Central banks hold key policy meetings amid rising interest rate expectations

Major central banks, including the Federal Reserve, the Bank of Japan, and the Bank of England, are scheduled to hold monetary policy meetings this week, a period being referred to by markets as a ‘super central bank week’.

In the United States, market expectations have shifted significantly toward an interest rate hike. According to the CME FedWatch tool, there is a probability of over 90% that the Federal Reserve will raise the federal funds rate by 25 basis points. This shift follows recent economic data showing that while the year-on-year Consumer Price Index (CPI) remained steady, the month-on-month core CPI rose by 0.3%, exceeding market expectations and signaling persistent inflation.

Analysts suggest that a rate hike could serve as a ‘preventative’ measure to maintain credibility in fighting inflation amid rising oil prices. Morgan Stanley has adjusted its forecast from no rate hikes this year to two hikes, predicting one this week and another in December.

Simultaneously, the Bank of Japan is expected to announce its own interest rate decision, with projections suggesting a 25-basis-point hike to address domestic inflation and yen depreciation pressures.