Fed Hike Ignites Warning of More Rate Increases Ahead

The Federal Reserve raised interest rates for the first time since 2023, joining the European Central Bank and Bank of Japan in a sudden return to monetary tightening. The OECD now says this shift isn't finished yet: inflation will run hotter than expected across almost the entire G20 in 2027, requiring another Fed hike this year and additional tightening across several major economies.

The Paris-based organization raised its inflation forecasts from June for every G20 economy except China and Saudi Arabia. Its chief economist, Stefano Scarpetta, said central banks need to remain 'very vigilant' as renewed energy shocks collide with stronger-than-expected demand while inflation in many countries is already above target.

The OECD expects the Fed to raise rates once more before year-end after its September increase. It also sees further modest hikes from the ECB, Australia and South Korea, additional increases from the Bank of Japan, and no immediate changes from the Bank of England or Bank of Canada.