A Higher-Rate World Is in Store as Central Banks Approach 2027
(Bloomberg) — Global central banks are likely to head into 2027 with even tighter monetary-policy settings to keep inflation at bay.
A year that began with the prospect of interest rates drifting lower across major economies looks set to conclude with a very different cycle crystalizing as officials increasingly act to tame consumer prices, according to Bloomberg Economics.
Its aggregate gauge of advanced-world borrowing costs now prices in almost a full quarter-point of hikes that will then linger to contain pressures from the Middle East war, resilient growth, the artificial intelligence boom, and government largess.
International Monetary Fund chief Kristallina Georgieva last week urged a “prudently hawkish bias” in response to that backdrop, a call that central bankers will consider as they gather in Bangkok this week for her institution’s annual meetings.
Such vigilance will also need to take into account the financial stability risks that abound, ranging from a possible AI bust to bond-market tensions.
What Bloomberg Economics Says…
“The Iran war is an up arrow for inflation — and has already forced central banks into action. A multi-decade high for bond yields is a down arrow. Tighter financial conditions don’t get central banks off the hook for controlling price pressure. They do temper expectations on how many hikes are ahead.”
Just as with Donald Trump’s trade policies or his war on Iran, the danger of the US President springing another surprise on the world economy as the second half of his term approaches can’t be excluded either.
Bearing in mind those potential pitfalls, here is BE’s quarterly guide on the policy prospects for 23 central banks around the world — accounting for a combined 90% of the global economy.
GROUP OF SEVEN
US Federal Reserve
Current federal funds rate (upper bound): 4% Bloomberg Economics forecast for end of 2026: 4% Bloomberg Economics forecast for end of 2027: 3.75% Market pricing: Money markets assign a 20% chance on a quarter-point hike later this month and fully price such an outcome for December’s decision. Thanks to an intervention from two senior Federal Reserve officials, the drama building around its Oct. 27-28 policy meeting, just days before US congressional elections, has been defused.
Investors earlier this month were betting heavily on a second consecutive rate increase, one that might inflame an already-frustrated Trump. Then, New York Fed President John Williams and Vice Chair Philip Jefferson, speaking just two days apart, said they saw little urgency to lift rates again. Each anticipated that inflation would decline in 2027 as tariffs and the impact of the oil-price shock fade. Investors promptly repriced, moving out the next expected rate increase to December.
A decision to hold could prompt some more hawkish members of the Federal Open Market Committee to dissent. Dallas Fed President Lorie Logan and Cleveland’s Beth Hammack have said they don’t think rates are high enough to restrain the economy.
Skipping a meeting, however, will give officials more time to let the data show the way. Two more months of inflation and employment reports could go some way to determining whether the Fed’s September rate increase was the first in a series that will extend well into 2027, or something akin to a mid-cycle adjustment that does just enough to allow core inflation to resume a downward path.
What Bloomberg Economics Says:
“We expect the Fed to remain on hold for the rest of the year. The rise in long-dated Treasury yields through much of 2026 should tighten financial conditions and increasingly weigh on the labor market. Beyond 2026, Warsh’s task forces could reinforce a wait-and-see approach as officials consider shrinking the balance sheet and incorporating more real-time data, which may provide earlier evidence that the inflation shock is transitory. We expect the Fed to eventually resume easing, with a 25-basis-point rate cut in the second half of 2027. Our call contrasts with the Fed’s latest dot plot, which points to another 25-basis-point hike in 2026 before an extended pause in 2027, and markets, which price in another 75 basis points of tightening through the end of 2027.”
—Anna Wong
European Central Bank
Current deposit rate: 2.5% Bloomberg Economics forecast for end of 2026: 2.75% Bloomberg Economics forecast for end of 2027: 2.25% Market pricing: Traders expect policymakers will hold rates steady at 2.5% this month. However swaps imply 23 basis points of hikes at this year’s final meeting in December. The European Central Bank is set to continue its quarterly pace of tightening with at least one more hike in December. That would take the deposit rate into slightly restrictive territory, ensuring that inflation approaching 4% won’t dislodge expectations and trigger higher wage demands. Policymakers say such second-round effects don’t yet exist, but warn that the risk rises the longer the energy shock lasts.
