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But policymakers must also contend with cooling economies, with U.S. post-COVID job creation possibly topping out and a gas supply crunch potentially throwing Europe into recession.
Here is your week in markets from Dhara Ranasinghe, Karin Strohecker and Sujata Rao in London; Kevin Buckland in Ottawa and Lewis Krauskopf in New York.
1/ WINTER IS COMING
Even as Europe confronts record-high temperatures, gas shortages have got officials bracing for a cold, dark winter.
Russia's Gazprom has cut flows through the Nord Stream 1 pipeline to a fifth of capacity, and the EU is urging members to curb usage and store gas for winter.
European gas prices are up almost 200% so far this year and the longer this shock continues, the worse economies will fare.
With Germany's mighty industrial complex accounting for 36% of the country's gas demand, business activity is slowing there and consumer confidence has hit record lows. Eurozone recession may arrive by early-2023, JPMorgan warns.
2/BOE-ING
The Bank of England started early, but has raised rates in smaller steps than its peers which are tightening policy in 50, 75 and even 100 basis-point increments. But a half-percentage point rise to 1.75% is possible on Aug. 4, which would be the biggest since 1995.
JPMorgan and HSBC are among those predicting a 50 bps move. While only three BoE policymakers favoured 50 bps at the last two meetings, data since then has shown inflation reaching 9.4%, a 40-year high. It could hit 12% by October - six times the BoE target.
Governor Andrew Bailey has pledged to act forcefully if needed. Yet, given the BoE sees barely any UK economic growth before 2025, a Reuters poll forecasts, by a slim margin, the BoE will stick with 25 bps.
The bank must then contend with the risk that a smaller hike triggers a sterling selloff, further fanning inflation.
3/ U.S. JOBS
A barrage of Federal Reserve rate hikes is slowing U.S. house price growth and forcing consumers to tighten their belts. Friday's non-farm payrolls data will show whether it is also impacting the red-hot employment market.
Given the Fed now favours a data-dependent approach over explicitly guiding markets on policy, the jobs figures and other numbers due over the next eight weeks until the next Fed meeting, carry added importance.
Employers are already becoming less enthusiastic on taking on staff, with corporations from Tesla to Goldman Sachs warning of slower hiring.
Analysts polled by Reuters estimate 255,000 jobs were added last month, following June's forecast-beating print of 372,000. A far smaller number may bolster the view that the Fed has reached "peak-hawkishness."
4/HIGHER DOWN UNDER
Traders have eased off bets on a 75 bps Australian rate hike at Tuesday's Reserve Bank meeting. But with inflation at the hottest in 21 years, a half-point hike looks like a done deal.
Latest data showed consumer prices climbing at a 6.1% annual pace, more than double the 2-3% target, and double the pace of wage growth. And Treasurer Jim Chalmers warns it will get worse before it gets better.
RBA Governor Philip Lowe has indicated rates, currently at 1.35%, will rise toward a "neutral" level of at least 2.5%, though markets expect them to top out at 3.75%.
Initially wrong-footed by flaring inflation, Lowe has overseen three consecutive hikes since May - the most aggressive action in decades. That tardiness, and the way it communicated its intentions, have prompted a government probe into RBA policies and governance.
5/BRAZIL BREATHER
The four countries investors once grouped under the BRIC umbrella - Brazil, Russia, India and China - were always vastly different. That divergence shows up these days even in their relative monetary policy direction.
Uber-hiker Brazil, which jacked up rates by 1,125 basis points since March 2021, is expected to keep the benchmark at 13.35% when policymakers meet on Wednesday and leave it there for the remainder of 2022 before easing in 2023.
Meanwhile for India, a late entrant in the current round of global monetary policy tightening, the only way is up. The central bank intervened heavily in recent weeks to lift the rupee from a succession of record lows. A Reuters poll predicts Indian policymakers, who meet on Thursday, will lift rates from the current 4.90% by another three-quarters of a percentage points by end-year.
(Compiled by Sujata Rao, editing by Tomasz Janowski)
