HSBC: Falling Oil Prices Rewrite the Global Rate Path
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HSBC's latest global policy rates review reveals that easing Middle East tensions and declining oil prices have prompted the withdrawal of previously anticipated rate hikes across several developed markets. In the United States, the Federal Reserve maintained its benchmark rate at the inaugural meeting chaired by Warsh. The statement featured a more hawkish tone with less forward guidance. Nevertheless, HSBC continues to project the federal funds target range will remain unchanged throughout 2026 and 2027.
Similarly, the European Central Bank raised its deposit rate by 25 basis points to 2.25% in June. However, following the subsequent drop in oil prices, HSBC now expects the ECB to hold rates steady rather than implementing further tightening in 2026, with a 25 basis point cut anticipated in September 2027. The Bank of England also maintained its rate at 3.75%. HSBC has consequently removed its forecasted BOE hikes for July and September, now projecting a single cut in November 2027.
Conversely, monetary policy trajectories in Asia and emerging markets remain highly divergent. India, Indonesia, and the Philippines continue to face inflationary pressures and currency vulnerabilities, necessitating further monetary tightening. Indonesia recently hiked its rate to 5.75% to support the rupiah. Meanwhile, the Bank of Japan continues its gradual normalization, with HSBC expecting an additional 25 basis point hike to 1.25% in December.
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