The euro zone’s economic outlook is clouded by doubts about some countries’ fiscal health, with a recent bond selloff centering on France. The government’s struggle there to rein in a bloated deficit has fed speculation that the ECB might have to dust off an emergency bond-buying tool to prevent its troubles from spreading.
The ECB is also preparing for a major management reshuffle, including the possible early selection of a successor to President Christine Lagarde.
What Bloomberg Economics Says:
“The surge in sovereign yields has sharply tightened financial conditions across the euro area, with France under particular pressure. That complicates the ECB’s response to the inflation jump triggered by higher energy prices. The bond sell-off should keep the Governing Council from adding to market stress with a surprise hike in October. However, with inflation set to remain well above target for longer, we still expect the ECB to raise rates one final time in December.”
—David Powell
Bank of Japan
Target rate (upper bound): 1.25% Bloomberg Economics forecast for end of 2026: 1.5% Bloomberg Economics forecast for end of 2027: 2% Market pricing: Money markets expect the central bank will leave the key rate unchanged this month, but see about a 90% chance of a hike by year end. The Bank of Japan is widely expected to raise rates again by December after accelerating the pace of normalization in September. Governor Kazuo Ueda has shifted his focus toward stabilizing underlying inflation around the bank’s 2% target, suggesting that the BOJ is picking up the pace from roughly six-month intervals between rate hikes.
The bank has long projected that underlying inflation will reach its 2% goal during the 1 1/2 year period starting this month. Achieving that would mark the first time the underlying inflation trend has reached the target since the bank introduced it in 2013.
US Treasury Secretary Scott Bessent and Prime Minister Sanae Takaichi will be key additional figures shaping market expectations for the BOJ. With the yen staying weak despite US-Japan currency intervention in July, Bessent has made clear his support for further BOJ rate hikes ahead of the September meeting, when the bank raised its policy rate by a quarter point.
Takaichi’s stance is less clear. A longtime supporter of monetary easing, she has yet to clearly show if she fully embraces faster BOJ normalization. Investors will closely watch how both Bessent and Takaichi frame their policy views.
What Bloomberg Economics Says:
“Ueda cemented a hawkish turn when he declared ‘the stage for policy conduct has changed’ after September’s hike. Will Takaichi go along with it? We think so, as long as it’s a smooth normalization process. The yen’s decline on news that two board member had dissented — reviving doubts that she will tolerate more tightening — was a wake-up call not to get in the way. We expect hikes in December, March and July, taking the rate up to 2%.”
—Taro Kimura
Bank of England
Current bank rate: 3.75% Bloomberg Economics forecast for end of 2026: 4% Bloomberg Economics forecast for end of 2027: 4% Market pricing: Traders are almost fully certain the BOE will raise the benchmark rate by 25 basis points at next month’s meeting and they are evenly split on the odds of a second hike in December. The Bank of England is edging toward its first rate hike in over three years as officials grow increasingly concerned over the length of the energy price shock.
Several key swing voters including Governor Andrew Bailey have warned in recent weeks that the risk of a rate rise is climbing the longer the Middle Eastern conflict drags on.
The UK central bank already expects inflation to peak at over 4% early next year and is looking for signs of second-round effects that keep price pressures elevated for a prolonged period. While a weak labor market provides the rate-setters some breathing space, traders and many economists expect the BOE to join other central banks in hiking rates as soon as next month.
What Bloomberg Economics Says:
“The BOE has so far held rates steady in response to rising energy prices. That position is looking increasingly hard to maintain with inflation set to flirt with 4% in early 2027. What’s more, the labor-market probably isn’t soft enough for the central bank to be confident that high inflation won’t impact wages. We expect 25 basis-point hikes in November and February as the BOE looks to shore up credibility and take out some insurance against the risk of persistent inflation.”
