Central banks tighten monetary policy amid rising inflation

Major central banks are tightening monetary policy in response to rising inflationary pressures, particularly driven by increased energy prices linked to conflicts in the Middle East.

The European Central Bank (ECB) recently raised its three official rates by 25 basis points, bringing the deposit rate to 2.50%. While the ECB has raised growth forecasts for 2026 and 2027, inflation is expected to remain above the 2.0% target through 2028.

Other significant moves include interest rate hikes by the U.S. Federal Reserve and the acceleration of monetary normalization by the Bank of Japan. Meanwhile, the Bank of England has maintained current rates but adopted a more restrictive stance. These shifts challenge previous market expectations of monetary easing, suggesting that interest rates may remain elevated for a longer period.