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Week Ahead: Fed & BoJ to Hike, BoE to Stand Pat
Updated Updated Mon, 2026 September 14 06:37
It’s set to be a tumultuous week of central bank action with three of the biggest deciding on rates. Developments in the US and Middle East have seen a jump in yields in recent weeks. A hawkish reset of expectations across markets has followed with Brent crude surging from lows around $70 in July to $100+ currently. Fears over inflation seemingly need to be quelled, both for the short and long-term, with central bank, and especially new Fed Chair Warsh’s credibility at stake.
The FOMC likely needs to be seen to react to the market’s concerns, even though the family feud on the Committee is almost certainly still alive and kicking. Certainly, last week’s inflation report cemented market bets of a first rate hike from Chair Warsh, which will at least burnish his ‘street cred’, as it were. Those odds have risen above 80% from 70% before the CPI figures. That reminds us that they have crossed the unofficial threshold of roughly 70% where the Fed doesn’t like to disappoint. Post hike at this meeting means scouring for guidance on what happens next, with a ‘one and done’ Fed move historically somewhat rare. But as per Warsh’s distaste for directing investors, it probably means a hugely data dependent stance going forward. That creates trading opportunities and it was instructive after the CPI release, that the dollar turned south along with 10-year Treasury yields. Notably the latter tapped 5% on Friday, which we have consistently said previously is a massive psychological marker.
The Bank of England is expected to deliver a ‘hawkish hold’ by teeing up a rate hike at its next meeting in November. But with around four quarter point moves priced in by money markets, will Governor Bailey really match those lofty expectations? No doubt, the doves will have a say and repeat that the risk of second round effects on inflation remain low. That means that a more cautious stance could weigh on sterling and test initial support at the 50-day SMA at 1.3476. An upside breakout in EUR/GBP might also be on the cards if we get Bailey push back, with the September high at 0.8607.
Finally, the BoJ will be under the spotlight after the wild moves in USD/JPY in recent weeks. Money markets have surged since June, with the US Treasury’s FX intervention in late July signalling a potentially quicker pace of rate hikes to support the yen. But will another rate hike by year end be too much, especially if there is no news from the GPIF about a major shift in its investment allocations? That would mean the lows are in for now around 153, though a move above 158 is needed to turn the downtrend. Options markets are pricing around a 200-yen pip range on Friday.
In Brief: Major Data Releases of The Week
Tuesday, 15 September 2026
UK Jobs: The key wage growth data has been trending lower with the ex-bonus figure seen steady in July at 2.8%. The jobless rate is forecast to remain unchanged at 4.9%. Employment growth is negative but not alarming.
Wednesday, 16 September 2026
UK CPI: Expectations are for the headline rate to rise two-tenths to 3.1%, core unchanged at 2.6% and all-important services at 3.5% from 3.4%. A sharp rise in fuel prices means the headline will likely overshoot the BoE’s July forecast.
FOMC Meeting: Last week’s sticky inflation report looks like it cemented a 25bps rate hike. The odds moved higher to around 80%+ from 70% before the data release. Chair Warsh struck a hawkish tone at Jackson Hole, but other officials have recently been more dovish. Fresh quarterly economic projections are likely to show lower inflation and little changed GDP.
Thursday, 17 September 2026
Bank of England Meeting: The MPC is expected to keep rates on hold at 3.75% with a 6-3 vote. Markets see a rate hike at the next meeting in November, when the MPR is released. Over 100bps are priced in until July 2027. Higher energy prices have weighed only modestly on growth and fuelled mild inflation. Bailey recently reinforced a wait-and-see stance.
Friday, 18 September 2026
Bank of Japan Meeting: Consensus sees the bank raising its policy rate by 25bps to 1.25%. This is expected to be accompanied with a hawkish tone as the bank has confirmed the real policy rate is negative and needs to be raised. Inflation remains elevated above 2% into 2028. Markets price in another hike by year-end.