Trump may have just killed rate cuts

Donald Trump’s war against Iran may be over, but the repercussions for global monetary policy are here to stay.With a shaky ceasefire largely holding following the US president’s onslaught in the Middle East, the path for central bank interest rates around the world has now shifted higher for years to come, according to Bloomberg Economics.

Its forecasts for borrowing costs, compiled here, show trajectories elevated by as much as half a percentage point or more through 2028 compared with those envisaged before the war.

That’s both on BE’s global gauge for rates, and its measure for advanced economies.132206194That outlook reflects evolving inflation risks, including those that might arise from the race to adopt artificial intelligence, which may yet subside.

Even so, price momentum is still lingering from the energy shock caused by the closure of the Strait of Hormuz.

With the dust settling from the conflict, BE’s forecasts showcase how the immediate cost-of-living impact on consumers and businesses will now be compounded by a period of more expensive loans and mortgages than might otherwise have been the case.

Earlier this year, BE predicted the Federal Reserve’s rate would end up a percentage point lower by the middle of 2027, instead of the single quarter-point reduction currently envisaged.

The European Central Bank is anticipated to hike again to a level half a point higher than originally envisaged, before then easing in due course.

What Bloomberg Economics Says...“Burned by the post-pandemic inflation experience, central banks have generally talked tough on inflation.

With price gains surging higher, if only briefly, willingness to walk back that hawkish rhetoric looks limited — our central bank speak indicators have generally stayed in hawkish territory even as oil prices have receded.”—Jamie Rush, director of global economicsBE’s outlook also suggests that the global economy is proving able to withstand more elevated borrowing costs, pointing to its capacity to weather repeated shocks.

But given Trump’s appetite for disruption, with the war having followed last year’s campaign to raise US tariffs, that resilience will surely be tested again before long.132206230With that caveat in mind, here is the quarterly guide by Bloomberg Economics to the monetary policy of 23 central banks, accounting for a combined 90% of the global economy.GROUP OF SEVENUS Federal ReserveCurrent federal funds rate (upper bound): 3.75%Bloomberg Economics forecast for end of 2026: 3.75%Bloomberg Economics forecast for end of 2027: 3.5%Market pricing: Traders are betting on one full quarter-point hike with a 20% chance of second by year end.The Kevin Warsh era is under way at the Fed, and it’s likely to bring a slew of changes.Already, investors have dialed up expectations for rate hikes this year, after the new chairman emphasized the US central bank’s commitment to fighting inflation during his first press conference in June.

About half of Fed policymakers expect at least one increase this year, according to their most recent projections.Warsh is also advancing a new communications strategy, including cutting forward guidance, meaning investors will have fewer signals about where policy is headed.

It’s a potential sea change that carries both opportunities and risks, long-time watchers say.How the Fed manages its rate policy in the coming months could have big implications for the November US midterm elections.

Inflation and affordability are priorities for many Americans, especially after the Iran war drove up energy and other prices.

Trump has continued to call for lower rates, but it remains to be seen whether his hand-picked Fed leader gets the economic conditions to deliver them.The Fed will hold its annual Jackson Hole symposium in late August.

Fed chairs have often used this forum to deliver big news, and Fed watchers will be keen to see if Warsh, who has promised “regime change” at the central bank and is assembling several task forces to scrutinize how it conducts monetary policy, will do the same.What Bloomberg Economics Says:“The Fed is likely to stay on hold for the remainder of 2026 as consideration of reforms by Warsh’s task forces provide a rationale for the increasingly hawkish committee to stay in wait-and-see mode.

BE expects the Fed to resume cutting rates in the first half of 2027 as inflation subsidies and the productivity gains from AI become more apparent.”—Andrew Sacher132206252European Central BankCurrent deposit rate: 2.25%Bloomberg Economics forecast for end of 2026: 2.5%Bloomberg Economics forecast for end of 2027: 2%Market pricing: Swaps imply around an 80% chance of a 25-basis-point increase by year-end and price a full hike by early next year.Progress toward peace in the Middle East has granted the ECB time to assess its June decision to raise rates for the first time since 2023.

US-Iran talks have triggered a steep pullback in oil prices that’s fed through to inflation, including underlying price pressures and the closely tracked services gauge.

