18.09.2026 - Hawkish, Hawkish, Hawkish
Three major central banks this week, and three hawkish messages.
After the Federal Reserve raised interest rates by 25 basis points on Wednesday, the Bank of England struck a distinctly hawkish tone yesterday, followed today by another rate hike from the Bank of Japan.
The BoJ raised its policy rate by 25 basis points from 1.00% to 1.25%, bringing Japanese interest rates to their highest level since 1995. The decision was made by a 7–2 vote, with two members preferring to wait. At the same time, Governor Kazuo Ueda signaled that the central bank has entered a new phase focused on preventing inflation from overshooting its target, leaving the door open for further rate hikes.
Yesterday, the Bank of England kept its Bank Rate unchanged at 3.75%, but the underlying message was clearly more hawkish. The decision was made by a 6–3 vote, with three MPC members already voting for an immediate 25-basis-point hike to 4.00%. The BoE also warned that rates may have to rise if the Middle East conflict and higher energy prices generate more persistent inflation pressures.
The message from global central banks is becoming increasingly clear: the Fed, ECB, BoE and BoJ are all increasingly focused on renewed inflation risks, particularly those coming from higher energy prices.
Markets:
Equities: relief rally seems already coming to an end with European indices down and US Futures falling back from intraday highs
Bonds: yields moving up again - US 2y yield above 4.73%, US 10y yield above 4.97%, Japan 10y yield 2.99%
Commodities: Oil prices unchanged after intraday rebound, WTI at USD 101/barrel and Brent around USD 104/barrel;
Precious metals prices unchanged after starting the day higher, gold USD 4’360/oz, silver above USD 66/ozCurrencies: US dollar moving higher - Japanese Yen falls despite the BoJ rate hike USDJPY 158
Cryptos: continued to rally - Bitcoin above USD 78k
Volatility: The VIX index unchanged below 16 (opportunity for hedging!)
My View: As mentioned yesterday, I expected the relief rally following the Fed announcement, but I also expected it to be short-lived.
The underlying problems have not disappeared. Tensions in the Middle East continue, while the global oil market remains under significant pressure. Saudi supply disruptions are affecting deliveries to European refineries, while diesel markets are becoming increasingly tight. None of this is the kind of news flow that would normally point toward sustainably lower energy prices.
For weeks, I have highlighted that markets were underestimating the situation in the oil market and that oil prices were trading too low relative to the underlying geopolitical and supply risks. That view remains unchanged.
In my opinion, oil remains the dominating factor for global financial markets in the short term.
The transmission mechanism is becoming increasingly important: Higher energy prices → higher transportation costs → renewed inflation pressure → upward pressure on bond yields → more pressure on central banks to raise interest rates → pressure on consumers and house owners
At the same time, consumer weakness continues to intensify as households face higher financing costs and increasingly higher energy and transportation expenses.
This combination, weakening consumers, persistent inflation, rising bond yields and increasingly hawkish central banks, is not fertile ground for risk assets. Quite the opposite.
Yet equity markets continue to show remarkably little concern, while volatility remains extremely low.
At some point, markets will have to confront this reality. The question is not whether these pressures matter. The question is when markets will finally start pricing them in.
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