BI, ECB, and China Set to Decide Interest Rates Next Week Amid Global Market Volatility

Global financial markets are likely to face renewed volatility in the week of 20-24 July 2026, with a series of important economic agendas from China, Japan, Indonesia, and Europe set to capture market attention. The primary focus will be on central bank interest rate policies. Bank Indonesia (BI) will decide on its rate direction after aggressive tightening, while the European Central Bank (ECB) will determine whether to raise rates again following its first increase since 2023. China will also announce its benchmark interest rate amid slowing consumption and a property sector crisis, while Japan’s trade and inflation data could influence the yen and expectations for Bank of Japan (BOJ) policy.

On Monday, the People’s Bank of China (PBoC) is expected to keep its one-year and five-year Loan Prime Rates (LPR) unchanged at 3% and 3.5% respectively, marking the 14th consecutive month of steady rates. The cautious stance reflects concerns over energy inflation, yuan weakness, and geopolitical uncertainty, even as the economy requires support following a surprise contraction in retail sales and continued pressure on the property sector.

Japan’s June trade balance, due on Wednesday, is expected to show a deficit of JPY120 billion, an improvement from the previous month, though some estimates suggest the deficit could widen to JPY700 billion. A better-than-expected figure could strengthen the yen and raise expectations for BOJ policy normalisation, given robust export growth driven by global semiconductor demand.

Bank Indonesia is projected to hold its benchmark rate at 5.75% on Wednesday. The rupiah’s recent strengthening and inflation remaining within the target range of 1.5% to 3.5% have reduced the urgency for further hikes. BI has already raised rates by a total of 100 basis points since May, and holding rates steady is seen as a positive sentiment for the Indonesia Stock Exchange, particularly for banking, property, automotive, and consumer sectors.

The ECB is expected to keep its rate at 2.4% on Thursday, following a 25-basis-point hike in June. Market attention will focus on President Christine Lagarde’s statement for clues on whether the June increase was a one-off response to energy inflation or the start of a tightening cycle, with current data suggesting a 70% probability of a rate hike in September.