Fed Set to Lead Uneasy G-7 With Rates Kept on Hold This Week

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(Bloomberg) — Policymakers in the US and across the Group of Seven will probably keep interest rates steady this week while watching nervously for signs of higher energy costs fanning inflation.   

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Three days of decisions in Washington, Ottawa, London, Frankfurt and Tokyo are widely anticipated to result in unchanged borrowing costs across the club of rich nations, with each central bank seen keeping a hawkish eye on fallout from the Iran war. 

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The combined outcome may amount to a firm reiteration by global monetary officials of their readiness to act. That posture would contrast with the sanguine approach prevailing at the onset of the last energy shock in 2022, when many viewed spiking inflation as transitory. 

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The Bank of Japan will be first on Tuesday, with officials who spoke in the past week leaning toward holding off this month on a potential hike. 

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The Bank of Canada and the Federal Reserve on Wednesday are both expected by economists and investors to insist on waiting and watching events too, and the Bank of England and European Central Bank will almost certainly echo with similar messages on Thursday.

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While domestic conditions are key for all of them, events at the Strait of Hormuz, the Middle East pinch point of global energy supply, could well partly dictate the path of their monetary policy too. 

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What Bloomberg Economics Says…

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“In the week ahead, the Fed, ECB, BOE, BOJ, and BOC, among others, will probably leave policy rates unchanged amid persistent and volatile US-Iran tensions. We expect the Fed to hold rates steady until the fourth quarter, while the ECB and BOE keep the option to hike open.”

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—Estelle Ou, economist. For full note, click here

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A further tension overshadowing the holding pattern central banks are expected to adopt this week will be uncertainty over the Fed chair. The policy meeting may well be the last for Jerome Powell as head of the US central bank.

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The US Justice Department is ending an investigation into building-renovation cost overruns at the Fed, potentially clearing a path to confirmation for Kevin Warsh, President Donald Trump’s pick to take over from Powell.

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Elsewhere, Chinese purchasing manager indexes, US and euro-zone inflation and growth numbers, and rate decisions from Brazil to Botswana will be on the schedule for investors.

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Click here for what happened last week and below is our wrap of what is coming up in the global economy.

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US and Canada

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In the US, the economy probably accelerated at the start of the year, rebounding from a government-shutdown-driven slump at the end of 2025. 

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The initial snapshot of first-quarter gross domestic product is expected to show a 2.2% annualized advance, economists project ahead of figures due Thursday, helped by vigorous business investment. Consumer spending growth is forecast to soften slightly.