Global central banks prepare for calm May schedule

Central banks around the world are preparing for a calm schedule in May amid ongoing Middle East tensions and high energy prices due to the effective closure of the Strait of Hormuz.

With rising energy prices driving up global inflation estimates, central banks continue to be cautious.

The Reserve Bank of Australia (RBA), Sweden's Riksbank, Norway's Norges Bank, the Czech National Bank (CNB), the Reserve Bank of New Zealand (RBNZ), and the Hungarian National Bank (MNB) will make their monetary policy decisions next month.

The RBA and the RBNZ in Oceania, as drivers of the region's financial liquidity, are expected to tighten their policies.

The RBA is widely expected to hike its rate by 25 basis points to 4.35% after Australia's inflation came in at 4.6% on an annual basis in the first quarter, falling short of estimates but signaling strengthening — the highest price hikes occurring in the housing, transportation, and food and non-alcoholic beverages sectors.

The RBA raised its policy rate by 25 basis points to 4.1% in its last meeting, within estimates. The bank said inflation declined since its 2022 peak but gained momentum again in the second half of last year, with the Middle East crisis fueling inflation through sharp hikes in gas prices.

Money markets estimate with a 60% probability that the RBNZ will issue a 25-basis-point rate cut on May 27.

The monetary policy decisions of Sweden and Norway are on the agenda in May.

Riksbank is widely expected to maintain its rate at 1.75% on May 7, following its decision to keep rates unchanged in March amid the Middle East war, which the bank expects will slow growth down somewhat in the short term

Norges Bank is expected to maintain its rate at 4% on the same day as Riksbank, following a decision to keep its rates steady amid rising inflation and uncertainties over Middle East tensions.

In Eastern Europe, the CNB maintained its rate at 3.5% in March while its annual inflation stood below the 2% target at 1.9%. What the bank will do next remains uncertain in market expectations but it may maintain tightening amid rising energy prices and the impact of Middle East tensions.

The MNB decided to keep its rate unchanged at 6.25% in April amid geopolitical tensions affecting global inflation and growth outlook.