—Dan Hanson
Bank of Canada
Current overnight lending rate: 2.25% Bloomberg Economics forecast for end of 2026: 2.25% Bloomberg Economics forecast for end of 2027: 2.75% Market pricing: Swaps imply about a 25% chance of a quarter-point hike later this month and around an 85% probability of an increase by year end. The Bank of Canada has held borrowing costs at 2.25% for seven consecutive meetings, but the next decision could be a closer call. Governor Tiff Macklem has warned that the longer energy prices remain elevated, the greater the risk that higher gasoline and diesel prices spread to other goods and services in the economy.
The yearly change in the consumer price index has been stuck at about 3% for months, and officials expect it to remain around that level for a while. Measures of core inflation have held near the bank’s 2% target so far. There’s also evidence the economy is holding up better than expected amid the ongoing trade war with the US and slowing population growth. Growth accelerated to an annualized 3.3% in the second quarter, and early estimates suggest the economy continued to expand at a solid pace afterward.
Macklem has also recently warned about the risk of falling behind the curve on rate hikes, saying waiting to long too respond to persistent inflation pressures could ultimately require deeper or faster tightening.
What Bloomberg Economics Says:
“The Bank of Canada has seen mildly better data in recent months, but inflation remains above target. Four events dominate the bank’s horizon: a new federal budget, renewal of the inflation-targeting monetary-policy framework by end-2026, the 2027 USMCA trade-deal review, and the June 2, 2027 expiry of Macklem’s term. The USMCA poses the biggest risk given renewed trade tensions with the US. Political risks include Alberta and Quebec national-unity tensions, the 2026 federal budget and US midterms.”
—Alex Tanzi
BRICS CENTRAL BANKS
People’s Bank of China
Current 7-day reverse repo rate: 1.4% Bloomberg Economics forecast for end of 2026: 1.3% Bloomberg Economics forecast for end of 2027: 1.2% The People’s Bank of China, along with other government agencies, rolled out mortgage subsidies to qualified home buyers last week as part of Beijing’s mini stimulus package to prop up economic growth that was at the risk of slipping below its annual target of 4.5%-5%.
The Chinese central bank also lowered the rate on a low-cost loan it provides to state-owned policy banks and expanded the coverage of the lending to support more infrastructure investment. It also raised the quota of relending programs that encourage commercial banks to lend to targeted sectors such as technological innovation and small firms.
The moves amount to China’s biggest mid-year stimulus push since September 2024, though the measures announced so far are targeted and investors have appeared underwhelmed. The restraint reflects policymakers’ desire to stabilize the economy without resorting to a broad fiscal expansion, as exports have remained robust while officials are focused on reducing local governments’ off-balance-sheet debt.
For the PBOC, its scope of easing is also constrained by other major central banks resuming hiking, and weak Chinese business and household demand for credit.
What Bloomberg Economics Says:
“The State Council has signaled more stimulus is coming. It’s likely to take the form of increased infrastructure investment and targeted support for consumption and housing. The PBOC may trim rates by 10 basis points by year end. That would be a small gesture aimed mainly at bolstering confidence. Monetary policy is playing an increasingly marginal role as private-sector deleveraging weakens demand for credit.”
—David Qu
Reserve Bank of India
Current RBI repurchase rate: 5.5% Bloomberg Economics forecast for end of 2026: 5.75% Bloomberg Economics forecast for end of 2027: 6% The Reserve Bank of India just raised rates for the first time in four years and changed its stance to “calibrated tightening” from “neutral,” signaling a deeper rate-hike cycle.
“Given the current conditions, rate cuts are off the table in the near term and policy action ahead can only be a rate hike or a pause, depending on the evolving conditions and the outlook,” Governor Sanjay Malhotra said.
While signs of supply-side pressures becoming embedded in pricing behavior remain limited, the six-member monetary policy committee moved preemptively to curb second-round effects. Malhotra also acknowledged a difficult global environment, including the West Asia conflict, tariff uncertainty, elevated bond yields and risks from a sharp AI-stock correction, suggesting external factors are increasingly influencing policy even as domestic inflation and growth remain the primary consideration for the Indian central bank.
