Three Central Banks Set to Hike Interest Rates This Week

• Fed to execute another oversize rate hike, with markets expecting a 75 basis point increase.
• SNB is to conclude negative interest rates this week on Thursday.
• Economists forecast a 50bp or more hike from BoE on Thursday.

This week starts slow due to the bank holiday in the United Kingdom and Japan. Nevertheless, it’s only calming before storming, with the markets bracing for new financial policy by multiple central banks later in the week.

FOMC Economic Estimates

The events will start on Wednesday with the most-anticipated bank decision. The United States Fed Reserve will likely execute another outsize rate increase of 75 basis points, pushing the rate to 3.25%.

Some market players anticipate a 1% rate rise by the Federal. And that remains a possibility. Despite the decision, volatility will likely skyrocket when the Federal Reserve publishes the FOMC Economic Estimates.

The Federal decision remains the most notable event of this week and will potentially affect the markets in the coming days and weeks. The August CPI data release (last week) catalyzed a four standard deviation within the marketplace – a rare event but likely to occur this week again during the FOMC meeting.

SNB to Execute a Massive Hike Too

The SNB (Swiss National Bank) meets quarterly. Meanwhile, the central bank seems ready for a 0.75% hike this Thursday. That would mean a historic move by the bank as it will terminate the negative rates.

Surprisingly, the market has priced in the upcoming rate decision, a 50 basis point surge in December and a last 25bp uptick in March next year. Thus, investors can expect moves from the Swiss franc amid the end of the negative rates plus hikes into the positive region.

Bank of England to Introduce Another 50bp Hike

The Bank of England mimicked the Fed, executing rate hikes early in the current tightening cycle. The markets expect another 50 basis point hike from the bank this week, pushing the official rate to 2.25%. Most market players anticipate the bank’s terminal rate to hit 3.25% come December 2022.

That translated to more impending hikes in November-December. Nevertheless, the risk remains that the Bank of England will surprise markets and frontload rates to tame inflation. That’s because the prices of services and goods soared dangerously near the double-digit region.