Central bank rate hike expectations shift after oil's surge past $100

Rate hike expectations by year-end

• BoE: 51 bps (57% probability of no change at the next meeting)

2027: 111 bps

• Fed: 50 bps (87% probability of rate hike at the next meeting)

2027: 91 bps

• BoJ: 43 bps (76% probability of rate hike at the next meeting)

2027: 111 bps

• RBA: 38 bps (85% probability of rate hike at the next meeting)

2027: 61 bps

• BoC: 38 bps (58% probability of rate hike at the next meeting)

2027: 132 bps

• ECB: 37 bps (62% probability of rate hike at the next meeting)

2027: 82 bps

• RBNZ: 35 bps (54% probability of rate hike at the next meeting)

2027: 119 bps

• SNB: 13 bps (88% probability of no change at the next meeting)

2027: 77 bps

• Last week's market pricing here. The 2027 pricing indicates the total amount of tigthening expected by the end of 2027, not how much is expected in 2027 alone.

A broad hawkish repricing swept through rate markets last week, pushing up expectations for rate increases across every major central bank. The key driver was oil prices crossing the psychologically significant $100 mark, which amplified inflation worries.

The shift was especially pronounced on the Federal Reserve side, where year-end hike projections climbed to 50 bps from 33 bps a week earlier. Friday's hotter-than-expected monthly core US CPI cemented the September rate hike, adding to fears that underlying inflation could be edging higher.

Elsewhere, expectations advanced across the board. BoE year-end hikes increased to 51 bps from 26 bps, BoC to 38 bps from 26 bps, RBA to 38 bps from 30 bps, and RBNZ to 35 bps from 25 bps. Even the SNB, the least hawkish among them, saw expectations rise to 13 bps from 5 bps.

The $100 oil level has reshaped the inflation outlook, prompting traders to price a more aggressive monetary policy path.

Everyone has become an oil trader.