What Bloomberg Economics Says:
“We expect two more 25-basis-point RBI hikes in December and February, taking the repo rate to 6%. Inflation is set to rise sharply as high oil prices and weak rains push up food and core prices. The calibrated-tightening forward guidance now officially limits rate action to a hike or hold. Beyond February, the rate path will hinge on oil prices and the impact of weak monsoon rains on the spring harvest. Risks are tilted to the upside.”
—Abhishek Gupta
Central Bank of Brazil
Current Selic target rate: 13.75% Bloomberg Economics forecast for end of 2026: 13.25% Bloomberg Economics forecast for end of 2027: 11% Brazil’s central bank lowered the benchmark Selic by 25 basis points to 13.75% in September, bringing total easing since March to 125 basis points. Policymakers said that future rate moves will depend on incoming data, maintaining a cautious stance in their final decision before the country’s presidential election.
The outlook for rates, however, shifted after right-wing Senator Flávio Bolsonaro finished ahead of President Luiz Inácio Lula da Silva in the Oct. 4 first-round vote, triggering a rally in Brazilian assets. Investors are betting that a new government could bring greater fiscal discipline and hence create more room for rate cuts.
Until now, slowing economic activity and more favorable inflation readings have supported the easing cycle. The vote result introduced a new variable, with the rate outlook now increasingly tied to whether the improvement in financial conditions and investor expectations persists, and what fiscal policies emerge after the Oct. 25 runoff.
What Bloomberg Economics Says:
“The BCB has sufficient reasons to keep easing gradually in the coming meetings. Headline inflation is cooling, and a target breach appears to have been averted. Growth risks are rising as high rates squeeze indebted firms and households. The stronger currency following Bolsonaro’s first-round lead makes further easing easier. Shifts in inflation expectations will be key to the size of cuts next year.”
—Adriana Dupita
Bank of Russia
Current key rate: 14% Bloomberg Economics forecast for end of 2026: 14% Bloomberg Economics forecast for end of 2027: 11.75% After holding borrowing costs in September for the first time in more than a year, the Bank of Russia now has to contend with renewed inflation risks from war-related fuel disruptions and a surge in state spending on the military as it weighs whether to resume easing. Policymakers expect inflation at 6%-7% at the end of 2026, above the 4% target and outpacing earlier forecasts after price growth accelerated recently.
Governor Elvira Nabiullina has warned that a more expansionary fiscal stance could require monetary policy to remain tighter for longer. The government now expects this year’s budget deficit to reach 3.2% of GDP, up from the original 1.6% plan. At the same time, Ukrainian drone attacks on refineries have helped push gasoline prices higher, while feeding through to a range of goods.
What Bloomberg Economics Says:
“Ukraine’s drone strikes deep inside Russia have sharply narrowed room for rate cuts this year, lifting inflation directly and, more importantly, feeding into underlying price pressures and inflation expectations. Fiscal risks also remain elevated, with the Finance Ministry’s benign deficit forecast likely to be overshot next year. We expect the September pause in easing to extend through year-end, leaving the key rate at 14%. Next year, we see it falling to 11.75% — still above the central bank’s projected path.”
—Ekaterina Vlasova
South African Reserve Bank
Current repo average rate: 7.25% Bloomberg Economics forecast for end of 2026: 7.25% Bloomberg Economics forecast for end of 2027: 6.5% Policymakers will probably hold rates at their final meeting of the year next month after two hikes in 2026 as they gauge the impact of wars in Ukraine and Iran on their forecasts.
Officials struck a hawkish tone at their September meeting, when they unanimously raised their benchmark by 25 basis points to 7.25%, signaling a marginally restrictive policy stance because of the fallout from the wars.
The central bank warned in its recent Monetary Policy Review that the fuel shock is “massive and persistent,” and its policy priority is to prevent inflation from becoming entrenched. It said without a firm policy response, higher fuel and El Niño-related food costs could lift inflation expectations and broaden into wage-setting and that it “will act decisively to prevent that from happening.”
