Markets Hold Breath as Fed and BOJ Prepare Rate Decisions Amid Global Turmoil

Markets are bracing for pivotal decisions from the Federal Reserve and the Bank of Japan this week, as policymakers navigate rising inflation, escalating conflict in the Middle East, and energy price increases.

The Fed is expected to announce a quarter-point interest rate hike on Wednesday, following hawkish comments from new Chair Kevin Warsh and a strong August jobs report. However, some investors remain unconvinced that rates will rise after being kept unchanged throughout 2026.

Meanwhile, the Bank of Japan is all but certain to raise its benchmark rate by 25 basis points to 1.25% on September 18, a level not seen in over three decades. The bigger question is what comes next for Japanese monetary policy.

Rising oil prices have also caught attention, with Brent crude surging above $100 per barrel for the first time since July. Physical prices are now above $120, and natural gas prices in Europe have reached their highest level since late 2022 as winter approaches.