Central Banks Hold Steady: Fed Eyes 55bp Cut While BOJ Considers Hikes

Market expectations for central bank policy remained largely unchanged this week, with the Federal Reserve still pricing in 55 basis points of rate cuts by year-end. The ECB and BoE show minimal easing expectations at 10bps each, while the BoC anticipates 24bps of cuts. The most significant shift came from Australia, where the RBA rate cut pricing increased to 33bps following stronger-than-expected monthly CPI data. Despite the inflation surprise, the RBA's focus on labor market conditions prevented more aggressive hawkish repricing. The RBNZ expects 36bps of cuts, while the SNB shows minimal easing at 6bps. Notably, the Bank of Japan remains the outlier with markets pricing 17bps of rate hikes by year-end, continuing its divergent policy path. This stability in rate expectations suggests traders await key US economic data for clearer direction.