Central Banks Prepare for Additional Rate Hikes Amid Persistent Inflation

Global central banks are recalibrating their monetary policies in response to persistent inflation and shifting economic conditions. Nomura’s experts predict that the US Federal Reserve will deliver another rate hike in December, followed by an extended hold through 2027. This contrasts with market expectations of three more rate increases, as the Fed aims to combat stubbornly high core inflation and rising energy prices.

The European Central Bank (ECB) is also expected to raise rates in December 2026 and March 2027, bringing the deposit rate to 3.00%. Despite resilient economic growth in the euro area, inflation remains a concern, driven by energy prices and geopolitical tensions. The ECB’s forecasts embed two additional rate hikes, with inflation projected to stay above target through 2028.

In Japan, the Bank of Japan (BOJ) is anticipated to raise rates in December 2026 and March 2027, reaching a terminal rate of 1.75%. The country’s core CPI is expected to evolve in three stages, with the second stage being critical in determining the terminal rate. The BOJ’s policy will be driven by risks rather than its main scenario, as it navigates the challenges of sustaining yen stability.

Across Asia ex-Japan, central banks remain hawkish due to inflation risks. In China, weak domestic growth momentum is expected to continue despite recent supportive measures. The outlook for the region remains constructive, supported by sustained AI demand and the normalization of energy supply chains.