What Bloomberg Economics Says:
“Protracted high energy costs raise the risk of second-round effects, forcing the SARB to tighten policy further in September. We expect the it to pause after that, giving this year’s cumulative 50-basis-point increase time to work through the economy. Favorable base effects should pull inflation lower from the second quarter of 2027, opening the door to rate cuts as soon as the second half of the year.”
—Yvonne Mhango
OTHER G-20 CENTRAL BANKS
Banco de Mexico
Current overnight rate: 6.5% Bloomberg Economics forecast for end of 2026: 6.5% Bloomberg Economics forecast for end of 2027: 6% Mexico’s central bank, known as Banxico, kept its rate unchanged at 6.5% for a third consecutive meeting in September. Still, policymakers dropped language saying they consider the current policy stance to be adequate, hence leaving the door open to future changes.
Banxico will set rates according to domestic conditions rather than “mechanically” following the Fed, Governor Victoria Rodríguez Ceja said in an interview days after the September meeting. Differences between the US and Mexican economies give the bank room to chart a separate monetary policy course, she said. Mexico’s headline inflation remains slightly above the 3% target, and central bankers see it slowing to that goal by the final quarter of next year.
What Bloomberg Economics Says:
“Mexico’s policy rate is at neutral, core inflation and expectations are elevated, and domestic and external uncertainty are both high. All that raises the bar for further easing. Economic conditions allow Banxico to decouple from Fed hikes, but tighter US monetary policy increases the risk of capital outflows and further limits room for cuts. Our baseline is for policymakers to stay on hold at 6.5% until late 2027, when a shift in the US rate cycle creates room for some easing.”
—Felipe Hernandez
Bank Indonesia
Current 7-day reverse repo rate: 5.75% Bloomberg Economics forecast for end of 2026: 6.25% Bloomberg Economics forecast for end of 2027: 5.75% Bank Indonesia is enjoying much-needed respite as a slew of positive domestic developments begin to restore investor confidence and stabilize the rupiah. President Prabowo Subianto has appointed well-respected technocrats to the top of the central bank and the finance ministry, and they have signaled a return to Indonesia’s economic playbook of fiscal prudence and conventional liquidity management.
BI’s extended pause, however, will be tested as the Fed and other major central banks grow increasingly hawkish. New Governor Destry Damayanti is so far resorting to non-rate measures to steady the rupiah, including lowering hedging costs for foreign flows. This has proved effective in the short-term, but may have limited impact should global rates steadily climb higher and erode Indonesia’s differentials.
What Bloomberg Economics Says:
“Rupiah vulnerability and declining FX reserve cover suggest Bank Indonesia will hike again in 4Q. Domestic-based threats stem from adverse governance and potential downgrades by rating agencies and MSCI Inc. Meantime, soaring US Treasury yields subdue portfolio inflows. Inflation also looks set to breach the upper end of BI’s 1.5%-3.5% target before year-end. The oil spike is working its way along global supply chains and El Nino is adding to food inflation, all while government stimulus cushions household spending.”
—Tamara Henderson
Central Bank of Turkey
Current 1-week repo rate: 37% Bloomberg Economics forecast for end of 2026: 35% Bloomberg Economics forecast for end of 2027: 27% Turkey’s central bank may be poised to deliver a rate cut later this month for the first time since the outbreak of the Iran war, favored by more-than-expected slowdown in headline inflation as well as a funds crisis, which has prompted a liquidity squeeze.
While prices slowed to 29.7% in September, the lowest in almost five years, high energy prices and any potential move for increased demand for dollars are keeping the central bank alert.
Some economists argue that policymakers might therefore opt out of a cut until later this year. They cite uncertainty stemming from geopolitical developments across the Middle East as well as a potential sentiment change toward the lira after a domestic “ponzi-like” scheme, which has led to the freeze of some $20 billion across 131 funds.
