Headline: Markets Scale Back Fed Cut Bets as Global Paths Diverge
Global interest-rate expectations shifted this week, with traders dialing down the odds of a near-term Federal Reserve rate cut while leaving most other central banks on hold. The Bank of Japan remains the outlier toward gradual tightening, as market pricing shows a modest hike into year-end.
By year-end, markets now see only a slight net easing from the Fed (about 8 bps), with a 67% chance of no change at the next FOMC meeting. The European Central Bank is priced for roughly 1 bp of easing and a 97% probability of staying on hold. The Bank of England stands out with about 22 bps of cuts priced and an 83% chance of a cut at the upcoming decision. Elsewhere, the Bank of Canada (4 bps of easing, 87% on hold), the Reserve Bank of Australia (2 bps, 90% on hold), the Reserve Bank of New Zealand (25 bps, 93% cut probability), and the Swiss National Bank (2 bps, 92% on hold) are largely steady. In contrast, the Bank of Japan is priced for a modest year-end hike of about 7 bps, with a 72% chance of no change at the next meeting.
Looking further out, cumulative pricing through the end of 2026 points to larger easing from the Fed (94 bps) and the BoE (63 bps), with smaller moves for the ECB (10 bps), BoC (6 bps), RBA (13 bps), RBNZ (37 bps), and SNB (7 bps). The BoJ is seen delivering about 43 bps of cumulative tightening over the same horizon. These figures reflect total expected moves by end-2026, not the change occurring in 2026 alone.
The hawkish tilt was driven by recent Fedspeak and Chair Jerome Powell’s reminder that a December cut is “far from” assured. Markets also noted the timing shift placing the November U.S. jobs report after the next FOMC meeting, limiting fresh labor-market guidance for policymakers. Incoming data—including September nonfarm payrolls and weekly jobless claims—were mixed but failed to signal clear weakness, reinforcing a cautious stance on premature easing.
Key Points – Markets now price minimal Fed easing by year-end (~8 bps) and a 67% chance of no change at the next meeting. – ECB, BoC, RBA, and SNB are largely seen on hold; BoE and RBNZ carry the highest probabilities of near-term cuts. – BoJ remains the exception, with about 7 bps of hikes priced by year-end and a 72% chance of holding at the next decision. – Cumulative moves priced through end-2026: Fed 94 bps easing; BoE 63 bps; ECB 10 bps; RBA 13 bps; RBNZ 37 bps; BoC 6 bps; SNB 7 bps; BoJ 43 bps tightening. – Repricing was catalyzed by hawkish Fedspeak, Powell’s remarks, and the timing of the upcoming U.S. jobs report. – Recent labor data were mixed, offering little evidence of broad-based weakness.
