If financial markets are on the money, it looks like there’ll be even more rate hikes from major central banks this year, including in Australia.
That point is rammed home by the chart below from the National Australia Bank (NAB).
It shows market pricing for a 25 basis point interest rate increase from the US Federal Reserve, the Bank of Canada and the Bank of England, all major central banks that increased policy rates last year.
Based on current market pricing, the Bank of Canada (BoC) is tipped to be the most aggressive major central bank in 2018 with financial markets pricing in the likelihood of at least three quarter-point increases, potentially four.
The BoC holds its January policy meeting on Wednesday this week (Thursday 2am AEDT) with markets pricing in a 85% probability that interest rates will increase to 1.25%.
While not to the same degree as their colleagues to the north, the US Fed is also tipped to raise rates several times this year with financial markets expecting at least two rate hikes with the risks skewed towards three.
Across the Atlantic, the Bank of England is also seen lifting its bank rate at least once.
Potentially joining those central banks on the policy tightening path, Australian overnight index swaps currently put the probability of a 25 basis point increase from the Reserve Bank of Australia (RBA) at just under 100%.
Currently, it’s not quite a lock but very close to it.
If the RBA do increase rates, it will mark the first time since late 2010 that official interest rates have increased.
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