By Alun John
LONDON, June 18 (Reuters) – The agreement between the United States and Iran to end their war, and the subsequent fall in oil prices, are good news for central bankers worried that high energy costs will spill over into broader price pressures.
Still, four developed market central banks are in hiking mode already, and several others, including the U.S. Federal Reserve, said this week they stood ready to act if inflation built.
Here’s where central banks in the Group of 10 developed economies stand, ranked from the highest policy rate to the lowest.
1/ AUSTRALIA
The Reserve Bank of Australia has raised interest rates three times this year to 4.35%, the highest in the G10, to head off a global energy shock, fully reversing the amount of cuts it made last year.
It paused this week, saying tighter financial conditions were slowing the economy, though warned it could hike again. Markets see around a 50% chance of a further increase later this year.
2/ NORWAY
Norway’s central bank held rates steady at 4.25% on Thursday but said inflation was too high and that borrowing costs would likely be raised again later this year.
The Norges Bank raised its policy rate in May, and annual core inflation rose unexpectedly that month to 3.4%.
3/ BRITAIN
The Bank of England kept interest rates on hold at 3.75% in June, as it has since the start of the U.S.-Iran war, given the unclear strength of increased inflation pressures.
The BoE said it was too soon to declare the inflation threat over, but just two of its nine rate-setters voted to hike at Thursday’s meeting.
It expects inflation to rise above 3.25% in the final quarter of this year, up from 2.8% in May, though this is a smaller increase than it projected in April under two of its three main scenarios. Markets see at least one hike this year.
4/ UNITED STATES
Kevin Warsh’s era as Federal Reserve chair began with a jolt on Wednesday. While the Fed held rates steady as expected, new projections and comments from Warsh blindsided traders and led markets to price in a possible hike within months.
The Fed produced a stripped down monetary policy statement, but quarterly projections showed nine Fed officials now anticipate a hike in rates by end-2026.
Markets see a good chance of a rate increase in September, and see a second hike before the year is out as more likely than not. That caused a sharp jump in short-term bond yields and the dollar.
5/ NEW ZEALAND
The Reserve Bank of New Zealand does not meet until early July, when markets see an increase in the current 2.25% rate as likely, with more later in the year.
