Global Central Banks Brace for More Rate Hikes as Inflation Risks Rise

Major global central banks are facing renewed pressure to raise interest rates as persistent inflation, resilient economic growth and rising energy prices complicate the monetary policy outlook.

The European Central Bank increased rates by 25 basis points on Thursday, while upcoming Federal Reserve and Bank of Japan meetings could deliver further tightening.

Australia’s central bank has raised rates three times this year to 4.35%, reversing last year’s cuts. Another increase remains possible after stronger-than-expected July inflation.

Norway’s policy rate stands at 4.25%. Norges Bank held rates in August as inflation eased, although markets still expect another 25-basis-point increase before year-end.

The Bank of England is expected to maintain its 3.75% rate next week. However, three policymakers supported a hike in July, and markets anticipate another increase this year.

In the United States, traders see more than a 50% probability of a Federal Reserve rate hike next week. Strong employment data and hawkish signals from policymakers have strengthened expectations for tighter policy. Fed Chair Kevin Warsh has also indicated he intends to avoid relying heavily on forward guidance.

New Zealand recently lifted its policy rate for a second consecutive meeting to 2.75%. Further tightening remains possible, although officials have signaled a more measured approach.

The ECB, meanwhile, delivered its second rate increase of 2026 as higher energy costs threaten to keep inflation elevated. Markets expect at least one additional hike before year-end.

Canada held rates steady last week, but Governor Tiff Macklem warned that multiple increases could be necessary if inflation stays high. Sweden is expected to keep its rate at 1.75% this month despite markets anticipating tightening later in 2026.

The Bank of Japan could raise rates to 1.25% next week as inflation concerns intensify, with economists expecting the rate to reach 1.75% by the second quarter of 2027.

Switzerland remains the most dovish among major developed economies. The Swiss National Bank is expected to hold its policy rate at 0% on September 24, supported by a strong franc that continues to restrain inflation.