meets eight times this year.

The reduction in meetings was in part so that the ECB and BOJ could act more transparently by publishing more reviews of their economies and decision-making. ECB President Mario Draghi also said last April that the previous "frequency of our meetings leads the public and the market to expect action."

At ING Bank NV, international economist Rob Carnell said that markets may also find a reason to calm down as central banks sit out a month.

"When you're approaching central bank meetings, their proximity is frequently a source of volatility and uncertainty, but if there's no imminent meeting you don't get quite so worked up," he said. "Markets can get confused over direction, so look for a steer — but I'd like to hope things settle down and they aren't as hung up on whatever the data tends to be and what it means."