Macro
Canada and New Zealand are expected to raise rates on Fed day, while the ECB and Bank of Japan are seen holding
Five central banks set policy between October 28 and 30, and the two smaller ones are the most likely to tighten.
HedgeWeekly News Desk ·
The Bank of Canada and the Reserve Bank of New Zealand both announce rate decisions on Wednesday, October 28, the same day as the Federal Reserve, and both are expected to tighten. In a Reuters poll taken October 21 to 23, 19 of 34 economists forecast a quarter-point Canadian increase to 2.50%. In the previous poll, 80% had expected the bank to stay at 2.25% for the rest of 2026.
Canadian inflation rose to 3.1% in September, just above the Bank of Canada's 1% to 3% target band. Interest rate futures moved from about a 30% chance of an October hike to roughly three in four, Reuters reported. Five-year inflation expectations in the bank's third-quarter Business Outlook Survey climbed to 3.91% from 3.39%, according to Newsquawk. In New Zealand, ANZ, BNZ and ASB expect the official cash rate to rise 25 basis points to 3.00%, while Westpac expects a hold. That follows a third-quarter CPI reading of 3.7%, below the 3.8% Reuters poll forecast and still above the RBNZ's 1% to 3% target.
The European Central Bank meets on Thursday, October 29, and is not expected to raise rates. Newsquawk says the French fiscal and bond-market situation is seen as limiting further tightening. The Bank of Japan decides on Friday, October 30 and is expected to keep its rate at 1.25% after a September increase, with markets putting the chance of a December hike at around 80%. A Reuters poll found 94 of 100 economists expect the Fed to hold on Wednesday.
Why it matters: if Canada and New Zealand hike while the Fed, the ECB and the BoJ hold, rate gaps between the major economies will move in a single week. That matters for currency and rates positioning at macro funds. The Reuters poll tied Canada's change of course to oil, which reached $117 a barrel on Friday for the first time since May. The Reserve Bank of Australia is next on November 3, with markets pricing roughly even odds of a hike after Australia's September CPI on October 28. New Zealand also holds a general election on November 7.