The Federal Reserve is widely expected to keep policy unchanged at its October meeting, with only the December gathering likely to see a 25 basis point rate hike. Senior Fed officials have indicated they prefer a measured approach, avoiding consecutive hikes. Despite market expectations of further tightening in 2024, the bank's projections suggest no additional hikes beyond December, citing elevated inflation and low unemployment.
For the European Central Bank, another rate hike is anticipated in December, though not in October, as the ECB awaits quarterly staff projections. The surge in bond yields, particularly in Germany and France, has already tightened financial conditions, potentially reducing the need for further rate increases. The ECB remains cautious, noting limited pass-through of higher energy prices to the broader economy.
The Bank of England is now expected to raise rates twice, once in November and again in February. Recent comments from the Bank suggest a shift toward more active policy adjustments, driven by inflation forecasts showing CPI briefly above 4%. However, the case for hikes remains uncertain, with a cooler jobs market and more restrictive interest rates compared to the US and eurozone.
The Bank of Japan is unlikely to hike rates in October, following its 25 basis point increase to 1.25% last month. The market expects the next hike in December, though some analysts suggest it could be delayed to January. The BoJ aims for a terminal rate between 1.75% and 2.00% next year, aligning with broader economic goals.