All Eyes on Walsh: Will the "Central Bank Super Week" See a G7 Rate Hike Wave Next Week?

The global monetary policy is standing at a new turning point. Against the backdrop of persistent inflationary pressures, renewed escalation in the Middle East, and oil prices climbing above $100 per barrel, the G7’s major central banks are set to announce interest rate decisions during the same week, possibly reshaping the landscape of global monetary policy.

The Federal Reserve will take the lead on Wednesday. Boosted by Friday’s stronger-than-expected core inflation data out of the U.S., bets on a rate hike led by Chair Walsh have surged — a move that could run directly counter to President Trump’s wishes. Bloomberg economists Anna Wong, Andrew Sacher, and Eliza Winger put it bluntly:

"The market signal is unambiguous: investors want and expect the FOMC to hike rates. If it doesn’t, Walsh will lose credibility in the eyes of market participants."

Over the subsequent two days, the Bank of England and the Bank of Japan will announce their decisions. The Bank of Japan is widely expected to hike rates on Friday, raising the policy rate to 1.25%, the highest level since 1995. The European Central Bank already tightened last Thursday, marking the second rate hike since the Iran conflict erupted. Investors are seeing a clearer picture of hawkish stances synchronizing among G7 central banks.

This Fed decision is closely watched, with the immediate catalyst being last Friday’s higher-than-expected core inflation reading. Walsh stated last month that if the Fed cannot "be reasonably assured that underlying inflation is moving towards target quickly enough," there’s "work to do." The latest data show no such assurance. Investors and economists currently view a Fed rate hike as nearly certain, which would be the first increase in the U.S. central bank’s benchmark rate in three years.

Support for a hike has already accumulated within the Fed. In the July policy meeting, three officials dissented from holding rates steady, instead favoring a hike. On Wednesday, the Fed will also release updated forecasts for economic growth, inflation, and rate paths, providing more forward guidance to the markets.

Meanwhile, the U.S. faces a data-heavy week, including retail sales data expected to rebound in August, as well as figures for new housing starts and industrial output.

The Bank of Japan is likely to be another focus this week. A range of supportive data underpins the expected rate hike, including the largest wage gains in nearly three decades. If a hike goes ahead as expected on Friday, it will be the second this year, lifting the policy rate to 1.25%.

The same day, Japan’s government will release nationwide CPI data for August, with inflation expected to rise 2% year-on-year. Analysts believe that a hike may further support the yen, which has recently rebounded.

The Bank of England is not expected to hike on Thursday, but its decision will be closely watched. At the end-July meeting, three officials explicitly supported a rate hike; meanwhile, U.K. inflation pressures are building — headline inflation in August is projected to rise to 3.1%, a five-month high. This makes a shift toward a hike as early as November a possibility that cannot be dismissed.

Employment data released on Tuesday is expected to show wage growth largely stable. Beyond the rate decision, markets will also be watching the Bank of England’s annual announcement on the pace of reducing its bond holdings.

The European Central Bank finished a key part of this rate hike cycle last Thursday. This marks the second tightening since the onset of the Iran conflict. ECB Chief Economist Philip Lane will attend a two-day research conference this week, while President Lagarde and colleagues will hold informal talks with EU finance ministers in Dublin.

In Canada, the central bank held rates steady earlier in the month, but its statement emphasized inflation risks. The minutes to be released on Wednesday are expected to give further clues about its policy leanings. Amid an escalating tariff war with the U.S., Canada will also release August inflation data on Monday, providing new reference points for the economic outlook.

For China, September 15 will see the release of key August economic data: industrial production, retail sales, nationwide real estate investment, and housing prices across 70 cities. CICC Macro expects retail sales growth to recover, with industrial value-added output growth at around 4.6% year-on-year.

India’s August inflation data will be released on Monday, with markets watching for further signs of price pressures, which could inform the Reserve Bank of India’s timing for any rate hike.

In Latin America, Brazil’s central bank is expected on Wednesday to announce its fifth consecutive 25 bps cut, lowering the Selic rate to 13.75%. Nonetheless, inflation above target and stubborn inflation expectations will make it difficult for the bank to commit to a more dovish stance.