What is the price for central bank meetings next week

We’ve seen the Bank of Canada signal a move to the sidelines this week, but that’s unlikely to be the case with the trio of major central banks expected to weigh in next week.

The first is Wednesday’s FOMC decision and the market is not anticipating any drama around Powell and the Fed. They strongly signaled a slowing in the pace of rate hikes, giving the market a 97% chance of 25 basis points and only the lesser tail risk of 50 basis points. Given the enthusiasm of the markets, I would put the rating 50bp slightly higher.

The following day presents the decisions of the ECB and the BOE. The ECB is expected to raise rates by 50 basis points to 2.50% and this is valued at 86%, but there is a 14% chance of 75 basis points. I think the odds here of 75 basis points are too high. There have been so many signals of consecutive 50 basis point moves from the ECB that I see no need to change.

Of the three, the BOE is the least certain in terms of market price. The rate market is at 70% for 50 bps and 30% for 25 bps. The market will consider the vote here as uncertainty is high around the future path of rates.