Market pricing now points to higher policy rate expectations across most major central banks by the end of the year, reflecting renewed concerns about inflation linked to geopolitical tensions. The Reserve Bank of New Zealand leads with 52 basis points of expected tightening, while markets imply 42 basis points for the European Central Bank, 37 basis points for the Bank of England, 26 basis points for the U.S. Federal Reserve, 21 basis points for the Bank of Japan, 16 basis points for the Bank of Canada, 15 basis points for the Reserve Bank of Australia, and 12 basis points for the Swiss National Bank.

Compared with the previous week, markets broadly shifted toward a more hawkish outlook after heightened tensions involving the United States and Iran renewed concerns that higher energy prices could keep inflation elevated. That repricing pushed expectations for tighter monetary policy across most major economies. Central banks, including the RBNZ, have acknowledged that geopolitical developments and energy costs have increased near-term inflation risks while remaining alert to the possibility that temporary price shocks could become more persistent.

The Federal Reserve was the main exception. Expectations for additional tightening eased after softer-than-expected U.S. inflation data reinforced the view that underlying price pressures are moderating, increasing confidence that inflation may have peaked even as other central banks face renewed inflation risks.

Markets remain focused on how long geopolitical tensions persist. A prolonged period of disruption could further weigh on global growth and financial markets while keeping inflation risks elevated, leaving investors closely watching for developments that could improve risk sentiment.