Some policymakers are now wavering on whether further action is needed, sowing doubt among investors that another hike will materialize this year.Other officials, though, are wary to sound the all-clear, warning that the initial surge in energy costs is still working its way through the economy and could prompt workers in the region to demand higher pay as food and services inflation quicken with a lag.

September’s meeting, with new economic projections, could be when differences of opinion spill over.What Bloomberg Economics Says:“The tone of Lagarde’s recent speeches suggests she still supports a rate increase in September, and we continue to expect a 25-basis-point rise.

However, the drop in oil prices since the announcement of a deal between the US and Iran as well as the deceleration of euro-area inflation in June weaken the case for that additional hike.

It would in all likelihood mark the end of this short tightening cycle.”—David Powell132206276Bank of JapanTarget rate (upper bound): 1%Bloomberg Economics forecast for end of 2026: 1.25%Bloomberg Economics forecast for end of 2027: 1.5%Market pricing: Money markets are wagering on 22 basis points of hikes by year end which implies around a 90% chance of an increase.The Bank of Japan will need to weigh if it should raise rates sooner than its roughly six-month pace in coming months as upside inflation risks continue to build.Governor Kazuo Ueda lifted borrowing costs just last month, but expectations are already mounting for faster action, with some flagging the risk of a move in September.The yen has fallen to its weakest level against the dollar since 1986, raising concerns that higher import costs will fuel inflation.

The BOJ already expects price growth to stay above its 2% target over coming years.Prime Minister Sanae Takaichi will also be a key factor.

While she has consistently signaled support for easy monetary policy, her dovish stance has contributed to yen weakness, potentially increasing the pressure on the BOJ to normalize earlier than she would prefer.What Bloomberg Economics Says:“Some market participants think the yen’s slide could push the BOJ toward a hawkish turn and bring its next rate hike forward, perhaps to October.

We disagree.

The BOJ is guided by its inflation outlook, and lower oil prices reduce the need for a quick move.

A pro-stimulus Takaichi administration is also likely to keep pressing for a slower pace of normalization.

We expect the BOJ to raise the policy rate to 1.25% in December.”—Taro KimuraBank of EnglandCurrent bank rate: 3.75%Bloomberg Economics forecast for end of 2026: 3.75%Bloomberg Economics forecast for end of 2027: 3.5%Market pricing: Traders assign a 75% probability of a quarter-point hike this year and expect a full hike by the middle of 2027.The plunge in oil and gas prices has alleviated the pressure on the Bank of England to hike rates to contain the inflation threat posed by the Iran war.While Governor Andrew Bailey has said it is too soon to consider resuming the rate cuts officials had planned before the conflict, economists now expect inflation to peak at levels below even the most optimistic scenarios the BOE laid out over the spring.The UK central bank has taken a wait-and-see approach to tackling the economic fallout from the conflict, with policy already in restrictive territory heading into the war.

A combination of easing energy prices and a weakening labor market could now allow the BOE to avoid hiking borrowing costs altogether.What Bloomberg Economics Says:“The BOE is likely to hold rates steady in 2026 as it balances above target CPI with a weak economy.

Falling energy prices have reduced the risk that the current bout of elevated inflation morphs into a more persistent problem that requires a forceful response from the BOE.

The prospect of looser fiscal policy following the appointment of a new prime minster will likely limit the central bank to just one 25 basis-point cut in 2027.”—Dan HansonBank of CanadaCurrent overnight lending rate: 2.25%Bloomberg Economics forecast for end of 2026: 2.5%Bloomberg Economics forecast for end of 2027: 3%Market pricing: Swaps imply slightly more than a 50% chance of a 25-basis-point increase by year end.Canada’s economy continues to face major headwinds from US tariffs and an abrupt slowdown of non-permanent immigration.

Though activity appears to have rebounded in the second quarter, the recovery follows two consecutive quarterly contractions that satisfied one technical condition of a recession and prompted economists to cut their growth forecasts for the year.At their last meeting, Bank of Canada policymakers said the combination of economic slack and higher global energy prices poses a “dilemma” and complicated their decision making.

But with domestic gasoline costs starting to fall and core inflation hovering near the central bank’s 2% target, upside inflation risks are fading.

