Market participants anticipate interest rate hikes from three major central banks this month. The European Central Bank is scheduled to meet this Thursday in Berlin, followed by the Federal Reserve and the Bank of Japan, which will convene on September 18. All three institutions are currently assessing the impact of energy price shocks resulting from the conflict in Iran.
The European Central Bank is widely expected to raise its deposit rate by 0.25 percentage points, moving it from 2.25% to 2.5%. According to a Reuters survey of 65 economists, the consensus for this increase has grown significantly since August. Inflation in the Euro area recently exceeded 3%, marking a three-year high, which supports the case for a more hawkish policy stance.
In Japan, swap contracts indicate a 97% probability of a rate hike on September 18, potentially moving the rate from 1% to 1.25%. Board member Kazuyuki Masu noted that rising fuel and chemical costs are contributing to broader inflationary pressures. The Bank of Japan estimates that the neutral interest rate level currently sits within the range of 1.1% to 2.5%.
The Federal Reserve faces a 61.2% probability of raising rates to a range of 375–400 basis points, up from the current 350–375 basis points. While headline CPI eased to 3.4% in July, it remains above the 2% target. Employers added 162 000 jobs in August, while the unemployment rate remained at 4.1%. The upcoming CPI data release on September 11 will influence the final decision.
