The key events for the w/c 23 March 2026: Prelim S&P PMIs March, global CPI reports: Japan, Aus, and the UK
Macro Recap: The Central Bank Response
The conflict in the Middle East has now entered its fourth week, with the Strait of Hormuz remaining closed. Markets are closely watching developments around the US ultimatum to reopen the Strait, with headline risk elevated in both directions.
Against this backdrop, last week’s central bank meetings provided important insight into how policymakers are assessing the risks of this evolving shock. While policy decisions diverged, a common theme emerged: central banks have shifted into a more conditional stance, balancing rising inflation risks from energy prices against uncertainty around the duration and impact of the conflict.
But as policymakers moved to manage expectations, global bond markets responded with a notable sell-off, pushing yields higher as investors began to price in the inflationary implications of a prolonged energy shock.
RBA: +25bps Hike
This was the second consecutive hike by the RBA, which signalled a pull-forward of its expected May hike. The primary driver of the decision was the further upside risk to inflation due to the energy price shock, occurring against a backdrop where inflation was already “too high”. The 5-4 decision in favour of a hike (versus hold) reflected a Board split on when to hike, not whether to hike.
“The Board concluded that the cash rate was not at a level consistent with returning inflation to target within a reasonable time frame.” RBA Governor Bullock
BoE: Hawkish Hold
The decision to stay on hold was unanimous. Before the onset of hostilities, markets had priced the possibility of a cut at this meeting. The decision to hold reflected a sharp pivot from the “continued disinflation” narrative to the expected inflation risk “caused” by this conflict. As a result, guidance shifted from “expecting more cuts” to “stand ready to act”. The key friction, however, stems from a growth and labour market backdrop that is far more subdued than during the energy price shock in 2022, a point noted by Governor Bailey.
“The recent experience of high inflation may also make households and businesses more sensitive to a new inflationary shock. At the same time, the starting point for this shock is a real economy with limited pricing power. Holding Bank Rate at this meeting is appropriate.” BoE Governor Bailey
BoJ: Hawkish Hold
The BoJ retained its guidance for hikes and policy normalisation. The decision to hold maintained the balance between achieving its inflation target through the “virtuous cycle” of wages and prices while the economy continues to recover. Governor Ueda expects that downward growth impacts from the conflict would likely be temporary; if so, rate hikes remain on the table. He also noted concern among Board members that inflation risks were skewed to the upside by energy prices. Furthermore, Takata’s dissent explicitly highlighted a key friction: upside risks to inflation against an inflation backdrop already largely at target with inflation expectations rising ‘moderately’.
“Even if economic growth were to decline, if that development is temporary and there’s not so much impact on the trajectory of the price trend then of course it will be possible to raise interest rates,” BoJ Governor Ueda
FOMC: Hold
A more neutral decision by the FOMC, albeit with hawkish undertones. The hold was based on the ongoing tension in the Fed’s dual mandate goals, where upside risks to inflation exist against the backdrop of downside risks to the labor market. While Chair Powell noted several times that it was “too soon” to establish the scope and duration of the conflict’s impact, committee members upgraded their growth and inflation outlooks. During the press conference, Chair Powell highlighted a lack of progress on core goods inflation. The FOMC maintained its easing bias, but trimmed expectations to a median of one cut this year.
“Not as much as we had hoped, but some progress on inflation. It should come as we start to see in the middle of the year, progress on tariffs going through once and then tariff inflation coming down. That’s — we should be seeing that. And the rate forecast is conditional on the performance of the economy. So if we don’t see that progress, then you won’t see a rate cut.” Fed Chair Powell
ECB: Hawkish Hold
The decision to stay on hold maintained its “Three Times Two” (2% Target, 2% Expectations, 2% Rates) baseline. However, risks have diverged, with forecast revisions for higher inflation and lower growth due to energy prices. Europe is at the forefront of this unfolding energy price shock, and uncertainty remains elevated. The ECB outlined two key scenarios for action and signalled greater agility and preparedness in the face of this latest shock.
“I think we are both well positioned and well equipped to deal with the development of a major shock that is unfolding, and we will continue doing that.” ECB President Lagarde
BoC: Dovish Hold
The decision to stay on hold primarily cited recent weaker activity and downside growth risks, while remaining alert to the inflationary risks from rising energy prices. The BoC has been lowering rates (now at the lower floor of ‘neutral’) to support the economy through structural trade and tariff adjustments; inflation slowed to +1.8% in Feb. While the Bank would look through the immediate impact on inflation, it remains committed to preventing those effects from broadening and becoming persistent. The BoC appears alert to a policy error – hiking into weakening economy in early 2026 – and shifted guidance, removing “the policy rate remains appropriate”.
“With inflation close to target and the economy in excess supply, the risk that higher energy prices quickly spread to the prices of other goods and serviceslooks contained.” BoC Governor Macklem
Outlook for the week ahead: Prelim S&P PMIs March, global CPI reports: Japan, Aus, and the UK.
The week ahead is relatively light on data, but the macro backdrop remains dominated by geopolitical developments and their implications for energy prices and inflation.
Geopolitical risks will remain elevated, as the start of the week remains within the US 48-hour ultimatum window for Iran to reopen the Strait of Hormuz. Headline risks remain elevated in both directions.
Of most interest on the data front this week will be the S&P preliminary PMIs for key developed markets at the start of March. These releases may provide some of the first indications of how the conflict is beginning to impact business activity, pricing, and sentiment.
There will also be several important CPI reports for Japan, Aus, and the UK for Feb.
Key factors & events to watch this week:
S&P Prelim PMI’s for March
- While it may be too early for a broad view, the PMI reports may provide some of the first insights into business impacts as the conflict began. Specifically: prices, business outlook sentiment, and supply chain impacts.
FOMC speeches
There will be several Fed speeches this week. Of note will be Vice Chair Jefferson speaking on the Economic Outlook and Energy Effects on 26 Mar. Governor Barr will also speak on the Economy on the same day. Other scheduled speeches will be noted in the calendar.
Global CPI reports – Feb
- Japan: National Core CPI ex fresh food is expected to slow to +1.7% in Feb, from +2% in Jan.
- Australia: Headline CPI is expected to be unchanged at +3.8% in Feb.
- UK: Headline CPI is expected to be unchanged at +3% in Feb, while core CPI is also expected to be unchanged at +3.1% in Feb.
This week, the US Treasury will auction and settle approx $518bn in ST Bills & FRNs, raising approx. $1bn in new money. Approx $14bn in ST Bills will mature on the Fed balance sheet and will be reinvested. The US Treasury will also auction the 2-year, 5-year, and 7-year Notes this week – to settle on 31 Mar/next week.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
