Big central banks say rate hikes are getting closer

• The Fed kept rates unchanged in an 8-4 vote, with three policymakers opposing the 'easing bias' language, suggesting the dovish stance may be removed as soon as June
• Australia's RBA leads G10 central banks with a 4.1% policy rate after two hikes this year, and markets see an 80% chance of another increase next week as inflation remains at 4.1%
• The ECB and BoE both held rates but signaled growing inflation concerns, with the ECB expected to hike as soon as June and markets pricing multiple increases across developed economies this year

Summary: Major Central Banks Signal Imminent Rate Hikes Amid Iran War-Driven Inflation Concerns

Major central banks held rates steady this week but warned of potential increases to combat inflation risks stemming from energy price surges triggered by the U.S.-Israeli war with Iran.

Federal Reserve: Kept rates unchanged (8-4 vote) but faced unprecedented dissent, with three policymakers opposing the "easing bias" language. Chair Jerome Powell indicated potential statement changes by June. Markets expect rate cuts eliminated and possible hikes in early 2027.

European Central Bank: Held rates at current levels but signaled June hike likely after "lengthy" policy discussions. President Lagarde confirmed unanimous decision to hold but acknowledged growing inflation concerns.

Bank of England: Maintained rates at 3.75% with one dissenting vote for a hike. The BoE abandoned standard forecasts, instead presenting three scenarios, including one requiring "forceful" rate increases.

Australia (Highest Rate at 4.1%): After two hikes this year, markets price 80% probability of another increase next week, with two more expected by year-end. Q1 inflation hit 4.1% year-over-year, exceeding the 2-3% target.

Other Key Developments

• Norway (4%): May raise rates 1-2 times this year; core inflation at 3.0%
• Japan (0.75%): Three dissenters pushed for immediate hikes; yen weakness complicating policy
• Switzerland (0%): Lowest G10 rate; relying on FX intervention; inflation hit 1.3% in March
• New Zealand & Canada (both 2.25%): Markets pricing multiple hikes despite inflation within target ranges

The coordinated hawkish pivot marks a significant shift as central banks prioritize inflation control over growth concerns amid geopolitical energy shocks.