07:08 AM EDT, 03/20/2026 (MT Newswires) -- Three weeks ago, there was a diverse range of outlooks for developed market central banks, said National Bank of Canada.

For some, rate stability was expected -- such as the European Central Bank and the Bank of Canada -- while others were primed for modest tightening -- for example, the Reserve Bank of Australia -- or easing (Federal Reserve), noted the bank.

This landscape has been turned on its head and now, traders have built in a tightening bias in most jurisdictions, stated National Bank.

This ongoing repricing comes almost exactly four years after the global economy's last big supply shock, when Russia invaded Ukraine in February 2022. Back then, the impact on rate expectations was notably less pronounced -- even though central banks had significantly more room to tighten, with most policy rates still near zero, and inflation was starting from a higher level.

Indeed, the jump in oil prices wasn't as sharp in 2022 -- rising "only" $10/barrel in the first three weeks of the conflict -- but the level of oil prices in March 2022 is roughly comparable with today, pointed out National Bank.

There's clearly less tolerance for inflation now after seeing how problematic -- not transitory -- it proved a few years ago, added the bank. Still, some central banks appear willing to look through this initial wave of energy price increases.

That's easier for central banks like the BoC, where price stability was intact before the war and the underlying economy was struggling. Other central banks, like the Bank of England and Federal Reserve, may have shorter leashes given the starting point for inflation.

For all central banks, the ability and time afforded to look through the supply shock depends on the evolution of inflation expectations -- beyond the near term, according to National Bank. These have understandably risen over recent weeks, but for the most part, are reasonably well anchored.

Keeping them so will be paramount, or else a tighter policy will be required, regardless of what domestic economic conditions suggest is appropriate, concluded the bank.