What Bloomberg Economics Says:
“The CBRT’s September pause was its last this year. With attention shifting to weakening growth and falling inflation clearing the way, we expect policymakers to resume cuts, taking the policy rate to 35% by year-end. Renewed pressure on the lira or a further escalation in the Middle East are the key risks. Either could delay cuts, or force an additional tightening in financial conditions.”
—Selva Bahar Baziki
Central Bank of Nigeria
Current central bank rate: 23% Bloomberg Economics forecast for end of 2026: 22.5% Bloomberg Economics forecast for end of 2027: 21.5% Nigeria’s central bank is expected to hold rates for the rest of the year, allowing a surprise 350-basis-point cut in September to filter through the economy while it assesses risks from elevated energy prices, flooding in food-producing areas and election spending ahead of January polls.
The reduction in the rate to 23% was needed to reassert the benchmark’s supremacy after it had diverged from market rates, policymakers said.
Governor Olayemi Cardoso said policy remains restrictive even after the cut, with the real rate among the highest globally, helping preserve Nigeria’s appeal to investors and supporting a transition to an inflation-targeting framework.
The bank expects inflation to moderate further in the short to medium term. That outlook, alongside a stable currency and robust reserves, helped justify the deepest cut since at least 2007.
What Bloomberg Economics Says:
“The Central Bank of Nigeria will likely keep cutting rates in the coming quarters after resuming its easing cycle in September with a jumbo 350-basis-point cut to 23.0%. The bigger-than-expected move signals policymakers are confident inflation will keep slowing despite the Iran-war oil shock. Disinflation should quicken as the fourth-quarter harvest comes in and transport inflation stays subdued.”
—Yvonne Mhango
Bank of Korea
Current base rate: 3% Bloomberg Economics forecast for end of 2026: 3.5% Bloomberg Economics forecast for end of 2027: 3.5% Following back-to-back hikes, the Bank of Korea is likely to leave its rate at 3% on Oct. 22 to gauge the impact of its most aggressive tightening in more than three years. Still, a pause wouldn’t signal the cycle is over. Governor Shin Hyun Song said every meeting remains live, and the bank’s latest six-month guidance points to one more increase.
Incoming data argue against a dovish turn. September inflation came in at 2.9%, exports more than doubled to a record, and apartment prices in Seoul extended a record run of weekly gains. Those trends will help determine whether the next hike comes in November or 2027 as policymakers assess the semiconductor boom’s impact on consumption, inflation and financial imbalances.
What Bloomberg Economics Says:
“The Bank of Korea’s tightening cycle has further to run. Two back-to-back hikes front-loaded its response to inflation and financial-stability risks. But the AI-led chip boom is boosting growth and incomes, with the gains spilling into domestic demand. That should keep core inflation elevated even as headline inflation eases. We expect the BOK to resume tightening with a 25-basis-point hike in November, followed by another in 1Q27, taking the policy rate to our 3.5% terminal-rate call.”
—Hyosung Kwon
Reserve Bank of Australia
Current cash rate target: 4.6% Bloomberg Economics forecast for end of 2026: 4.6% Bloomberg Economics forecast for end of 2027: 4.1% Market pricing: Money markets price around 6 basis points of hikes for next month’s outcome and double that amount for the final meeting in December. The Reserve Bank of Australia is still struggling with elevated inflation, having failed to achieve the 2.5% midpoint of its target band for much of the past five years, and the rate-setting board is running out of patience. This can be seen in its recent reduced emphasis on the labor market that forms the second leg of its dual mandate.
While it’s possible the RBA will raise rates again at its Nov. 2-3 meeting — after it boosted borrowing costs to a 15-year high of 4.6% last month — the board has signaled it will be data dependent. Any sign of second-round inflation effects, a further spike in energy prices or tightening of the labor market could prompt it to pull the trigger. On the other side, declining house prices and deteriorating consumer sentiment are likely to weigh on economic activity in the period ahead. It’s likely to be a close call.
