The Federal Reserve raised its policy interest rate by 25 basis points while the Bank of Japan lifted its benchmark interest rate to 1.25 percent.
Global policy tightening
The Bank of Japan passed its decision by a 7 to 2 vote. The 1.25 percent level marks a 31-year high for the Japanese benchmark rate. Meanwhile, the Bank of England and the Czech National Bank both kept their borrowing costs unchanged alongside hawkish accompanying commentary, as central banks continue to confront high crude oil prices near 100 dollars per barrel.
Structural shifts are continuing to reshape price dynamics across the global economy. Salman Ahmed, analyst at Fidelity International, said: “It is not just that inflation is taking longer to decline; the structure of the economy itself has changed, with geopolitical fragmentation, energy security, a greater fiscal policy role, duplicated supply chains, and the capital intensity of the AI investment cycle pointing to a world where inflation will likely remain more persistent.”
Projections and diplomacy
In the United States, the Federal Open Market Committee dot plot median projection points to tighter borrowing conditions over an extended horizon, expecting one more rate hike by the end of 2026, no cuts during 2027, and inflation returning to the 2 percent target no earlier than 2029.
Geopolitics also frames the economic calendar. Chinese President Xi Jinping is scheduled to make a state visit to the United States on 23-25 September to meet President Donald Trump regarding the expiration of a one-year trade war truce.
Related: Deutsche Bank warns markets misprice global rate hikes · Fed lifts key interest rate by 25 basis points
Source: Federal Reserve
