Central bank scanner: How high for how long?

European Central Bank (ECB):

• Recent action (September 10): The ECB raised the policy rate 25 basis points in a unanimous decision. President Christine Lagarde called it a “no brainer.” Inflationary pressures stemming from the conflict in the Middle East prompted the upward move. The annual economic growth rate doubled in the second quarter.
• Upcoming (October 29): Policymakers are adamant the ECB’s inflation target will be met, while maintaining a data dependent position. Strong second quarter growth, paired with upside risks to inflation, make the case for at least one more hike. 

Federal Reserve (Fed):

• Recent action (September 16): The Fed raised the policy rate 25 basis points in a unanimous decision. That marks the beginning of a new tightening cycle after policymakers found financial conditions were not sufficiently restrictive. Chair Kevin Warsh believes inflation will cool without derailing the economy.
• Upcoming (October 28): The Fed is now reversing the rate cuts of 2025. The breadth of inflation, and the length of time inflation has been above target, should give policymakers pause. Warsh put his hawkish words from Jackson Hole into action; the unanimous vote to raise rates shored up his and the Fed’s credibility. Participants at the meeting lean toward at least one more rate hike prior to year-end. An additional hike is favored by the majority for 2027. 

Bank of Canada (BOC):

• Recent action (September 2): Rates remained unchanged against a backdrop of concern about the blow to growth associated with the trade war and a real estate market. The influx of immigration, which buoyed housing, has been curbed. Inflation remains muted with little pass-through of higher oil prices.
• Upcoming (October 28): The BOC expects to remain on the sidelines through the rest of the year. Soft employment data and limited spread of inflation give the bank room to hold. 

Central Bank of Brazil (BCB):

• Recent action (September 16): The BCB cut 25 basis points as it continues to pursue a gradual easing path. Inflation came in below expectations as several categories including housing, transportation and food and beverage recorded deflationary readings. The BCB has been in restrictive territory on rates for some time.
• Upcoming (November 3): Additional rate cuts are expected but at a measured pace. Historically, an El Niño season has been associated with rising food prices, which is particularly important for Brazil. Higher food prices play a large role in inflation and nominal growth via exports. The BCB has invested heavily in defending its credibility on inflation, which it wants to maintain. 

Bank of Japan (BOJ):

• Recent action (September 18): The BOJ raised the policy rate 25 basis points in a 7-2 decision. This hike comes three months after the previous hike. That is the shortest period between hikes since 1990. A stronger yen over the last two months mitigated some price pressures; however, the bank still expects inflation to top its 2% target for at least two more quarters.
• Upcoming (October 30): Policymakers continue to balance concerns about inflation’s persistence against the effects of higher rates on growth and elevated public debt burdens. More rate hikes are in the pipeline, especially if inflation bleeds into wage gains.

Reserve Bank of India (RBI):

• Recent action (August 5): Policymakers held rates steady while monitoring inflation pressures and a weakening rupee. Economic growth remains robust, providing the RBI with the flexibility to maintain a restrictive stance.
• Upcoming (October 7): Food inflation will be top of mind in response to El Niño and higher input costs associated with conflict in the Middle East. Inflation has been above the RBI’s target for three straight months, although it is still within its tolerance band. Policymakers will hesitate to cut rates; that could threaten further price pressures and currency depreciation.

Bank of England (BOE):

• Recent action (September 17): The BOE left rates unchanged in a 6-3 vote. The three dissents were for a rate hike. Financial conditions tightened more in the UK than other major economies; that allowed policymakers to deviate from other central banks.
• Upcoming (November 5): AI spurred growth in the second quarter, while inflation is expected to accelerate due to energy prices. That provides policymakers with room to hike, but they are likely to remain cautious and highly data dependent.

Bank of Mexico (Banxico):

• Recent action (August 6): Banxico maintained a cautious approach amid elevated core inflation. Second quarter growth was the highest since early 2022, up the ante on a potential rate hike.
• Upcoming (September 24): Policymakers have indicated that the policy rate is likely to remain steady, although the Federal Reserve’s recent rate hike and potential for more raise the risks of a hawkish hold and an upside for rates.

Reserve Bank of Australia (RBA):

• Recent action (August 11): The RBA kept rates unchanged as underlying inflation started to ease. Quarterly growth picked up in the second quarter after a lackluster start to the year.
• Upcoming (September 29): Oil prices are well above the RBA’s assumptions, meaning the central bank’s forecasts will need to be changed. One more hike is expected this year.

People’s Bank of China (PBOC):

• Recent action (August 20): The PBOC has maintained a historically low policy rate for fifteen consecutive months. Second quarter growth was the weakest since late 2022 on continued soft domestic demand and private investment. Exports of AI-related inputs provided support.
• Upcoming (September 21): Additional targeted policy moves are more likely than a rate change. Government bond yields continue to slide, bolstering support for private-sector investment, but they are unlikely to shore up consumer demand. The latter has been wracked by years of deflation in the real estate market.

Central Bank of Turkey (CBRT):

• Recent action (September 10): The CBRT left the policy rate unchanged at 37%, as it weighs weak growth against extremely elevated inflation.
• Upcoming (October 22): Further easing is expected in response to weaker growth and a deceleration in inflation.