What Bloomberg Economics Says:
“Surging energy prices have shifted the balance of risks for the RBA. Our base case is for rates to stay on hold, but it’s a line-ball call, with the risks tilted toward another hike in November. Energy prices, inflation expectations and firms’ passthrough of higher costs will be key. Weak demand, outside data center construction, rising unemployment and a deepening housing downturn will eventually tip policy toward easing, but that’s not likely before the second half of 2027.”
—James McIntyre
Central Bank of Argentina
Argentina’s central bank now targets monetary aggregates Argentina continues without a policy rate, generating high volatility in the nation’s borrowing costs. Monthly inflation cooled to 1.7% in August, marking the reading lowest since June 2025, and it is expected to remain below 2% going forward.
President Javier Milei’s reserve-buying spree has slowed as the government prioritizes disinflation, even as critics warn an overvalued peso is weighing on activity. Some economists expect Argentina to enter a technical recession in the third quarter.
With Milei facing reelection in 2027, the question is whether he remains focused on the peso or pivots toward economic growth. He also hopes to pass a largely symbolic central bank charter reform against money printing.
What Bloomberg Economics Says:
“Soft growth and contained inflation pressures provide scope for the government to further rebalance monetary policy in favor of activity. Policy has been accommodative since March, but tightened somewhat over the past couple of months. Given incoming growth and inflation data, it probably should have moved in the other direction. We look for the ON rate to remain in the low-20% zone through year-end, though election-related volatility in 2027 is likely to call for an increase.”
—Adriana Dupita
G-10 CURRENCIES AND EAST EUROPE ECONOMIES
Swiss National Bank
Current policy rate: zero Bloomberg Economics forecast for end of 2026: zero Bloomberg Economics forecast for end of 2027: 0.25% Market pricing: Money markets see a small chance of a hike in December, pricing about a six-basis-points move. President Martin Schlegel and his colleagues at the Swiss National Bank have kept their rate at the world’s lowest level for more than a year now and look happy to stay there some time longer. Inflation sped up to 1% in September, but that’s comfortably in the middle of the central bank’s targeted range of 0-2%, and slower compared to the rest of Europe.
Officials will keep an eye on the franc, given its impact on import costs. They see the oil-driven acceleration in consumer-price growth as temporary and not meaningfully lifting medium-term expectations. Schlegel recently said the central bank is in a “comfortable” situation on price growth.
What Bloomberg Economics Says:
“The SNB has little reason to follow its peers into rate hikes. Swiss inflation remains close to zero excluding energy, while zero rates have weakened the franc with few negative side effects so far. We expect the SNB to stay on hold until late 2027 as it looks through what it sees as a temporary, energy-driven price shock. A renewed oil surge is the main risk: in our high-oil scenario, hikes could start in March 2027.”
—Jean Dalbard
Sveriges Riksbank
Current policy rate: 1.75% Bloomberg Economics forecast for end of 2026: 2% Bloomberg Economics forecast for end of 2027: 2.25% The Riksbank board’s guidance from its September policy meeting suggested around a 65% chance of a quarter-point rate hike at its next gathering in November, and policy makers appear increasingly convinced that the risk of higher inflation is intensifying as the economy rebounds.
Governor Erik Thedeen said in minutes of the September meeting that it remains appropriate to “sail in full sail” for now, but in November “we probably need to reduce the sail area”.
Board members also highlighted the risk that the weaker krona, the worst performing Group of 10 currency this year, could contribute to excessive inflationary pressure.
What Bloomberg Economics Says:
“The Riksbank is done waiting. The upward shift in the inflation outlook points to building underlying pressures, which we expect will prompt 25-basis-point hikes this quarter and next, taking the policy rate to 2.25% from 1.75% currently. A sustained escalation in the Iran war is an upside risk that could bring the second hike in our outlook closer”
—Selva Bahar Baziki
Norges Bank
Current deposit rate: 4.5% Median economist forecast for end of 2026: 4.5% Median economist forecast for end of 2027: 4% Persistent wage pressure in Norway, along with rising energy costs, prompted the officials at Norges Bank to raise their key rate in September for a second time this year. That move was one of their closest decisions in years due to somewhat more benign developments in core prices over past months, contrasting with prospects for stronger business activity.
