Frederik Ducrozet, Head of Macroeconomic Research, Nadia Gharbi, Senior Economist, and Thomas Costerg, Senior US Economist, at Pictet Wealth Management give you their predictions for the various central bank meetings next Wednesday and Thursday (14-15 December 2022).

We expect central banks to slow the pace of tightening but hint at higher terminal rates

• Major central banks meeting next week each face different macroeconomic conditions but a similar challenge. They will need to balance the need for a more gradual approach, following one of the fastest monetary tightening cycles in history, with lingering inflation risks, including concerns over wage growth and second-round effects.
• We expect the Federal Reserve (Fed), the European Central Bank (ECB), the Bank of England (BoE) and the Swiss National Bank (SNB) to hike their policy rates by 50 basis points next week. Their communications should remain hawkish, consistent with higher terminal rates and no early rate cuts.
• The Fed will likely highlight the risk a still-tight labour market fuels a wage-price spiral. The ECB will express similar concerns over wage growth and present the broad principles of its plans for quantitative tightening. The BoE looks likely to prioritise the fight against inflation over economic pain even though the UK economy has likely entered recession already. The SNB is not done yet with its hiking journey despite lower inflation than in other countries and it will likely signal that it is too early to let the Swiss franc weaken.