That should give Governor Tiff Macklem more room to dial back some of his more hawkish comments about possible rate hikes and shift focus toward a weak housing market, persistent business investment uncertainty and the soft labor market.What Bloomberg Economics Says:“Dull economic activity, a soft labor market, and cooling core inflation argue for the Bank of Canada to keep policy accommodative.

Much of what ails the economy is beyond central bankers’ control, but policymakers have proven willing to help smooth economic activity in a ‘period of structural change.’We expect clarity on the USMCA in 2H, helping improve investment and hiring.

That would open the door for the BoC to raise rates by a quarter-point to 2.5% near year-end.”—Stuart Paul132206307BRICS CENTRAL BANKSPeople’s Bank of ChinaCurrent 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 rolled out a new overnight reverse repo operation last week, advancing Governor Pan Gongsheng’s goal to steer short-term funding costs with sharper precision.

The shift brings Beijing closer to the playbook of global peers like the Fed, which relies heavily on a primary overnight rate to guide the economy.With the rate set below market expectations, some economists interpreted the move as a de facto rate cut aimed at cushioning a slowing economy.

However, the PBOC’s decision to skip a formal public announcement on the rate itself has divided analysts, with others viewing the approach as a sign that authorities prefer to maintain the policy status quo.What Bloomberg Economics Says:“China’s two-speed economy is complicating the PBOC’s easing outlook.

Headline growth, driven by exports and production, appears robust.

Under the hood, however, domestic demand is in distress and in clear need of stimulus support.

That said, a more favorable external backdrop argues for less aggressive easing.

We now expect the PBOC to cut its rate by just 10 basis points to 1.3% this year and lower the reserve requirement ratio by 25 basis points — less than our previous call.”—David Qu132206356Reserve Bank of IndiaCurrent RBI repurchase rate: 5.25%Bloomberg Economics forecast for end of 2026: 5.5%Bloomberg Economics forecast for end of 2027: 5.25%The Reserve Bank of India kept its rate unchanged at 5.25% in June, opting to wait for clearer signs that inflation pressures were becoming more broad-based.

Minutes of the June 3-5 policy meeting showed officials expected the economic outlook to improve as tensions in the Middle East eased and saw no need for a pre-emptive rate hike, even as the RBI cut its growth forecast and raised its inflation outlook for the year through March.

Governor Sanjay Malhotra said policymakers would “continue to be data dependent and remain vigilant about inflation getting generalized.”While cooling oil prices have pushed back expectations of rate hikes, deficient rainfall is emerging as a key risk.

The RBI also unveiled measures to support the rupee, including allowing banks to raise foreign-currency deposits.

The measures helped the rupee to strengthen more than 2% from its record low of nearly 97 per dollar in May.What Bloomberg Economics Says:“We expect the RBI to keep the repo rate on hold through October as lower oil prices ease inflation.

However, a rainfall deficit of about 40% and a strengthening El Niño could push inflation above the 6% tolerance ceiling by October, prompting cumulative 50 basis points of rate hikes from December.

If oil falls further to around $65 a barrel in the fourth quarter, inflation should remain within the target band, allowing the RBI to extend its pause into next year.”—Abhishek GuptaCentral Bank of BrazilCurrent Selic target rate: 14.25%Bloomberg Economics forecast for end of 2026: 14.25%Bloomberg Economics forecast for end of 2027: 11%Brazil’s central bank extended its cautious easing cycle in June despite a worsening inflation outlook, lowering the benchmark Selic by a quarter point for the third straight meeting, to 14.25%.The central bank justified the rate cut by signaling its monetary policy will put inflation near the 3% target in the first quarter of 2028.

The move reinforced economists’ expectations of another quarter-point reduction before a pause.Policymakers led by Gabriel Galípolo have said the total size of Brazil’s cycle will depend on incoming data.

In the backdrop, economic activity and inflation have accelerated.

Furthermore, the board warned that demand and consumer prices could get a boost from President Luiz Inácio Lula da Silva’s stimulus measures before the October election.What Bloomberg Economics Says:“The Brazilian central bank is again in a bind: despite very tight policy, widespread inflation and worsening expectations raise questions about monetary policy’s effectiveness and the BCB’s willingness and ability to return inflation to target.

