Within just over a week, the European Central Bank, the Federal Reserve and the Bank of Japan all raised interest rates, while the Bank of England held steady. The ECB lifted its deposit rate to 2.50% and said higher energy costs could keep inflation above its 2% goal well into 2027. In the US, the Fed delivered a further 25-basis-point increase and signalled a steeper policy-rate path, while the BoJ raised rates by 25 basis points to 1.25% as it continues to unwind ultra-loose settings.
Central Bank Policy Shifts and Rate Movements
Policy signals converged as central banks focused on second-round effects, where energy shocks feed into core inflation via wages, pricing behaviour and expectations. The BoE kept rates on hold at 3.75%, but forecast consumer prices exceeding 4% in early 2027 and maintained a hawkish stance. Officials also leaned on resilience in activity: the ECB pointed to firmer consumption, investment and services, the Fed upgraded growth projections, and the BoE revised third-quarter growth forecasts higher. Japan’s underlying inflation was described as nearing target, with wage pass-through and rising inflation expectations supporting further normalisation.
