Markets materially raised their expectations for additional monetary tightening across major economies this week, with the Federal Reserve experiencing the sharpest hawkish repricing. Expectations of this kind are priced continuously from short-term interest rate markets, offering a real-time read on how traders anticipate each central bank's next move, and shifts in them are closely tracked for their implications for bond yields, borrowing costs, and currency valuations.

Rate-hike pricing by year-end:

• Fed: 28 bps (88% probability of a 25 bps hike at the next meeting; 12% probability of a 50 bps hike) — 88 bps by end-2027
• BoE: 21 bps (85% probability of a hike at the next meeting) — 94 bps by end-2027
• RBNZ: 20 bps (82% probability of a hike at the next meeting) — 83 bps by end-2027
• ECB: 20 bps (82% probability of a hike at the next meeting) — 71 bps by end-2027
• BoJ: 19 bps (76% probability of a hike at the next meeting) — 78 bps by end-2027
• BoC: 16 bps (64% probability of a hike at the next meeting) — 75 bps by end-2027
• SNB: 5 bps (82% probability of no change at the next meeting) — 63 bps by end-2027
• RBA: 1 bp (94% probability of no change at the next meeting) — 18 bps of rate cuts by end-2027

The 2027 pricing reflects the cumulative amount of tightening expected by the end of 2027, not the amount expected in 2027 alone. All figures are expressed in basis points, with one basis point equal to one-hundredth of a percentage point.

Federal Reserve

The Fed saw the most significant hawkish repricing this week, driven by Fed Governor Waller's hawkish remarks and hotter-than-expected US inflation data. Waller said he would support a 25 bps rate hike in December even if inflation improved, while warning that a 50 bps increase could prove necessary if inflation surprised to the upside. The December meeting has consequently become the immediate focal point for markets, with the size of any move explicitly tied to how incoming inflation data evolve.

October CPI subsequently came in above expectations, with headline inflation rising 0.4% m/m versus 0.3% expected and core CPI increasing 0.3% versus 0.2% expected. Increased US-Iran tensions have added to inflation concerns through the energy channel, reinforcing the hawkish pricing.

Bank of England

The BoE saw a hawkish repricing after better-than-expected UK GDP data and hawkish remarks from MPC members. The central bank raised rates by 25 bps to 4% at its last meeting in an 8–1 vote, with one member favoring a larger 50 bps increase.

The inflation outlook remains the main driver. UK CPI accelerated to 3.5% in September — well above the bank's 2% target — and the BoE expects inflation to approach 5% by mid-2027 as higher energy prices feed through the economy. Stronger-than-expected activity data and persistent domestic inflation pressures have also strengthened the case for further tightening, while the prolonged US-Iran conflict adds another layer of upside risk to inflation expectations.

Reserve Bank of New Zealand

The RBNZ unexpectedly kept rates unchanged at 2.75% in October in a 4–3 vote, despite markets fully pricing a rate hike. The decision reflected concerns about economic uncertainty and the need to assess the effects of previous tightening. Nevertheless, the central bank maintained a tightening bias.

Inflation remains above the bank's 1–3% target range. Higher fuel prices and broader underlying inflation pressures could require further tightening, and the latest increase in geopolitical tensions adds to those risks.

European Central Bank

The ECB has also seen a slightly hawkish repricing amid increasingly hawkish communication from policymakers. ECB policymaker Žigman recently described another December rate hike as a strong possibility while cautioning that policymakers need more data before deciding. The risk of higher energy prices feeding into wages and broader price-setting behavior remains a major concern.

Bank of Japan

The BoJ's hawkish repricing was driven by the central bank's increasingly confident assessment that underlying inflation has reached its 2% target. Governor Ueda recently signaled that the December meeting would include a discussion about another rate increase, suggesting the BoJ is becoming more comfortable with further policy normalization.

Japanese inflation is also expected to remain above the 2% target, partly reflecting the impact of higher energy prices. However, divisions persist within the BoJ, with some policymakers warning that further tightening could undermine the economic recovery.

Bank of Canada

The BoC is also expected to deliver another rate hike at its next meeting, despite economic data showing no urgency whatsoever. The central bank delivered its first rate hike since July 2023 in October, taking the policy rate to 2.5%. The decision reflected a deterioration in the inflation outlook, with persistently elevated oil prices and increasing evidence that businesses will eventually pass higher input costs on to consumers.

The BoC also revised its inflation outlook higher, expecting CPI inflation to average around 3% in 2027. Governor Macklem acknowledged that further tightening might be necessary, although policymakers intend to proceed cautiously given the uncertainty surrounding the economic outlook.

Swiss National Bank

The SNB remains the least hawkish central bank given limited signs of acceleration in underlying inflation. Although headline inflation has increased due to higher energy prices, the SNB has previously stressed that medium-term inflationary pressures remain relatively contained. There is also little evidence of second-round effects, meaning higher energy prices have not yet translated into broader and more persistent inflation. The Swiss franc's safe-haven appeal amid geopolitical uncertainty provides some additional protection against imported inflation.

Reserve Bank of Australia

Markets are not pricing any further RBA rate hikes; on the contrary, traders have started to price in rate cuts in 2027. The RBA raised rates five times this year, taking the Cash Rate from 3.60% to 4.85% in November. At the last meeting, three members voted against the increase as the appetite for further tightening faded amid softer labor market data.

The central bank's latest projections suggest inflation will remain above 3% until late 2027, but restrictive monetary policy is also expected to weigh on economic activity. Traders expect the cumulative impact of previous tightening to eventually weaken growth enough to allow rate cuts. That contrast makes the RBA the clearest outlier in this week's global repricing, underscoring how divergent regional inflation dynamics have become.