The BCB has been here before, responding with an extra hawkish tilt.

With policy already highly restrictive, this may mean holding rates through year-end before resuming gradual cuts next year — provided growth, inflation and expectations cool.”—Adriana DupitaBank of RussiaCurrent key rate: 14.25%Bloomberg Economics forecast for end of 2026: 13%Bloomberg Economics forecast for end of 2027: 10%Russia’s monetary easing cycle is set to continue through the end of the year, but at a slower pace.

After the Bank of Russia unexpectedly halved the size of its rate cut to just 25 basis points and highlighted a range of new risks, market participants fear the policy makers may stick to that smaller increment at upcoming meetings.The outlook is clouded by fiscal and external risks.

As the government ramps up spending on the war in Ukraine, officials have signaled this year’s budget deficit will exceed the original plan, prompting Governor Elvira Nabiullina to vow to offset the inflationary impact.

Lower oil prices after the US-Iran agreement and higher fuel costs following Ukrainian attacks on refineries are adding to the pressure.What Bloomberg Economics Says:“The Bank of Russia’s fight against stubborn inflation is again colliding with the war economy.

Inflation was already on track to miss the target for a seventh straight year, and risks are now building on two fronts.

Fiscal policy is set to stay looser than expected as military spending rises.

More recently, Ukrainian drone strikes on Russian refineries have triggered a fuel crunch that could spill over into broader prices.

That doesn’t end the cutting cycle, but it leaves much less room for easing.”—Ekaterina Vlasova132206378South African Reserve BankCurrent repo average rate: 7%Bloomberg Economics forecast for end of 2026: 7%Bloomberg Economics forecast for end of 2027: 6.25%When South African Reserve Bank policymakers meet later this month, their focus will be on the first increase in inflation expectations in more than two years, which drifted above 4%.Officials raised their rate by 25 basis points to 7% in May, the first hike in three years, citing concerns that higher energy costs stemming from the Iran war could trigger second-round effects and feed into price expectations.The rise in expectations justified the May hike, Governor Lesetja Kganyago said in an interview with Bloomberg on July 1, while signaling that further tightening may be needed to anchor them closer to the central bank’s 3% inflation target.“Inflation expectations have risen,” he said.

“They are above our target, and that is the concern, and that is what we should actually be responding to.”What Bloomberg Economics Says:“The fading oil shock should keep inflation broadly steady in the second half before it slows to the SARB’s 3% target by the end of 2027.

The recent jump in inflation expectations raises the hurdle for a hold.

We expect the increase in expectations to prove temporary as the oil shock fades, preventing broader price pressures from taking hold.”—Yvonne MhangoOTHER G-20 CENTRAL BANKSBanco de MexicoCurrent 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 held its rate steady at 6.5% in June, ending its two-year monetary easing cycle, and indicated it expects to leave borrowing costs unchanged in coming meetings.

Governor Victoria Rodriguez Ceja subsequently told Bloomberg News the pause has no predetermined length.The board is now focused on assessing whether closely-watched core inflation continues to moderate, and also on how the economy responds to a period of restrictive monetary policy.While Banxico, as the central bank is known, acknowledged persistent weakness in economic activity, it also reiterated that upside risks remain for consumer prices.

Put together, that view suggests any future policy adjustment would require greater confidence that the inflation slowdown toward the 3% target is on track.What Bloomberg Economics Says:“With the policy rate now neutral, above-target inflation, persistently elevated inflation expectations, and high domestic and external uncertainty have raised the bar for further easing, pointing to a prolonged pause.

Even so, most policymakers retain a dovish bias, expecting economic slack to gradually bring inflation lower.

Our baseline is that rates remain on hold until early 2027, when slower inflation and a wide negative output gap should allow the central bank to begin a gradual easing cycle.”—Felipe HernandezBank IndonesiaCurrent 7-day reverse repo rate: 5.75%Bloomberg Economics forecast for end of 2026: 6%Bloomberg Economics forecast for end of 2027: 6%Bank Indonesia will enter the third quarter with more breathing room as pressure on the currency abates somewhat.

After 100 basis points in rate hikes and a concerted effort to push up bond yields and bring in foreign flows, the rupiah has finally fallen below the key 18,000 level against the dollar.

