Let’s not beat around the bush here. As inflation fears come back into the picture, suddenly major central banks have a challenge up ahead of them in the coming weeks/months. And there will be plenty of watchful eyes and scrutiny on them next week, with a full slate on the agenda. The full list can be found below:
- Reserve Bank of Australia (RBA) meeting decision – 17 March
- Bank of Canada meeting (BOC) decision – 18 March
- Federal Reserve (Fed) FOMC meeting decision – 18 March
- Bank of Japan (BOJ) meeting decision – 19 March
- Swiss National Bank (SNB) meeting decision – 19 March
- Bank of England (BOE) meeting decision – 19 March
- European Central Bank (ECB) meeting decision – 19 March
Yup, the only one missing is the Reserve Bank of New Zealand – who will only return to the fray on 8 April next. That aside, it is going to be a jam-packed three days in the week ahead.
That being said, there might not be too much drama in terms of rate decisions. The only central bank that could take action is arguably the RBA. Deputy governor Hauser’s remarks here yesterday have certainly reignited the debate for a potential rate hike next week.
And we’re starting to see market pricing reflect that sentiment as well. The odds of a rate hike next week were at ~35% before he spoke but have jumped up now to ~71%. And that is also seeing the aussie dollar surge higher, with AUD/USD breaking new ground this week in a jump to 0.7170 currently.
The US-Iran conflict is threatening stronger price pressures at a time when the RBA is already struggling to pin down inflation. So, policymakers might feel the need to get ahead of the curve.
Of note, NAB, Deutsche, and Morgan Stanley have all shifted their calls and are penciling in a rate hike for next week now.
So, that will be a key decision to watch.
As for the other major central banks, the rate decisions will be less interesting with no changes expected across the board. The only main thing to watch will be how policymakers respond to possibly higher inflation to come.
Will they revert back to what we saw back in 2021-22 in dismissing it all as “transitory”? That was a mistake at the time, so it will be interesting to see if history will repeat itself.
But considering that we’re just less than two weeks into the conflict, I would expect central banks to play for flexibility. And that means reaffirming a wait-and-see approach and not jumping to conclusions on how price developments are going to change. They will definitely acknowledge the risks of higher oil prices and inflation to come, but they won’t prematurely commit to anything so early on.
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