European markets closed 1.2% lower as all eyes turned toward the Federal Reserve, with Societe Generale (SocGen) leading the losses with a 12% decline.

At the commencement of the trading week, European stock markets witnessed a sharp decline, setting the stage for what promises to be a week of significant central bank decisions.

The pan-European Stoxx 600 index experienced a notable drop of 1.18%, with every sector entering negative territory. Leading the losses were the health care and travel sectors, along with banks, all recording approximately 1.8% declines.

Market participants eagerly await the decision of the U.S. Federal Reserve, which is scheduled for announcement on Wednesday. While the prevailing consensus anticipates the central bank maintaining the current interest rates, investors are closely monitoring this event to gain insights into the Federal Reserve's stance on inflation.

In addition to the Federal Reserve's announcement, several other central banks worldwide are poised to make significant decisions this week. Australia's central bank will release minutes from its September 5 policy meeting on Tuesday, the Swiss National Bank is set to announce its latest rate decision on Thursday, and the Bank of Japan will conclude its monetary policy meeting on Friday.

Furthermore, the People's Bank of China is expected to disclose its loan prime rate decisions on the same Friday.

In Europe last week, the European Central Bank raised interest rates by 25 basis points, marking the tenth consecutive rate hike and bringing its main rate to a historic high of 4%.

Slovakian central bank chief Peter Kažimír poured cold water on the notion that the European Central Bank has concluded its interest rate hikes following last Thursday's increase. He remarked, "I wish last week’s interest rate hike was the last one. Nevertheless, common sense dictates, 'never say never.'" He emphasized that inflation and growth forecasts for December 2023 and March 2024 would determine whether the central bank is making consistent progress toward its inflation target.

Furthermore, he cautioned against premature speculation about the timing of future rate cuts, suggesting that if rates have indeed peaked, "we may have to stay camping here for quite some time and spend the winter, spring, and summer here."