The slide in global oil prices also tempers fiscal risks weighing on bond investors.The respite could prove temporary with the Fed seen to tighten policy later this year, eroding the spread between US and Indonesian yields.

Broader concerns over President Prabowo Subianto’s increasingly interventionist policies — including a law that threatens to erode central bank independence — could also keep fund inflows on hold, capping the rupiah’s gains.What Bloomberg Economics Says:“Risk aversion and price pressures keep rate hikes in the pipeline, despite aggressive tightening in June.

Even if oil prices remain near the pre-war range, accumulating domestic threats will keep investors wary and the rupiah under downward pressure.

What’s more, inflation looks set to breach the upper end of Bank Indonesia’s 1.5%-3.5% target in the second half.

The earlier oil spike is working its way along supply chains and the government’s social programs are stoking household spending.”—Tamara HendersonCentral Bank of Turkey Current 1-week repo rate: 37%Bloomberg Economics forecast for end of 2026: 37%Bloomberg Economics forecast for end of 2027: 25%Turkey’s central bank is expected to keep its main rate unchanged until September, according to a majority of analysts.

Still, policymakers are likely to get some leeway from easing oil prices and a return to a slowdown in inflation as of June.

That could allow the central bank to reduce its current funding rate of 40% this month, bringing it closer to the policy rate.What Bloomberg Economics Says:“Inflation is set to end the year above official forecasts, expectations remain poorly anchored and risks are two-sided, driven chiefly by Iran war uncertainty.

Against that backdrop, we expect the CBRT to keep the one-week repo rate at 37% through year end.

That does not mean policy will stand still, though.

Policymakers will gradually shift funding from the overnight lending facility back to the repo window over the summer, lowering the effective funding rate from 40%.”—Selva Bahar BazikiCentral Bank of NigeriaCurrent central bank rate: 26.5%Bloomberg Economics forecast for end of 2026: 25.5%Bloomberg Economics forecast for end of 2027: 23%Nigeria’s central bank will likely return to cutting rates from July, albeit cautiously as policymakers assess the impact of the US-Iran ceasefire on prices.Officials held rates at 26.5% at their last meeting in May, projecting a moderate increase in near-term inflation.They were, however, convinced that the energy shock would be temporary and that economic reforms were strong enough to support a return to disinflation.Government pressure on fuel distributors to cut pump prices could further reduce transport and food costs, if successful.Still, policymakers will keep an eye on national election campaigns that begin in August.

The period is historically associated with large injections of liquidity into the economy.What Bloomberg Economics Says:“A sustained slowdown in inflation from the third quarter of 2026 should give Nigeria’s central bank room to resume rate cuts as early as September.

The fading oil shock should push inflation lower in the second half of the year, with the harvest season helping to curb food prices in the final three months.

That return to disinflation should prompt policymakers to shift from holding the policy rate at 26.5% to cutting rates.”—Yvonne MhangoBank of KoreaCurrent base rate: 2.5%Bloomberg Economics forecast for end of 2026: 3%Bloomberg Economics forecast for end of 2027: 3.5%The Bank of Korea enters the second half of 2026 with the focus shifting from signaling tighter policy to deciding when to deliver its first rate increase, after stronger inflation, resilient semiconductor-driven growth and rising housing risks prompted policymakers to adopt their most hawkish stance in years.

The central bank next meets on July 16, with markets watching whether recent data justify moving sooner rather than later.Beyond the near-term decision, BOK board members will also weigh whether the chip-driven expansion is broadening across the economy or remains confined to a handful of sectors, as household debt and Seoul-area home prices continue to rise.

Officials have increasingly argued that monetary and macroprudential policies must work in tandem to curb financial imbalances without derailing the AI investment boom.What Bloomberg Economics Says:“The Bank of Korea looks set to hike.

Crude prices and a weaker won are keeping inflation pressure high.

Strong AI-chip demand is boosting growth, lifting exports and production.

Financial conditions look too loose, with a debt-fueled stock rally adding froth.

Governor Shin Hyun Song signaled the BOK should move before it’s too late.

We expect a 25-basis-point hike on July 16.

