Sept 11 (Reuters) - Policy makers at the Federal Reserve and the Bank of Japan are preparing key interest rate decisions against a backdrop of escalating conflict in the Middle East and rising energy prices.
Elsewhere, BRICS leaders meet in India and Swedes head to the polls in a tight election race that could give more sway to the far right.
Here's all you need to know about the coming week in financial markets by Nikunj Ohri in New Delhi, Rocky Swift in Tokyo, Lewis Krauskopf in New York and Amanda
Cooper and Marc Jones in London.
1/WAITING FOR WARSH
Markets head into a pivotal week wondering whether the Federal Reserve is finally ready to pull the trigger on a rate hike to tackle stubborn inflation.
Fed Funds futures point to markets leaning toward a quarter-point increase when policy makers announce their decision on Wednesday, though plenty of investors remain unconvinced. The central bank has kept rates unchanged throughout 2026, and some traders doubt that will suddenly change now.
Bets on a hike grew after new Fed Chair Kevin Warsh struck a hawkish tone last month and were bolstered by a hot August jobs report.
Adding to the suspense, Warsh has made clear he won't offer much forward guidance, leaving markets guessing not just about this meeting, but what comes next.
2/ BOJ'S NEXT ACT
The Bank of Japan may be the easiest central bank call of the month. Markets are all but certain policymakers will raise rates by 25 basis points to 1.25% on September 18, a level not seen in more than three decades.
The bigger question is what comes next. After plenty of jawboning by BOJ officials about the need for policy tightening, investors are already looking beyond September. Analysts see the BOJ's October and December meetings as live, while swaps fully price in rates reaching 1.5% by January.
The X factor is the yen. Propping up the currency became a de facto aim of the BOJ as the yen slumped, reaching a four-decade low in July. A recent rebound has eased that pressure, though investors remain sensitive to any renewed unwinding of yen-funded carry trades, which have rattled assets far beyond Japan's shores.
3/INFLATION FIRES
Oil's climb barely raised eyebrows for weeks. Now it has. Brent crude has surged back above $100 a barrel for the first time since July..
Physical prices are above $120. Diesel has hit record highs, jet fuel is nearing April's peaks. In Europe, natural gas prices are at their highest since late 2022, with winter approaching and gas storage at its lowest level for this time of year in 15 years.
Record-breaking heatwaves this summer have devastated crops and pastures in many regions, igniting the threat of food inflation. Meanwhile copper, vital for everything from power grids to AI hardware, has raced to record highs near $15,000 a tonne..
The number of fires central bankers are fighting is growing fast.
4/BRICS AND CLICKS
As BRICS leaders gather in New Delhi on September 12-13, India is pushing an idea that could test the bloc's ambitions: linking central bank digital currencies to make cross-border payments faster and cheaper.
The catch? Politics. Some members have strained relations, and digital currencies remain a niche experiment in much of the world. Iran and the UAE have severed financial ties amid the Middle East conflict, while India has long been cautious about deeper financial integration with China.
BRICS has flirted before with alternatives to the dollar, including talk of a common currency, but those plans went nowhere. A CBDC link-up may be more modest, yet any move that chips away at the dollar's dominance is likely to draw attention from markets - and irk Washington.
5/SWEDEN'S NAIL-BITER
Swedes go to the polls on Sunday in what is shaping up to be one of the country's tightest elections in years.
Prime Minister Ulf Kristersson's centre-right coalition has eroded the lead once held by Magdalena Andersson's centre-left opposition, turning what once looked like a comfortable opposition victory into a nail-biter race.
The bigger question is what happens afterwards. The anti-immigration Sweden Democrats, backing Kristersson's government since 2022, are pushing for cabinet posts and could gain unprecedented influence over policy, adding to a broader shift to the right across parts of Europe.
For investors, the focus is on spending plans. The government has already cut taxes on fuel and food, and is promising more tax breaks and free kindergarten places if it wins another term, putting fiscal policy back in the spotlight.
(Graphics by Pasit Kongkunakornkul, compiled by Karin Strohecker, editing by Alexandra Hudson)
