Super Rate Week Amid Iran War... Four Major Central Banks Expected to Hold Rates Steady

Focus on Inflation Outlook as Rate Surprises Unlikely

With international oil prices surging due to the war between the United States and Iran, major central banks around the world are set to make interest rate decisions this week. Starting with the United States Federal Reserve (Fed) on the 18th (local time), the European Central Bank (ECB), Bank of England (BOE), and Bank of Japan (BOJ) will each hold rate-setting meetings on the 19th. Leading foreign media outlets such as the Financial Times (FT) and Bloomberg predict that there will be no major surprises in the interest rate decisions of each central bank, while the possibility of a resurgence in inflation is expected to be a key topic at the meetings.

While U.S. President Donald Trump is pressuring the Fed to cut interest rates, the market widely expects the Fed to keep rates unchanged at the Federal Open Market Committee (FOMC) meeting held on the 17th and 18th. According to CME FedWatch on the 16th, the market is pricing in a 99.2% probability that the Fed will maintain the current benchmark rate of 3.5–3.75% at the March meeting.

Exterior view of the Federal Reserve building in the United States. Photo by AFP Yonhap News

Bloomberg reported that it is highly likely the Fed will not cut rates this month. However, the slowdown in the U.S. labor market is more pronounced than the inflation threat from the Middle East, suggesting that the Fed may be considering a rate cut. In a report released on the 12th, Goldman Sachs predicted that the Fed would cut rates twice, in September and December. Morgan Stanley maintained its previous outlook that the Fed would lower rates by 0.25 percentage points each in June and September.

Most expect the ECB to keep rates unchanged on the 19th. The Eurozone economy remains resilient, and it is believed to be well positioned to respond to rising inflation. However, some warn that surging oil prices could increase inflation risks and raise the possibility of a rate hike within the year. In a Bloomberg interview on the 10th, Peter Kazimir, Governor of the National Bank of Slovakia, noted that the war in Iran and its inflationary aftermath could force the ECB to raise rates sooner than expected. However, in a Bloomberg survey conducted from the 6th to the 11th, only 7% of respondents anticipated a rate hike this year.

According to Bloomberg, prior to the outbreak of the war in Iran, the probability of a BOE rate cut in March was about 80%, but now expectations have shifted toward the bank holding rates steady. As high oil prices increase inflationary pressure, concerns about an economic recession are also growing. Emma Moriarty, portfolio manager at CG Asset Management, stated that the Bank of England "faces a classic stagflation problem," adding, "It must react sensitively to market conditions and keep inflation expectations stable. However, raising rates poses a real risk of further worsening weak demand."

In Japan, the inflation rate has exceeded the BOJ’s 2% target for four consecutive years, raising the likelihood of a rate hike. While the BOJ is expected to keep rates unchanged on the 19th, Bloomberg, citing sources, reported that a rate hike in April is also possible.

In addition, Australia, Brazil, China, Canada, Indonesia, Sweden, and Switzerland will also make interest rate decisions this week. There are forecasts that the Reserve Bank of Australia (RBA) will move forward its rate hike initially planned for May to the 17th due to the aftermath of the war in Iran. The Bank of Canada (BOC), which cut rates four times last year, is expected to hold rates steady on the 18th.

This content was produced with the assistance of AI translation services.