Three more increases should take the rate to 3.5% by the first half of 2027.”—Hyosung KwonReserve Bank of AustraliaCurrent cash rate target: 4.35%Bloomberg Economics forecast for end of 2026: 4.35%Bloomberg Economics forecast for end of 2027: 3.35%Market pricing: Money markets are almost evenly split on whether policymakers will hold rates steady or hike 25 basis points by year end.The Reserve Bank of Australia delivered a hawkish hold in June after raising rates at its first three meetings of the year.

The central bank is trying to cool demand in order to bring down resurgent inflation that’s been amplified by the Middle East energy shock.A weakening of domestic activity and the interim deal between the US and Iran have led some economists to suggest the RBA’s next move will be down.

Still, the most recent update of forecasts predicted inflation would only return to the target midpoint in June 2028, based on an assumed cash rate of 4.7% at the end of this year.

That’s at least one hike above the current 4.35%, suggesting the RBA will keep a hawkish bent.What Bloomberg Economics Says:“Cooling inflation and a deepening housing slowdown have shifted the balance of risks for the RBA.

Sticky inflation will likely linger, but easing energy supply pressures reduce the risk of persistent price pressures.

Softer labor market and inflation data have lowered the odds of further rate hikes after the increases in February, March and May.

We expect weak demand, outside data center construction, to tip policy toward easing by late 2026 if the housing downturn deepens.”—James McIntyreCentral Bank of ArgentinaArgentina’s central bank now targets monetary aggregatesArgentina hasn’t set a policy interest rate since June 2025, when it adopted a monetary-targeting framework.

Financial conditions have been loose, with non-performing household loans at their highest since the central bank began keeping records in 2010.Monthly inflation slowed in May to an eight-month low of 2.1%, easing from a period when war in the Middle East added pressure to consumer prices.

The increase in cost-of-living is seen falling below 2% in June.Meanwhile, President Javier Milei’s government has surpassed its year-end reserve accumulation target, buying more than $10 billion.

That reserve buildup and also the nation’s improved sovereign credit ratings are together fueling expectations that Argentina may soon return to international bond markets.What Bloomberg Economics Says: “While disinflation remains Milei’s signature achievement, we don’t think it must extend much further to deliver political dividends.

The government appears to agree and has adjusted monetary policy to balance lower inflation against other macro goals, including growth.

We expect this to continue, though tightening is likely to become unavoidable as the October 2027 election approaches, and likely unsettles markets.

We look for the ON rate to remain in the low-20% zone through year-end but climb above 30% in 2027.”—Adriana DupitaG-10 CURRENCIES AND EAST EUROPE ECONOMIESSwiss National BankCurrent policy rate: 0%Bloomberg Economics forecast for end of 2026: 0.25%Bloomberg Economics forecast for end of 2027: 0.5%Market pricing: Money markets see a relatively small chance of a hike by year end, pricing a six-basis-points move.A temporary pickup in Swiss prices prompted by the Iran war lost momentum in June, with inflation slowing for the first time in eight months.

That highlights how benign the oil shock has been in Switzerland compared with the surrounding euro zone.

As higher energy costs offset the strong franc’s drag on inflation, Swiss National Bank policymakers including President Martin Schlegel can continue their wait-and-see stance.Officials will still watch for prices falling short of forecasts.

Borrowing costs are at zero and inflation is predicted to average just 0.6% this year and next.

If geopolitical flareups prompt renewed haven flows into the franc, that’s sure to raise a red flag, as it weighs on inflation.

The SNB has repeatedly stated its greater willingness to intervene against such flows.

What Bloomberg Economics Says:“The SNB left its rate unchanged at zero in June, but the backdrop has become more supportive.

Receding deflation risks, a weaker franc and a more hawkish Fed and ECB strengthen the case for a gradual normalization of its policy.

Even so, we expect the SNB to wait until December before hiking, with risks skewed toward a longer hold, while continuing to use threats of FX interventions to discourage franc appreciation.”—Jean Dalbard132206385Sveriges RiksbankCurrent policy rate: 1.75%Bloomberg Economics forecast for end of 2026: 1.75%Bloomberg Economics forecast for end of 2027: 2%The Riksbank’s latest guidance from its June policy meeting suggested a 50% chance of a quarter-point increase to borrowing costs by year-end, but the recent reduction of tension in Iran suggests that hike may not materialize over the months ahead.

