As central banks around the world continue to shape monetary policy, this week’s update on interest rate expectations highlights potential changes across major economies. Here’s a closer look at the probabilities of rate adjustments by the year’s end.

Rate Cuts Expected by Year-End

Several central banks are poised to reduce rates, with varying degrees of certainty. Here’s the breakdown:

• Federal Reserve (Fed): Markets indicate a 99% probability of no change at the upcoming meeting. However, a cumulative 39 basis points (bps) of cuts are anticipated by year-end.
• European Central Bank (ECB): There’s a strong expectation of easing, with markets pricing in 97 bps of cuts by year-end. Notably, there’s a 91% probability of a rate cut at the next meeting.
• Bank of England (BoE): With inflation moderating, markets foresee 64 bps of cuts by year-end. The likelihood of a cut at the upcoming meeting stands at 82%.
• Bank of Canada (BoC): A 76% probability of a rate cut at the next meeting aligns with market expectations of 58 bps in cumulative cuts this year.
• Reserve Bank of Australia (RBA): The RBA is projected to ease by 70 bps by year-end, with a 65% probability of a rate cut in the near term.
• Reserve Bank of New Zealand (RBNZ): Markets predict 102 bps in cuts by year-end, with a notable 61% probability of a 50 bps rate cut at the upcoming meeting.
• Swiss National Bank (SNB): A 98% probability of a rate cut at the next meeting underscores market expectations of 42 bps of easing this year.

Rate Hikes Expected by Year-End

In contrast, the Bank of Japan (BoJ) is the only major central bank projected to tighten monetary policy. Markets anticipate a 50 bps hike by year-end, with an 82% probability of an increase at the next meeting.

Key Takeaways

• Global monetary policy continues to diverge, with most central banks leaning toward easing amid signs of slowing growth and moderating inflation.
• The Bank of Japan remains an outlier, with a significant likelihood of tightening its historically accommodative stance.
• Market expectations reflect high probabilities of immediate rate decisions, providing insight into the direction of global financial markets.