Interest Rate Outlook — September 2026
Monthly macro report · published 18 Sept 2026
Where the rate cycle stands
September’s reporting points to renewed tightening pressure rather than a synchronised easing cycle: the Fed and BoJ have raised rates, while the BoE has held and the ECB faces renewed inflation pressure. Our base case is a pause at each bank’s next decision, with December providing another opportunity to respond to persistent inflation or weakening activity. Energy costs and inflation expectations are increasingly important constraints on late-cycle policy flexibility. Next-meeting probabilities are desk estimates of likely market pricing; the supplied Fed pricing refers to September and December, not October.
Next decision — what is priced in
| Central bank | Current rate | Next decision | Expected action | Implied odds |
|---|---|---|---|---|
| Federal Reserve Fed funds target range | 3.50–3.75% | Oct 28, 2026 | Hold | 60%low |
| European Central Bank Deposit facility rate | 2.25% | Oct 29, 2026 | Hold | 60%low |
| Bank of England Bank Rate | 3.75% | 5 Nov 2026 | Hold | 65%medium |
| Bank of Japan Policy rate | 1.00% | 30 Oct 2026 | Hold | 70%low |
Implied odds are model-derived estimates of market expectations, built from macro data and published central bank guidance — not exchange or futures pricing. Commentary, not investment advice.
Sources used this month: Implied odds are model-derived estimates of market expectations, built from published central bank guidance, current market reporting and macro data — not exchange or futures pricing. Sources read on 2026-09-18: Federal Reserve press releases, ECB press releases, Bank of England news, Bank of Japan releases, Investing.com economic indicators, CNBC economy.
Federal Reserve — Hold expected on Oct 28, 2026
2026 so far: Our working estimate is broadly steady policy through July followed by the reported September hike, assumed to be 25bp, leaving roughly 25bp of net tightening in 2026.
The range represents the rounded 3.63% midpoint required by the database anchor; that August observation and the subsequent report of a September hike create a timing inconsistency in the supplied evidence. We favour an October 28 pause to assess inflation persistence against subdued hiring, with December 9 the stronger candidate for another increase. September 14 reporting put the September hike probability above 92% and another December increase above 75%; neither figure measures October pricing, for which our hold estimate is 60%.
European Central Bank — Hold expected on Oct 29, 2026
2026 so far: Our working estimate is broadly unchanged policy before a 25bp September increase, implying approximately 25bp of net tightening in 2026.
The estimated 2.25% deposit rate assumes that the September hike anticipated in reporting occurred; the supplied September 10 decision headline does not itself establish the outcome. Inflation reportedly above 3% and rising household expectations argue against easing, but modest growth supports an October 29 pause before reassessment on December 17. The 60% hold probability is a desk estimate rather than quoted market pricing.
Bank of England — Hold expected on 5 Nov 2026
2026 so far: Our working estimate is around 25bp of net easing earlier in 2026, followed by holds into September, with the September 17 hold at 3.75% explicitly confirmed.
The confirmed September hold, despite reported inflation of 3.1%, supports continued restraint rather than an immediate move to match the Fed. We favour another hold at the November 5 projection round, with December 17 depending on whether energy pressure feeds into wages and services prices or weak activity restrains demand. Our 65% probability is a desk estimate of likely market pricing, not a figure supplied by the feeds.
Bank of Japan — Hold expected on 30 Oct 2026
2026 so far: Our working estimate is two 25bp increases during 2026, including the reported September 18 hike, for approximately 50bp of cumulative tightening.
Reporting establishes that September’s hike occurred; the 1.00% policy rate and cumulative increase are working estimates because the supplied account gives no rate level or increment. Core inflation near target favours an October 30 pause, although the yen’s reported weakening after the hike could strengthen the case for another increase on December 18 through import-price pressure. The 70% hold probability is a desk estimate, while the softer yen and lower bond yields suggest the decision did not trigger a straightforward hawkish repricing.
What would change the outlook
- Further energy-price increases or higher inflation expectations could bring forward additional tightening, particularly at the Fed and ECB.
- Sharper deterioration in employment or demand could extend pauses and reopen the case for cuts.
- Persistent UK wage and services inflation could turn the November projection round towards a hike.
- Further yen depreciation could accelerate BoJ tightening despite core inflation remaining near target.
- Reconciliation of the Fed’s mandated database anchor with September reporting, and fuller ECB and BoJ decision details, could materially change estimated rate levels and cumulative moves.
Track the rate cycle live
- 2026 FOMC calendar & interest rate decision dates
- ECB meeting schedule 2026
- Bank of England meeting schedule 2026
- Bank of Japan meeting schedule 2026
- CPI release schedule 2026 — the inflation prints each decision is built on.
- Economic calendar — every macro release, with impact ratings.