Governor Erik Thedeen said in minutes of the June meeting that the central bank was shifting its course “in a slightly tighter direction” but that the “rudder angle remains small”.The Swedish krona, the worst performing Group of 10 currency this year, has now come into focus for policy makers, with Thedeen calling it an “important factor going forward” as the board seeks to judge the risk of too high inflation.What Bloomberg Economics Says:“Despite progress toward a peace deal, the Iran war remains a key source of inflation and policy uncertainty.

Even so, we see the Riksbank well poised to look through any near-term volatility supported by low inflation, well-anchored medium- and long-term inflation expectations, and the inflation target’s role as the benchmark for wage negotiations.

We see the policy rate unchanged at 1.75% through the first half of 2027.”—Selva Bahar BazikiNorges BankCurrent deposit rate: 4.25%Central bank guidance for end of 2026: 4.5%Norway’s rate-setters took a pause from tightening at their last meeting after having pivoted in May to respond to sticky domestic price pressure.

They said another hike is likely “at one of the forthcoming monetary policy meetings,” with Governor Ida Wolden Bache citing signs of “somewhat higher inflation” and pledging more focus on price developments.Norges Bank’s new policy outlook signals an equal likelihood of a 25-basis-point increase in August or September, with a 20% chance of another hike before the year-end, according to analysts.

Its updated forecasts still only project core price growth declining close to its 2%-target by 2029.Reserve Bank of New ZealandCurrent cash rate: 2.25%Bloomberg Economics forecast for end of 2026: 2.25%Bloomberg Economics forecast for end of 2027: 3%Market pricing: Swaps price between two and three quarter-point hikes this year with the first increase expected as soon as this week.The Reserve Bank is expected to raise rates progressively toward the so-called neutral level at or above 3% through the remainder of 2026.

However, whether the tightening begins as early as this month remains uncertain.

Those who argue for a July hike fear inflation will get embedded in the economy, which may necessitate a more aggressive response later.

Others say policymakers can wait until September because economic growth is weak and there is slack in the labor market that is curbing wages.New measures such as disclosure of how policy committee members vote and attributing material differences in views are intended to enhance transparency of decision making going forward.

That was evident at the May meeting, when the committee was unexpectedly split 3-3 and the decision to hold was made after Governor Anna Breman’s casting vote, leading investors to increase rate-hike bets.What Bloomberg Economics Says:“Lower oil prices should let the RBNZ rest easier in the coming months.

The risk of a prolonged, broad-based inflation shock drove its line-ball decision to hold rates in May.

With that risk fading, the balance of inflation risks now tilts toward the economy’s wide output gap and elevated unemployment.

Weak confidence and a negative wealth effect should allow the RBNZ to look through the inflation spike and maintain an expansionary stance through the second quarter of 2027.”—James McIntyreNational Bank of PolandCurrent cash rate: 3.75%Median economist forecast for end of 2026: 3.75%Median economist forecast for end of 2027: 3.75%Poland’s easing inflation has further diminished the prospects for rate increases, with the outlook starting to tilt toward cuts.The central bank paused its easing cycle in recent months to gauge the impact of the Iran war on prices.

But after an initial flare-up, it proved to be less acute than feared after the government imposed temporary measures to cap gasoline costs.The months-long slowdown in inflation has been reflected in Polish policymakers’ progressively less hawkish rhetoric.

Governor Adam Glapinski said in May that rates were “high enough.”Czech National BankCurrent cash rate: 3.75%Market expectation for end of 2026: 4%The Czech central bank lifted its main rate by 25 basis points in June as domestic risks from sticky services inflation, buoyed by robust wage growth, prevailed over lower oil prices.

The central bank defied pressure from billionaire Prime Minister Andrej Babis, who has urged it to lower borrowing costs.

In fact, Governor Ales Michl pointed to the budget deficit as one of the reasons warranting tighter policy.Investors are betting on one more hike this year, although policymakers insisted the June move wasn’t the start of a tightening cycle.

“We want to slow growth in the money supply, we want to slow core inflation,” Michl said last month.

“‘Our answer is tight monetary policy and higher rates than what we were used to before.” ...