Global Central Banks Week Takes Center Stage as Oil Prices Break Above $100, Is There Still a Chance for Rate Cuts This Year?

This week, the global financial markets are迎來 a key super week for central banks, including the Federal Reserve (Fed), the Bank of Japan, and the Central Bank of Taiwan, all of which will announce their latest interest rate decisions. Recently, tensions in the Middle East have escalated, especially with the disruption of the Hormuz Strait, causing international crude oil prices to break through the $100 per barrel mark. This sharp fluctuation in energy prices poses significant pressure on global inflation prospects and presents severe challenges to the monetary policy paths of various central banks. This article will summarize the schedule of major central bank meetings this week and explore the potential impact of rising oil prices on macroeconomic data and the stance of decision-making committees.

Geopolitical conflicts drive up oil prices and inflation pressures

Recent conflicts in the Middle East, along with disruptions to key energy transportation routes such as the Strait of Hormuz, have threatened the global energy supply chain. Brent and WTI crude oil prices have both risen significantly. After the U.S. conducted military strikes on Iran’s main export hub, Kharg Island, over the weekend, Brent crude oil prices surged by 3.3%, briefly surpassing $106 per barrel. This strike could inject new turbulence into the energy market, which has already experienced decades of major price fluctuations. Since the outbreak of war, rising oil prices have affected various assets, sparking inflation concerns, pushing up U.S. Treasury yields, strengthening the dollar, and pressuring global stock markets.

Energy prices are a core component of the Consumer Price Index (CPI), and high oil price volatility will directly translate into imported inflation pressures. For economies heavily dependent on energy imports, this not only increases corporate operating costs but may also weaken consumers’ disposable income.

This week’s major central bank decision schedules

Inflation risks may become the market’s focus this week, as eight of the world’s top ten central banks will announce policy decisions. The Reserve Bank of Australia (RBA) is expected to raise interest rates for the second consecutive month, while other central banks may hold rates steady, awaiting clarity on the duration of the conflict.

Reserve Bank of Australia (RBA): 3/17

Federal Reserve: 3/17–3/18

Bank of Canada: 3/18

Bank of Japan (BOJ): 3/19

Taiwan: 3/19

European Central Bank (ECB): 3/19

Bank of England: 3/19

Swiss National Bank: 3/19

Swedish Riksbank: 3/19

Will the Fed keep rates steady, and is a rate cut still possible this year?

For the Federal Reserve, inflation concerns triggered by rising oil prices are changing its monetary policy trajectory. Unlike the previous era of quantitative easing, the current environment is more sensitive to price changes. In response to energy shocks, there are differing assessments within the Fed regarding the risk of cooling the labor market and reigniting inflation. High oil prices may suppress real economic growth, but premature rate cuts could lead to unanchored inflation expectations.

According to CME FedWatch data, due to concerns about inflation driven by rising oil prices, traders generally believe the Fed will keep rates unchanged this year, with another rate cut unlikely until December. Before the Middle East conflict escalated, the market widely expected 2–3 rate cuts this year.

Japan suffers from high oil prices and a weakening yen

The market generally expects the Bank of Japan to keep its benchmark interest rate unchanged on Thursday, while reassuring the market that it remains on the path of policy normalization.

Given Japan’s heavy reliance on oil imports from the Middle East, BOJ Governor Ueda Kazuo may emphasize the need to closely monitor developments.

Persistent high crude oil prices could harm Japan’s economy and exacerbate inflation pressures. Policymakers must also consider that adopting a dovish stance could further weaken the yen. The USD/JPY exchange rate has approached 160. Last Friday (13th), Japanese Finance Minister Shunichi Kato stated that the government is committed to taking all necessary measures at any time and under any circumstances, considering the impact of escalating Middle East tensions on the yen’s depreciation.

Traders will scrutinize the BOJ’s statements and Ueda’s remarks for clues, as investors are closely watching the possibility of a rate hike in April. Some insiders earlier this month indicated that a rate increase is not ruled out at that time.

Taiwan’s central bank will hold steady for the eighth consecutive time

Taiwan’s central bank will also convene its first-quarter board meeting on Thursday. Market consensus suggests that, due to rising oil prices driven by Middle East tensions, inflation will be a key concern. The central bank is expected to observe developments in the Middle East conflict and whether oil prices continue to rise before deciding on policy. The policy rate is likely to remain at 2%, unchanged for the eighth consecutive time, with future adjustments to monetary policy evaluated based on evolving circumstances.

This article, “Global Central Banks Week: Oil Prices Break $100, Is a Rate Cut Still Possible This Year?” first appeared on Chain News ABMedia.