Rate cuts by year-end
- Fed: 17 bps (68% probability of rate cut at the upcoming meeting)
2026: 82 bps
- ECB: 1 bps (96% probability of no change at the upcoming meeting)
2026: 12 bps
- BoE: 8 bps (68% probability of no change at the upcoming meeting)
2026: 64 bps
- BoC: 3 bps (91% probability of no change at the upcoming meeting)
2026: 12 bps
- RBA: 2 bps (92% probability of no change at the upcoming meeting)
2026: 25 bps
- RBNZ: 21 bps (83% probability of rate cut at the upcoming meeting)
2026: 35 bps
- SNB: 2 bps (94% probability of no change at the upcoming meeting)
2026: 7 bps
Rate hikes by year-end
- BoJ: 7 bps (73% probability of no change at the upcoming meeting)
2026: 45 bps
*The 2026 pricing reflects the cumulative easing expected by the end of 2026, not how much easing is expected in 2026 alone.
The first notable change was seen in the RBA market pricing following the hot Australian quarterly CPI report. RBA Governor Bullock on Monday sounded hawkish but she added that she was open to change her mind in case the forecasts proved to be wrong and the data came out weaker than expected.
They did prove to be wrong, but on the other side. In fact, the RBA forecasted a 0.6% increase in the quarterly Trimmed Mean CPI, but instead we got a 1.0% increase. That was even higher than RBA’s worst case scenario of 0.9%. The market of course scrapped the rate cut bets and it’s now seeing the next rate cut in June 2026 at the earliest.
Next we got the Fed decision. The US central bank cut interest rates by 25 bps and announced an end to QT as widely expected, but the only thing that mattered was one line from Fed Chair Powell’s opening statement in the press conference. In fact, once he said “a December cut is not a foregone conclusion – far from it”, the market reacted immediately by scaling back the almost 100% probabilities of a cut in December.
He repeated that line many times suggesting that there is indeed a strong chance that we could not see a rate cut in December, although the data will have the final say. Speaking of the data, he added that in case they don’t get the data due to the shutdown, they might as well not cut because they are “driving in a fog”.
Lastly, we got the BoJ decision and although the central bank left everything unchanged with again two hawkish dissenters as expected, BoJ Governor Ueda in the press conference suggested that a rate hike this year might not happen at all as they want to see early momentum of spring wage negotiations. So, the next hike should be delayed to early next year either already in January or March 2026.