This week, three of the world's leading central banks — the US Federal Reserve (Fed), the Bank of England (BoE), and the Bank of Japan (BoJ) — will announce their monetary policy decisions. The meetings come as oil prices have risen above $100 per barrel, partly due to renewed tensions in the Middle East.
The Federal Reserve is expected to keep its policy rate unchanged, with markets pricing in a 66% probability of no change at this meeting. However, expectations remain strong that the Fed may deliver at least one rate hike by the end of the year.
Fed Chair Kevin Warsh refrained from providing forward guidance at his first press conference and instead emphasized the central bank's commitment to price stability.
The European Central Bank (ECB) maintained its three key policy rates last week, a move that was widely expected. ECB President Christine Lagarde noted that the full impact of the energy shock from the Middle East has not yet fully reflected in inflation.
The BoE is expected to keep its policy rate unchanged at its upcoming meeting, but may raise rates by the end of the year. UK Prime Minister Andy Burnham, who recently took office, aims to grow the economy through a new model that strengthens the role of the state, decentralizes economic decision-making, reindustrializes the country, and supports domestic production.
Japan's annual inflation rose to 1.7% in June, its highest level in six months. The Bank of Japan raised its policy rate to 1% in June, a 31-year high, but is expected to remain cautious at its meeting on Friday, with markets expecting one more rate hike by the end of the year.
The depreciation of the yen complicates decision-making for Japanese policymakers, and intervention is possible.