G7 central banks converge on rate hikes in pivotal week

Central banks across the Group of Seven are converging on a hawkish policy stance this week, with the Federal Reserve, Bank of Japan, and Bank of England all set to deliver rate decisions within days of each other — a stretch that could reshape the global monetary landscape for the remainder of 2026.

The Fed Takes Center Stage

The week's most consequential decision comes Wednesday, when the Federal Reserve concludes its September 15–16 meeting. Markets are pricing in roughly a 90% chance that Fed Chairman Kevin Warsh and his colleagues will raise the benchmark rate by 25 basis points to a target range of 3.75% to 4%, marking the first hike since mid-2023.businesstimes+2

The probability surged after August's consumer price index showed annual inflation holding at 3.4%, with core prices rising a hotter-than-expected 0.3% month over month. Goldman Sachs The Goldman Sachs Group, Inc. ↘ 0.36%, JPMorgan ↘ 0.84%, HSBC ↘ 1.14%, and Deutsche Bank ↘ 4.34% have all called for a hike. Three Fed officials already dissented in favor of raising rates at the July meeting.reuters+4

"We now expect the Fed to hike twice this year, in September and December," said Michael Feroli, chief U.S. economist at JPMorgan. "At this stage, failing to back up words with action could put the credibility of the institution at risk."businesstimes

The move would likely defy President Donald Trump, who has publicly pressured the Fed to hold or cut rates.cnbc

BOJ Poised for Highest Rate Since 1995

The Bank of Japan is widely expected to raise its policy rate by 25 basis points to 1.25% at its meeting concluding Friday — the highest level since April 1995 and the second hike this year, coming just three months after a June increase. Japan's largest wage increase in nearly three decades has bolstered the case for tightening. Markets imply about a 76% chance of the move.thestar+4

Morgan Stanley ↘ 0.55% MUFG Securities expects Governor Kazuo Ueda to flag "the risk that underlying inflation could overshoot 2%" at his post-decision press conference.marketscreener

ECB Already Moved; BOE Under Growing Pressure

The European Central Bank completed its piece of the puzzle on September 10, raising the deposit facility rate by 25 basis points to 2.50% — its second hike since the outbreak of the Iran conflict. ECB President Christine Lagarde warned in an interview with Ouest-France that the inflation shock "will probably last longer than we had expected," citing the war and the destruction of refining capacity.khancapitals+2

The Bank of England is expected to hold at 3.75% on Thursday, but Goldman Sachs now forecasts a November hike as inflation is projected to quicken to 3.1% in August, a five-month high. Three officials already voted for a hike in July.ndtvprofit+2

Oil above $100 a barrel, fueled by attacks on Saudi Arabia's East-West pipeline and threats to shipping through the Strait of Hormuz, is amplifying inflationary pressures worldwide. Bloomberg Economics analysts Anna Wong, Andrew Sacher, and Eliza Winger put it bluntly: "The unfiltered market signal is clear: investors want and expect the FOMC to hike. If it doesn't, Warsh will lose credibility in the eyes of market participants."thestar+3