Central bank scanner: Central banks’ waiting game

European Central Bank (ECB):

• Recent action (July 23): The ECB left policy rates unchanged after raising rates in June. Central bankers emphasized the need to assess incoming inflation data and the persistence of energy-related price pressures.
• Upcoming (September 10): July inflation data was better than expected; however, incoming food price pressures related to El Nino and the ongoing closure of the strait will likely lead policymakers to increase rates. Improved economic growth gives the ECB room to tighten policy. Markets are pricing in a near certain rate hike. 

Federal Reserve (Fed):

• Recent action (July 29): The Fed held rates steady in a 9-3 vote. Fed Chairman Kevin Warsh continued to emphasize inflation risks and a commitment to price stability. Markets found the absence of forward guidance or even a decision rule to be uncomfortable. Government bond yields headed higher in response. 
• Upcoming (September 16): Policymakers are moving in a hawkish direction. Several who voted against a rate hike in July are now publicly saying they are open to rate increases if inflation remains too hot. Staying above the Fed’s inflation target for more than five years now risks creating muscle memory for firms and consumers on inflation, which would make it even harder for the central bank to dislodge. Soft labor market data may give the Fed pause about rate hikes for fear of slowing the broader economy. Warsh’s upcoming remarks in Jackson Hole will be must see TV for market participants. We are sticking with our forecast of two rate hikes by the end of the year. 

Bank of Canada (BOC):

• Recent action (July 15): The BOC noted an improving economy in the face of high energy prices. That progress is unlikely to continue. The prolonged pause has been in order to monitor inflation and domestic demand. The Canadian dollar clawed back some of its losses against the US dollar, creating a minor headwind to exports.
• Upcoming (September 2): Policymakers are expected to remain on hold amid soft growth and manageable inflation pressures. Core inflation is near a six-year low. The US’s threatened 50% tariff rate on $20 billion worth of products may be more of a shock to headlines than the overall economy.

Central Bank of Brazil (BCB):

• Recent action (August 5): The BCB cut 25 basis points, bringing the policy rate to 14%. Policymakers maintained a cautious tone on inflation risks, citing domestic demand as the primary driver of price pressures. Headline inflation is now within the BCB’s target range.
• Upcoming (September 15): The BCB will be watching the second-round effects of inflationary shocks. Additional, modest, rate cuts are likely if inflation expectations remain anchored. 

Bank of Japan (BOJ):

• Recent action (July 31): The BOJ left rates unchanged in an 8-1 vote, after the June rate increase. The one dissent was in favor of a rate hike. The policy rate stands at the highest level since September 1995. The BOJ downgraded its inflation forecast and increased its growth outlook for this year.
• Upcoming (September 18): Second quarter growth missed to the downside. Solid net exports partially offset soft private consumption and business investment. Policymakers retain a tightening bias as they monitor inflation persistence and yen weakness. Sustained intervention by the US and Japan to support the yen is unlikely. We expect three more rate hikes by the end of 2027.

Reserve Bank of India (RBI):

• Recent action (August 5): Despite a weakening rupee, the RBI unanimously voted to hold rates steady. Inflation exceeded the central bank’s target range for the first time in 18 months; some of this is oil-related, giving policymakers room to breathe.
• Upcoming (October 7): Risks to power and food prices from monsoons are on policymakers’ radar on top of the conflict in the Middle East. Despite headwinds, growth is supported by broad-based economic activity. At least two rate hikes are expected by the end of 2027.

Bank of England (BOE):

• Recent action (July 30): The BOE left policy rates unchanged in a 6-3 vote. The three dissents opted for a hike. The committee maintained a hawkish tone amid upside risks to cooling inflation.
• Upcoming (September 17): A soft labor market and the highest government bond yields in the G7 are helping to contain inflation. Second-round inflation effects remain limited. Solid second quarter growth gives the BOE room to increase rates again in 2026. One more hike is expected in 2026. 

Bank of Mexico (Banxico):

• Recent action (August 6): Banxico followed through on its signals to hold rates steady in a unanimous vote. Second quarter growth was the highest since late 2023 amid uncertainties about the future of the US trading relationship.
• Upcoming (September 24): Inflation cooled to just above the 3% target. The international environment has had a limited effect on Mexico due to its position as a prominent energy producer. Policymakers reaffirmed expectations to keep rates unchanged at the next meeting. 

Reserve Bank of Australia (RBA):

• Recent action (August 11): The RBA maintained a restrictive stance while acknowledging softer labor market conditions.
• Upcoming (September 29): A slowdown in economic activity is at odds with persistent inflationary pressures. That puts policymakers in a hard spot. The effectively closed strait is likely the nail in the coffin. One more hike is expected this year. 

People's Bank of China (PBOC):

• Recent action (July 20): Annual producer prices turned positive earlier in 2026 for the first time since 2022. Consumer inflation eased in July on government fuel-price cuts and temporary relief from the supply disruptions of the Middle East. Weak second quarter growth may prove a tipping point for rate cuts.
• Upcoming (August 20): Policymakers indicated that a rate cut is on the horizon. Private consumption has been weak for years. Retail sales in July came in far short of expectations. Government sponsored consumption programs have not spurred persistent spending.

Central Bank of Turkey (CBRT):

• Recent action (July 23): The policy rate remains at 37% with inflation at 30%. The CBRT judged that inflation is still a risk that warrants a pause even as domestic demand shows signs of cooling.
• Upcoming (September 10): Further rate reductions are likely if inflation and inflation expectations continue to improve. The CBRT indicated that it can be patient as rates are already in restrictive territory.