Governor Ida Wolden Bache and her colleagues said at their last meeting it will “likely be necessary to keep the policy rate elevated for a time,” and signaled they are ready for another hike beyond 4.5%, the second-highest level in the Group of 10 sphere of nations with the most traded currencies. The central bank raised consumer price forecasts through 2028, and now only sees price growth easing to its target by 2029.
Reserve Bank of New Zealand
Current cash rate: 2.75% Bloomberg Economics forecast for end of 2026: 3% Bloomberg Economics forecast for end of 2027: 3.75% Market pricing: Traders price 14 basis points of hikes for this month’s decision and a cumulative 33 basis points of increases by year end. The Reserve Bank is expected to keep raising rates toward the so-called neutral level at or above 3% through the remainder of 2026, but investors and economists are undecided whether it will proceed with urgency and hike in October or wait until December.
The case for a pause was outlined in its last statement when policymakers said they wanted time to assess how back-to-back hikes in the third quarter are impacting the economic recovery. But the recent jump in global oil prices led Governor Anna Breman to warn that inflation will be faster than expected, adding to the prospect of an October move.
Meantime, the Nov. 7 general election is proving too close to call, with a potential change to a Labour-led administration that has said it wants to return the RBNZ to a dual mandate of price stability and maximum employment.
What Bloomberg Economics Says:
“A renewed upswing in energy prices is likely to hasten the RBNZ”s removal of monetary policy accommodation, despite elevated unemployment and sizeable output gap. Surging fuel prices, especially diesel, have raised the risk of a prolonged, broad-based inflation shock and reduced the central bank’s scope to hike gradually. We expect rates to continue rising into the second half of 2027 in order to contain inflation spillovers.”
—James McIntyre
National Bank of Poland
Current cash rate: 3.75% Median economist consensus for end of 2026: 3.75% Median economist consensus for end of 2027: 3.5% The talk of more rate cuts in Poland is over and the central bank is getting ready to increase them for the first time in four years.
The outlook for fuel prices is going to be key, according to Governor Adam Glapinski. For the time being, there is no indication that the oil shock from the war in Iran is spreading into the wider economy, he told reporters in October.
However, the central bank was ready to act “if inflation risks continue to mount,” according to Glapinski. The government has moved to cap prices at the pump after inflation surged to 4% in September, or above the upper end of the target range.
That’s likely to make a hike less imminent, although a lot will depend on the government’s ability to hold down prices when the deficit is already project to stay above 7% of gross domestic product.
Czech National Bank
Current cash rate: 3.75% Median economist forecast for end of 2026: 3.75% Median economist forecast for end of 2027: 3.75% The Czech central bank is increasingly likely to lift its main rate again, possibly as early as November, as high energy costs compound robust domestic pressures.
Policymakers are chiefly concerned about elevated core inflation, now at around 3%, and see the main risks in surging costs of services, the housing market, wage growth and more government spending financed by debt. Investors are betting on four hikes over the next 12 months, although central bankers see such expectations as too aggressive.
“We are prepared to tighten monetary policy further if it turns out that inflation risks are really happening,” Governor Ales Michl said after the September meeting. “As we proved in June, we won’t hesitate to raise interest rates if the situation requires.”
–With assistance from Bastian Benrath-Wright, Heesu Lee, Ott Ummelas, Charlie Duxbury, Tom Rees, Nduka Orjinmo, Monique Vanek, Christopher Condon, Toru Fujioka, Gonzalo Soto, Martha Beck, Manuela Tobias, Matthew Malinowski, Peter Laca, Claire Jiao, Ntando Thukwana, Beril Akman, Michael Heath, Erik Hertzberg, Greg Sullivan, Tracy Withers, Fran Wang, Piotr Skolimowski, Jana Randow, James Hirai, Scott Johnson (Economist), Barbara Sladkowska, Harumi Ichikura and Chloe Whiteaker.
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