Forex: Tracking Central Bank Rate Hike Expectations

Wondering when a central bank is set to raise interest rates? Here’s what the market pricing in for each of the major central banks. As you can see, a full 25bp of tightening has not been priced in for the U.S. In contrast, the market expects 2 quarter point hikes from the BoE, ECB, BoC and RBNZ this year. Rate hike expectations can and will change with incoming economic data but these numbers explain why the dollar could under perform this year

Source: Barclays


  1. I think the BoE forecasts are “highly optimistic” to say the least given the U.K.’s large deficit and recent GDP results. How do the analysts justify these forecasts and brush aside the concerns that raising rates won’t torpedo England into full out recession again? Although the recent inflation figure was a tad alarming, I think the BoE would take the risk of inflation in the short term over the risk of disaster in the short term.


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