Central Banks Go Hawkish as Energy Costs Rise and Inflation Persists

Major central banks around the world have taken on a more hawkish tone as energy costs rise and inflation pressures persist.

The European Central Bank increased interest rates by 25 basis points, following a similar hike earlier this year. Markets expect at least one more rate increase by the end of the year, with some predicting a deposit rate above 3% in 2027.

Elsewhere, the Federal Reserve's meeting next week is expected to bring further monetary tightening, with markets pricing in over a 50% chance of a rate hike. The Bank of Japan is also set to raise rates, potentially to 1.25%, although some BOJ members have hinted at the need for rapid hikes if inflation accelerates.

However, not all central banks are expected to tighten their policies. Sweden's Riksbank is seen as dovish and likely to keep its key policy rate unchanged at 1.75% when it meets later this month.