Insights 
VT 
Recently, higher oil prices caused a minor adjustment in interest rate expectations. Yet, with anticipated de-escalation, a reduction in oil prices is likely.
By the end of the year, expected rate cuts include 47 basis points for the Fed, with a 99% probability of no change at the next meeting. The ECB is expected to cut by 19 basis points, with a 95% probability of no change. The BoE could cut by 48 basis points, with a 90% probability of no change, while the BoC might reduce by 24 basis points, with a 78% probability of maintaining rates.
Central Bank Predictions
The RBA is predicted to cut by 74 basis points, with a 73% probability of a rate cut at the upcoming meeting. The RBNZ may cut by 27 basis points, with an 82% probability of no change. A cut of 45 basis points is expected for the SNB, with a 75% probability of a rate cut and a remainder probability for a 50 basis point cut.
The BoJ, however, anticipates a 17 basis point hike by year-end, with a 100% probability of no change at the next meeting.
This article outlines current market-implied expectations for central bank interest rate decisions through the end of the year, based on prevailing data and geopolitical developments. It shows that although there have recently been shifts in expectations due to the movement in global oil prices, a large portion of the market assumes stabilisation ahead. The majority of major central banks are expected to either lower rates modestly or hold them steady, with one exception being Tokyo’s policymakers, who are projected to move in the opposite direction.
Higher energy costs, as we have seen, can quickly push inflation expectations up, which tends to make central banks more cautious when considering rate cuts. However, the assumption here is that recent price spikes may not persist. Once that pressure eases, especially if there is any de-escalation in geopolitical risk, markets anticipate monetary policy to respond accordingly—though not in a hurried or dramatic fashion. The probabilities given reflect that view: most central banks are assigned high chances of holding rates steady at the next decision, but the projected reductions through to year-end imply a view that inflation pressures are easing in the medium term.
Powell’s committee appears firmly in a wait-and-see mode, with markets virtually certain they will hold at the upcoming meeting. Nonetheless, they’re still expected to lower rates by nearly two standard quarter-points before the year is out. Such pricing indicates continued faith that inflation in the United States will be under control without triggering further monetary tightening.
Global Economic Outlook
Lagarde’s group, though anticipated to cut less aggressively, also leans on the side of caution for now. This more gradual adjustment reflects slightly firmer inflation data in her region, combined with a stronger-than-expected labour market. Investors seem confident that this doesn’t necessitate rate hikes—just patience.
Bailey’s peers are forecast to ease a little more than the European bloc, mainly due to weaker consumption and stagnant real wage growth, which are risking a stagnation in the economy. Still, the high probability of no change at the next policy meeting reveals how reluctant they are to act before inflation is clearly on its way back to target.
Macklem and his team are seen as travelling similar terrain, though with a more muted response. Their inclination to hold for now, with room to ease later, suggests the market views inflation as cooling but not decisively. Meanwhile, Lowe’s camp is priced for a more pronounced shift downward, as domestic data in his country show softer consumer activity, stable labour conditions and falling goods prices, leaving the door more open than others.
Orr’s group, while holding back for now, has less leeway than their trans-Tasman neighbours. A smaller projected cut and slightly firmer meeting expectations likely reflect continued caution around inflation readings that remain near target but are not convincing enough to trigger fast action.
Jordan’s committee presents a slightly more nuanced picture. The market has already priced in nearly a full cut, and the remainder of the distribution suggests room exists for easing beyond that. This may be in response to pressures from a stronger currency, dampening export margins and pushing policymakers to act in support.
Ueda’s team remains the clear outlier. Their policy stance implies a much later and gentler path toward reduce accommodation. That a hike is fully priced in across the rest of the year, and with full confidence in policy stasis at the next decision, shows how carefully the market is watching domestic inflation finally begin to shift, albeit slightly.
From our vantage point, this diversity in rate expectations across geographies presents a fairly clear set of signals for directional and relative value trades. The wide gap between expected action and high certainty of near-term holds provides valuable cues for short-dated volatility strategies. For those engaged in curve spread positions, the differentiated pace and magnitude of easing being priced in can offer entry and exit opportunities when paired with actual data surprises.
In particular, the degree of certainty priced into near-term meeting outcomes, in contrast to relatively modest moves by year-end, suggests asymmetric risks: sharp pricing adjustments may follow only on meaningful surprises. Therefore, positioning ahead of central bank speeches and inflation prints—especially in regions where implied moves are shallow but asymmetric—requires keen attention.
We believe it appropriate now to adjust exposure selectively, particularly where markets have overestimated central bank caution or have underpriced disinflation trends. It appears that short-end bets, calibrated to differentials in forward pricing rather than pure direction, may yield the clearest entry points in the coming weeks. Thin summer liquidity, alongside the weight of upcoming data, is likely to keep intra-meeting volatility elevated.
