Rate hikes by year-end
- RBNZ: 55 bps (62% probability of rate hike at the next meeting)
- Fed: 31 bps (30% probability of rate hike at the next meeting)
- ECB: 27 bps (69% probability of no change at the next meeting)
- BoE: 20 bps (86% probability of no change at the next meeting)
- BoJ: 19 bps (97% probability of no change at the next meeting)
- BoC: 18 bps (96% probability of no change at the next meeting)
- RBA: 8 bps (87% probability of no change at the next meeting)
- SNB: 5 bps (94% probability of no change at the next meeting)
- Last week’s market pricing here
If you check last week’s pricing, you can notice that we got a dovish repricing across the board. The likely culprit is the quick selloff in oil prices which have already reached pre-war levels. The market is expecting inflation to ease going forward which would require less or no hikes at all.
There’s another scenario though where the negative supply shock caused by the US-Iran war turns into a positive demand shock now that the war ended and oil prices dropped significantly. That could boost economic activity further and keep inflation higher for longer, eventually requiring rate hikes anyway.
The data will have the final say…
