Super Central Bank Week Arrives, Geopolitical Tensions Push Oil Prices Higher, Fed and Bank of England Rate Cut Expectations Completely Erased, ECB Rate Hike Probability Surges

Reuters Finance APP News — According to Reuters Finance APP, this week will feature a “Super Central Bank Week.” Although these central banks’ rate decisions are not expected to bring surprises, the ongoing Iran conflict and the policy guidance accompanying the decisions will be closely watched. The four major central banks — the Federal Reserve, the European Central Bank, the Bank of England, and the Bank of Japan — will announce their decisions on Thursday. Additionally, rate setters from Australia, Brazil, major Asian countries, Canada, Indonesia, Sweden, and Switzerland will also hold meetings this week.

Apart from the Reserve Bank of Australia possibly taking a slight tightening step, other central banks are likely to keep rates unchanged. However, the Iran conflict has significantly increased the likelihood of rate hikes later this year. The latest market pricing shows a clear hawkish response to the upcoming energy price shocks: expectations of rate cuts by the Federal Reserve and the Bank of England have been completely eliminated, replaced by the possibility of the Bank of England turning to rate hikes within the year; expectations for ECB rate hikes this year have also risen further. Since the conflict began, the Bank of Japan’s rate path has remained relatively unchanged.

The core focus of this “Super Central Bank Week” is on policy guidance rather than immediate actions. Brent crude oil prices have surged to around $100 per barrel due to disruptions in shipping through the Strait of Hormuz, causing a sharp rise in global energy costs and directly boosting core inflation expectations worldwide. The Federal Reserve’s current target range for the federal funds rate is 3.50%-3.75%. Market expectations for at least two rate cuts in 2026 have been fully dismissed, and the dot plot may indicate that the first rate cut has been postponed to 2027; the Bank of England maintains its benchmark rate at 3.75%, with previous market expectations of a March rate cut now completely ruled out, and the probability of further hikes has increased significantly; the ECB’s deposit rate is at 2.75%, with the previously planned multiple rate cuts shifting to at least one hike this year; the Bank of Japan’s policy rate remains at 0.75%, unchanged, but geopolitical tensions and imported inflation may accelerate its subsequent small increases.

The transmission mechanism of energy shocks is complex and far-reaching: in the short term, it raises inflation (supply side) while suppressing economic growth (demand side), creating a typical stagflation risk. This forces major central banks to clearly incorporate a “data-dependent” framework in their guidance — if oil price shocks persist, priority will be given to safeguarding inflation targets rather than stimulating growth. Overall, this week’s meetings will mark a key turning point in global monetary policy from “dovish expectations” to “cautious watchfulness.”

Below is a comparison of the latest scenarios for the four major central banks under this week’s meetings and the war’s impact (based on the latest market consensus and official data):

Aside from these four, the Reserve Bank of Australia has already entered a tightening cycle due to domestic inflation pressures, while central banks in emerging and developed markets like Canada tend to maintain current policies, focusing on communication to manage market expectations. Geopolitical uncertainties are forcing global central banks to shift from “forward guidance” to “conditional caution,” and any unexpected sustained high oil prices will amplify policy shifts.

Overall, while the “Super Central Bank Week” may not feature dramatic rate changes, it is reshaping the global monetary policy landscape for 2026 through guidance. Energy price shocks have become an overriding variable, and investors should closely monitor press conferences by central bank leaders to catch signals on stagflation responses.

Editor’s Summary

Global central banks are collectively facing a new environment dominated by supply shocks: high oil prices boost inflation expectations while dragging down growth momentum. Although the four major central banks are likely to hold steady, their policy paths have shifted from easing to cautious or hawkish, which is expected to significantly impact exchange rates, bond markets, and commodity prices. Markets should remain alert: if conflicts prolong, stagflation risks will further compel more central banks to adjust their full-year guidance, with regional economic resilience and energy substitution capabilities becoming key to the recovery pace.

【Frequently Asked Questions】

1. What is “Super Central Bank Week,” and which central banks are meeting this week?

This week features decisions from the Federal Reserve, European Central Bank, Bank of England, and Bank of Japan, along with over ten other institutions including the Reserve Bank of Australia, Brazil, major Asian countries, Canada, Indonesia, Sweden, and Switzerland. The four major central banks will announce their results on Thursday. Combined with earlier meetings from the RBA, this creates a dense period of global monetary policy releases. The focus is not on rate changes themselves but on guidance regarding inflation and growth amid geopolitical conflicts.

2. How does the Iran conflict change expectations for rate cuts by the Fed and Bank of England?

The conflict has pushed Brent crude oil prices above $100 per barrel, raising global inflation expectations. The Fed’s plan for multiple rate cuts in 2026 has been fully dismissed by the market; the latest pricing suggests no rate cuts this year or delays until 2027. The Bank of England’s previous expectation of a March rate cut has also been canceled, with the probability of further hikes rising. Both are being forced to prioritize price stability due to energy cost pass-through to core inflation and wage pressures.

3. Why have ECB rate hike expectations increased?

As a net energy importer, Europe is more sensitive to oil price shocks. Before the conflict, markets expected multiple rate cuts; now, the probability of at least one hike this year has increased. The ECB must balance stagflation risks: rising inflation from oil prices while growth slows. If the ECB “sees through” short-term shocks, it may lag behind the curve, leading to a more hawkish guidance to maintain confidence in its 2% inflation target.

4. Why does the Bank of Japan’s path remain relatively unchanged?

Japan has ended its negative interest rate policy, with the current rate at 0.75%. Despite imported inflation from geopolitical tensions, Japan’s economy is less sensitive to oil prices, and wage-price transmission differs. Yen intervention risks remain a key consideration. Markets expect no change this week, but a gradual normalization to 1.00% may accelerate later, with the conflict not fundamentally altering its cautious approach.

5. How should ordinary investors respond to potential impacts of Super Central Bank Week?

Focus on forward guidance from the four major central bank leaders rather than rate moves alone. The dollar may remain strong due to hawkish Fed signals, while the euro and pound could face pressure. The yen should be watched for intervention signals. Commodity and energy sectors may benefit short-term, but if guidance confirms stagflation risks, volatility in risk assets will increase.