Status quo in policy stance likely to prevail at both Fed and BOJ

TODAY is a big day for central bank policy.

The key monetary policy committees of both the Bank of Japan (BOJ) and the US Federal Reserve will reveal their next steps within hours of each other. In the case of the Fed, the outcome is more predictable - albeit not a foregone conclusion. By contrast, what the BOJ will come up with is a high-stakes guessing game.

The big decision that the Federal Open Market Committee (FOMC) is confronted with is whether to hike the key Fed Funds rate for the first time since last December, when it lifted it off zero to a range of 0.25 to 0.5 per cent. The data is a mixed bag. On the one hand, inflation has shown signs of ticking up. The personal consumption expenditure deflator index (the Fed's favourite inflation measure) rose 1.6 per cent on an annualised basis in August, but this is still below the Fed's 2 per cent target.