Big central banks say rate hikes are getting closer
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Major central banks left interest rates unchanged this week but warned that they could raise them soon to prevent a jump in energy prices, caused by the U.S.-Israeli war with Iran, spilling over into a surge in broader inflation.
The Federal Reserve kept rates steady but three policymakers felt the reference to an “easing bias” in the policy statement was no longer appropriate, while central banks in Europe and Japan hinted that they will hike rates at upcoming meetings.
Here’s where the 10 developed market central banks stand, ranked from the highest policy rate to lowest:
A multiple line chart showing the policy rates of G10 central banks.
1/ AUSTRALIA
The Reserve Bank of Australia has raised rates twice this year, now to 4.1% – the highest rate in the G10. Markets see around an 80% chance it’ll hike again next week, and expect at least two increases by year-end.
Inflation is running hot. Wednesday data showed headline inflation at 4.1% in the first quarter compared to a year earlier, well above the RBA’s 2-3% target range, though the core measure, at 3.5% offered a modicum of relief.
A line chart with the title ‘Australia’s inflation and interest rates’
2/ NORWAY
Norges Bank also meets next week having said it may raise rates once or twice this year to rein in renewed inflation pressures from strong wage growth and higher energy costs.
It kept rates on hold in March at 4%.
Core inflation, at around 3.0% in March, has exceeded its target of 2% each month since early 2022.
A line chart with the title ‘Norway’s inflation and interest rates’
3/ BRITAIN
The Bank of England left its key rate steady at 3.75% on Thursday, with one vote for a rate hike.
The BoE also scrapped its usual practice of publishing a central forecast for inflation and other key economic indicators, instead producing three scenarios, the most extreme of which could require a “forceful” increase in borrowing costs.
A line chart with the title ‘Britain’s inflation and interest rates’
4/ UNITED STATES
The Fed left rates unchanged on Wednesday in an 8–4 vote, the narrowest split in decades. Three officials opposed a tilt toward easing and one voted for a rate cut.
The Fed kept the “easing bias” in its policy statement, but outgoing Chair Jerome Powell said that a change could conceivably be made as soon as June.
Traders expect the Fed will skip rate cuts in 2026 and possibly raise rates in the first half of 2027.
A line chart with the title ‘US inflation and interest rates’
5/ NEW ZEALAND
The Reserve Bank of New Zealand held rates at 2.25% earlier in April. Its governor said this week that measures of core inflation were stable within its 1-3% target band in the first quarter though it was ready to act if needed.
Markets are pricing three hikes by year-end.
A line chart with the title ‘New Zealand’s inflation and interest rates’
6/ CANADA
The Bank of Canada held rates steady at 2.25% on Wednesday, saying higher oil prices would benefit Canada by boosting export revenues, while modestly squeezing businesses and consumers.
The BoC assumed oil prices would fall to $75 a barrel by mid‑2027, and if so its policy rate was about right. But it said it would respond swiftly if inflation proved persistent.
Inflation rose to 2.4% in March, within the BoC’s target range.
A line chart with the title ‘Canada’s inflation and interest rates’
7/ EURO ZONE
The ECB is also biding its time for now. It too left rates unchanged at 2% on Thursday but signalled its rising concerns over soaring inflation, bolstering bets it would lift rates several times this year with an initial move likely as soon as June.
