Central banks face an energy-driven reality shift
The coming week in financial markets will be dominated by key central bank decisions, as policymakers confront a new and challenging reality following a sharp surge in energy prices. Investors are watching nervously how decision-makers will respond to the effects of the conflict in the Middle East, which has pushed oil prices above $100 per barrel. The main focus is on the US Federal Reserve, which will announce its decision on Wednesday. While interest rates are widely expected to remain unchanged at 3.50%–3.75%, forward guidance will be key.
Until recently, markets had been pricing in a series of rate cuts, but the energy shock has led investors to sharply revise these expectations. They now allow for only one reduction by year-end, and some analysts are even beginning to speculate about the need to return to rate hikes if inflation gets out of control.
Source: own calculations, as of 16 March 2026.
Global policymakers reconsider easing paths
Policymakers in other parts of the world face similar dilemmas. The Bank of Canada, the Bank of England and Sweden’s Riksbank are also making decisions this week, and in most cases the scenario of rapid monetary easing has been called into question.
