How have interest rate expectations changed after this week’s events?

Rate hikes by year-end

• RBNZ: 62 bps (82% probability of rate hike at the next meeting)
• Fed: 30 bps (83% probability of no change at the next meeting)
• ECB: 24 bps (72% probability of no change at the next meeting)
• BoJ: 20 bps (99% probability of no change at the next meeting)
• BoE: 18 bps (93% probability of no change at the next meeting)
• RBA: 10 bps (85% probability of no change at the next meeting)
• BoC: 8 bps (91% probability of no change at the next meeting)
• SNB: 5 bps (96% probability of no change at the next meeting)
• Last week’s market pricing here

We can see that we got some further dovish repricing almost across the board this week. The main culprits were oil prices falling below pre-war levels and inflation data showing further cooling in June.

The RBNZ is the only major central bank expected to hike in the summer but they might deliver a dovish hike given the quick drop in energy prices.

For the other central banks, it looks like it’s going to be a tranquil summer waiting for more data and then deciding on the next moves from September onwards.