Central banks of the G7 countries face a decisive week. Rising inflation risks are increasing pressure to raise interest rates.
Three key decisions are expected in the coming days. The US Federal Reserve will start on Wednesday, followed by the Bank of England and the Bank of Japan.
Attention is focused on the Fed. Recent data showed a higher-than-expected level of core inflation. Investors are betting that Chairman Kevin Warsh and his colleagues will raise the key rate.
This may happen contrary to the wishes of President Donald Trump, who has repeatedly demanded rate cuts. Warsh was chosen by Trump to head the Fed.
The rise in oil prices above 100 dollars per barrel, caused by the conflict in Iran and problems in the Strait of Hormuz, is fueling inflation in the US. Annual inflation remains at 3,4%.
In the UK, the Bank of England is likely to leave the rate at 3,75% on Thursday. However, three of the nine members of the Monetary Policy Committee already voted for a hike in July, and fresh data on economic growth may intensify inflation concerns.
In Tokyo, the Bank of Japan is expected to raise the rate by a quarter point to 1,25% on Friday. This will be the highest level in more than 30 years.
The European Central Bank has already raised rates on Thursday, citing inflationary pressure from the conflict in the Middle East. How will these decisions affect global markets and currencies in the coming months?
Markets are also watching US and Japanese interventions to support the yen, while global bond markets remain unstable.
