Markets Await Fed Rate Decision Amid Rising Energy Prices

Global markets are bracing for a pivotal week as investors await the Federal Reserve's interest-rate decision on Wednesday. The Fed has kept rates unchanged throughout 2026, but expectations for a hike increased after new Fed Chair Kevin Warsh adopted a hawkish tone and August employment data came in stronger than expected.

The key focus will be on what Warsh signals about the path for rates beyond this meeting. Markets are leaning towards a 25-basis-point rate hike, although conviction remains mixed.

In addition to the Fed's decision, the Bank of Japan is widely expected to raise its policy rate by 25 basis points to 1.25% on September 18. The bigger question for investors is what comes next, with markets already looking towards the BOJ's October and December meetings.

The rising energy prices have emerged as another major challenge for central banks, with Brent crude climbing back above $100 a barrel and physical oil prices moving above $120. Diesel prices have reached record highs, while European natural gas prices have surged to their highest levels since late 2022.