Global FX: Divergent central bank paths and Oil – Wells Fargo

Wells Fargo Economics has raised its global Gross Domestic Product (GDP) forecast to 2.7% for 2026 and trimmed global Consumer Price Index (CPI) to 4.3%, reflecting a slightly lower Oil price path. They expect final hikes from the European Central Bank (ECB), Reserve Bank of Australia (RBA) and Bank of Japan (BoJ), a possible short cycle from the Bank of England (BoE), while the Bank of Canada (BoC) likely holds and emerging market central banks pursue mixed easing and tightening.

Mixed policy moves across major banks

"We have raised our global GDP growth forecast to 2.7% this year, and have trimmed our global CPI inflation forecast by two-tenths to 4.3% to reflect a modestly lower average oil price path."

"We expect final hikes from the European Central Bank, the Reserve Bank of Australia and the Bank of Japan, and potentially the start of a short hiking cycle from the Bank of England, where the Ofgem price cap has delayed some of the pass-through of the recent spike in energy prices."

"Others, like the Bank of Canada, however, are more likely to hold rates steady as they determine whether commodity-driven price increases begin to feed more meaningfully into underlying inflation."

"Among emerging market economies, policy is more divergent. We expect further easing from the People’s Bank of China as domestic demand remains soft, Brazil’s central bank to continue cutting as inflation moderates, tightening from the Reserve Bank of India and Banxico to remain on hold."