Rate cuts by year-end

• Fed: 35 bps (99% probability of no change at the upcoming meeting)
• BoE: 13 bps (87% probability of no change at the upcoming meeting)
• SNB: 8 bps (93% probability of no change at the upcoming meeting)

Rate hikes by year-end

• RBA: 55 bps (58% probability of no change at the upcoming meeting)
• BoJ: 48 bps (92% probability of no change at the upcoming meeting)
• RBNZ: 43 bps (95% probability of no change at the upcoming meeting)
• ECB: 23 bps (92% probability of no change at the upcoming meeting)
• BoC: 18 bps (94% probability of no change at the upcoming meeting)

You can find last week’s market pricing here.

This week was all about the US-Iran war and the surging energy prices amid the basically blocked Strait of Hormuz. This has led to a hawkish repricing across the board as traders focused on the inflation risk and the central banks’ inability to cut rates.

In fact, central banks are now in a tough spot. If they cut rates to support the economy, it could lead to more serious problems with inflation in the future. On the other hand, if the economy weakens and they wait hoping for the event to be “transitory”, they could end up with a recession.