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G-7 Central Banks Set to Hold Rates as Oil Shock Rekindles Inflation Risk

Markets now read higher energy costs as a reason to pause rate moves.

Households already struggling with cost of living pressures face a critical two and a half weeks, with key data and a federal budget all set to hit hard.
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Overview

  • Central banks in the US, Canada, the UK, the euro area, and Japan are expected to leave borrowing costs unchanged this week as they track the fallout from the Iran conflict and shipping strains in the Strait of Hormuz.
  • Brent crude has climbed to about $106 a barrel after Iran’s Revolutionary Guard tightened control of the Strait, pushing up transport and input costs that feed into headline inflation.
  • The Federal Reserve’s upcoming meeting may be Jerome Powell’s last as chair, with a leadership change now seen as possible depending on the Senate’s timeline.
  • The US Justice Department moved to end a probe into Fed building cost overruns, prompting Senator Thom Tillis to drop his hold on Kevin Warsh’s chair nomination and clearing a path to a confirmation vote.
  • A packed calendar of rate decisions and US data, including the Fed announcement, PCE inflation, GDP and a factory survey, will show whether the energy spike is starting to lift broader prices or slow growth.