Central bank week: Fed and ECB seen on hold as markets bet on rate hikes
Investors expect higher rates by December as oil-driven inflation persists. New Zealand's central bank is expected to raise rates as early as Wednesday.
Archive image · Photo: Federalreserve / Wikimedia Commons, Public domain (cropped and resized)
Several major central banks set policy this week, among them the U.S. Federal Reserve, the European Central Bank and the Bank of Japan. All three are expected to leave rates unchanged for now. But markets are pricing a roughly 80% chance of a Fed hike in December, Reuters reported, with much the same priced in for the ECB and the Bank of Japan.
The backdrop is concern over persistently high inflation driven by oil prices. New Zealand's central bank is expected to act as early as Wednesday with a 25-basis-point increase to 3.0%. JPMorgan economist Bruce Kasman said "a relatively shallow rate hike cycle is underway". Goldman Sachs expects the Fed to skip in October and hike in December.
In Britain, new finance minister John Healey presents his first budget on Wednesday against a backdrop of rising global borrowing costs. In the United States, data are due on September core inflation, expected at 3.1%, and on third-quarter growth, forecast at an annualised 3.2%.