Global central banks to announce monetary policy decisions in September

Major central banks worldwide will make monetary policy decisions amid geopolitical risks in the Middle East and mounting uncertainties about the global inflation and growth outlook, as the final quarter approaches.

Geopolitical risks stemming from US-Israel-Iran tensions continue to affect global economies, with regional tensions intensifying energy supply concerns, leading to price pressures in economies already struggling with inflation.

The September meetings of the Fed, the European Central Bank (ECB), and the Bank of Japan’s (BoJ) are in the market’s spotlight.

The banks’ forward guidance for the upcoming period will be crucial for market trends.

Forecasts for the timing of rate cuts, amid accelerating disinflation in most global economies, were replaced by hawkish projections following the energy shocks that began Feb. 28, when the Middle East war broke out.

The Fed’s meeting in September is expected to be one of the key events shaping the direction of global markets.

Slowing inflation and signs of weakness in the US labor market tempered hawkish expectations for the Fed.

The bank is expected to maintain its policy rate next month, with markets pricing in a 63% probability, while expectations that it may raise rates once by the end of the year remain strong.

Additionally, the Bank of Canada (BoC) is also expected to maintain rates next month, having kept its policy rate at 2.25% in June for the sixth consecutive meeting.

On the other side of the globe, the ECB is widely expected to hike rates by 25 basis points on Sep. 10.

The eurozone’s annual inflation rose to 2.9% in July amid rising energy prices, while monthly iflation stood at 0.2%, according to preliminary data from Eurostat. The bloc’s annual inflation stood at 2% in July last year.

The eurozone’s core inflation came in at 2.5% on an annual basis and 0% month-on-month in July, indicating that rising energy costs due to the Middle East conflict pushed up prices in the region.

European central banks will have a busy schedule next month as the Bank of England (BoE), the Swiss National Bank (SNB), and the Central Bank of Russia (CBR) will each announce their respective monetary policy decisions.

The BoE is expected to maintain its policy rate next month as inflation came in within estimates at 0.3% month-on-month and 2.9% on an annual basis in July, its highest in four months.

The UK’s consumer price index (CPI) rose 0.1% on a monthly basis and 2.6% year-on-year in June. The US-Israel-Iran conflict in the Middle East contributed to higher inflation in the UK.

Drought conditions in the country also threaten to push up food prices in the coming months.

Türkiye’s Central Bank (CBRT) will announce its monetary policy decision on Sep. 10.

The bank maintained its one-week repo auction rate at 37% in July, while keeping the overnight lending rate at 40% and the overnight borrowing rate at 35.5% amid a slightly declining core inflation trend.

The CBRT said energy prices began to trend upward again due to uncertainties and geopolitical developments, while recent data showed that domestic demand eased.

The bank resumed its one-week repo auctions after six months as part of it’s broader Turkish lira liquidity management framework. The bank had previously suspended these auctions to limit the impact of the Middle East conflict.

In Asia, the BoJ will make its critical monetary policy decision on Sep. 18, after the Japanese yen fell to its lowest level against the dollar in 40 years and somewhat recovered only after intervention, albeit currently trading weakly.

The BoJ raised its policy rate to 1% in June, in line with estimates, its highest level in 31 years, but maintained the rate at that level in July, in line with expectations.

The BoJ is expected to hike its policy rate by 25 basis points at its meeting next month, while the market is pricing in the possibility of another rate hike by year-end.

As for Oceania, the Reserve Bank of Australia (RBA), as one of the world’s major central banks and a player in regional financial liquidity, is expected to maintain rates next month.