All eyes are on Warsh; will next week's "Central Bank Super Week" see a wave of G7 interest rate hikes?

Global monetary policy is at a new turning point. With persistent inflationary pressures, renewed escalation of tensions in the Middle East, and oil prices returning above $100 per barrel, the major G7 central banks are set to make interest rate decisions within the same week, potentially reshaping the global monetary policy landscape.

The Federal Reserve will be the first to raise interest rates on Wednesday. Boosted by better-than-expected core inflation data from last Friday, market bets on Fed Chairman Warsh leading the rate hike have surged—a move that could directly contradict President Trump's wishes. Bloomberg economists Anna Wong, Andrew Sacher, and Eliza Winger bluntly stated:

"The market signal is unmistakable: investors want and expect the Federal Open Market Committee to raise interest rates. If it doesn't, Warsh will lose credibility in the eyes of market participants."

In the following two days, the Bank of England and the Bank of Japan announced their decisions. The Bank of Japan is widely expected to raise interest rates on Friday, bringing the policy rate to 1.25%, the highest level since 1995. The European Central Bank had already tightened rates last Thursday, marking its second rate hike since the outbreak of the conflict with Iran. A picture of a convergence of hawkish stances among the G7 central banks is gradually becoming clear to investors.

Warsh's critical moment: Inflation data closes the door to "holding back"

The Fed's decision is under intense scrutiny, directly triggered by Friday's higher-than-expected core inflation reading. Warsh stated last month that if the Fed cannot "be confident enough, quickly enough, that underlying inflation is on its target," it will have "work to do." Latest data shows that this confidence has not materialized. Investors and economists now view a Fed rate hike as a near certainty, which would be the first increase in the benchmark interest rate by the US central bank in three years.

Support for interest rate hikes has been building within the Federal Reserve for some time. At the July policy meeting, three officials dissented from maintaining current interest rates and leaned towards raising them. On Wednesday, the Fed will also release its latest economic growth, inflation, and interest rate path projections, providing the market with more forward-looking signals.

Meanwhile, this week features a packed schedule of US economic data, including retail sales figures expected to rebound in August, as well as data on new home starts and industrial production.

Bank of Japan: The confidence to raise interest rates behind 30 years of wage growth

The Bank of Japan is expected to be another focus this week. A series of supportive data provides solid groundwork for this rate hike, including the largest wage increase in nearly three decades. If the rate hike occurs as expected on Friday, it will be the second this year, raising the policy rate to 1.25%.

On the same day, the Japanese government will release nationwide consumer price index (CPI) data for August, with inflation expected to rise by 2% year-on-year. Analysts believe that the interest rate hike may also provide further support for the yen, which has already shown signs of recovery recently.

Bank of England: Hold rates steady, but hawkish sentiment cannot be ignored.

The Bank of England's decision on Thursday is not currently expected to be a rate hike, but the outcome will still be closely watched. At its meeting at the end of July, three officials explicitly supported a rate hike; meanwhile, inflationary pressures in the UK continue to build – the overall inflation rate is projected to rise to 3.1% in August, a five-month high. This makes a rate hike as early as November a possibility that cannot be ignored.

Tuesday's employment data is expected to show broadly stable wage growth. In addition to the interest rate decision itself, the market will also be watching the Bank of England's annual announcement regarding the pace of its bond-holding reduction.

ECB and Canada: The Hawkish Puzzle is Becoming More Complete

The European Central Bank (ECB) completed a significant piece of its latest interest rate hike puzzle last Thursday. This marks the second tightening since the outbreak of the conflict with Iran. ECB Chief Economist Philip Lane will attend a two-day research conference this week, and President Christine Lagarde and her colleagues will also hold an informal meeting with EU finance ministers in Dublin.

In Canada, while the Bank of Canada kept interest rates unchanged earlier this month, it emphasized inflation risks in its statement. The meeting minutes, to be released on Wednesday, are expected to further reveal the balance of its policy. Against the backdrop of the escalating tariff war with the United States, Canada's August inflation data will also be released on Monday, providing a new reference for judging the economic trend.

Asia and Emerging Markets: Chinese Data and Brazilian Interest Rate Cut

On the Chinese data front, on September 15th, economic data for August, including industrial value-added, retail sales, national real estate development investment, and housing prices in 70 cities, were released. CICC Macro predicts that retail sales growth is likely to rebound, and the year-on-year growth rate of industrial value-added may reach 4.6%.

India's August inflation data will be released on Monday, with the market focused on whether price pressures will spread further in order to assess the Reserve Bank of India's interest rate hike window.

In Latin America, the Brazilian central bank is expected to announce its fifth consecutive 25-basis-point cut to its benchmark interest rate on Wednesday, lowering the Selic rate to 13.75%. Nevertheless, above-target inflation and persistent inflation expectations will likely make it difficult for the bank to commit to a more accommodative policy stance.

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