LONDON — A recently reached agreement between the United States and Iran to end their conflict has caused oil prices to drop, offering some breathing room for central bankers who have been worried that soaring energy costs could fuel broader inflation. Even so, the situation remains tense across the world’s major economies.
Four developed-nation central banks are already raising interest rates, and several others — including the U.S. Federal Reserve — signaled this week that they are prepared to act if inflation continues to climb. Here is a look at where each central bank in the Group of 10 developed economies currently stands, ordered from the highest policy rate to the lowest.
1. AUSTRALIA — 4.35%
Australia’s central bank has raised interest rates three separate times this year, bringing its rate to 4.35% — the highest among G10 nations. The moves were aimed at countering a global energy shock and fully reversed last year’s rate cuts. This week, the Reserve Bank of Australia chose to pause, noting that tighter financial conditions are slowing the country’s economy, though it left the door open for future increases. Markets currently place roughly a 50% probability on another hike later this year.
2. NORWAY — 4.25%
Norway’s central bank held its rate steady at 4.25% on Thursday, but made clear that inflation remains too elevated and that borrowing costs will likely need to rise again before the year ends. The Norges Bank had already raised its rate in May, and annual core inflation unexpectedly climbed to 3.4% that same month.
3. BRITAIN — 3.75%
The Bank of England has kept its interest rate on hold at 3.75% since the start of the U.S.-Iran war, citing uncertainty about how strong inflation pressures will ultimately become. At Thursday’s meeting, only two of the nine rate-setters voted to raise rates. The central bank cautioned it is too early to declare the inflation threat over, and it expects inflation to climb above 3.25% in the final quarter of this year — up from 2.8% in May — though that is a smaller jump than it had projected back in April under two of its three main scenarios. Markets anticipate at least one rate hike before the end of the year.
4. UNITED STATES
The start of Kevin Warsh’s tenure as Federal Reserve chair came with a surprise on Wednesday. The Fed kept rates unchanged, as widely expected, but new projections and remarks from Warsh caught markets off guard, prompting traders to price in the possibility of a rate increase within months. The Fed released a simplified monetary policy statement, and quarterly projections revealed that nine Fed officials now expect rates to rise by the end of 2026. Markets see a strong chance of a hike in September and consider a second increase before year’s end more likely than not. The news sent short-term bond yields and the value of the dollar sharply higher.
5. NEW ZEALAND — 2.25%
New Zealand’s central bank does not hold its next meeting until early July, when markets expect it to raise its current 2.25% rate, with additional increases anticipated later in the year. The bank faces a difficult situation: inflation is projected to climb well beyond its 1% to 3% target range, while the unemployment rate sits at a ten-year high.
6. CANADA — 2.25%
The Bank of Canada held its policy rate at 2.25% last week, pointing to limited evidence that higher energy costs are bleeding into broader inflation. The bank is expected to keep rates steady in the months ahead. Recent data showed inflation staying within its 1% to 3% target range.
7. EURO ZONE — 2.25%
The European Central Bank raised rates for the first time in nearly three years last week, hoping to get ahead of inflation before the energy cost surge tied to the Iran conflict spreads more widely through the euro zone economy. The widely anticipated move brought the benchmark deposit rate to 2.25%. Traders are pricing in one additional quarter-point hike by the end of the year.
8. SWEDEN — 1.75%
Sweden’s central bank left its policy rate unchanged at 1.75% on Wednesday, in line with expectations. The Riksbank noted that the likelihood of a rate hike later this year has grown as the Middle East conflict has increased inflationary pressure, but added that underlying inflation remains low.
9. JAPAN — 1.0%
Japan’s central bank raised its rate to 1% on Tuesday — a 31-year high — marking a significant step in its effort to normalize monetary policy. The Bank of Japan also signaled it is ready to tighten further to keep price pressures in check. Higher rates could help bolster the weakened yen, though Japanese rates still remain low compared to most other G10 nations.
10. SWITZERLAND — 0%
Switzerland holds the lowest policy rate in the G10 at 0%, and the Swiss National Bank left it unchanged on Thursday. Policymakers said medium-term price pressures have barely shifted despite a recent uptick in inflation driven by higher fuel costs. Swiss officials have been contending with the strength of their currency, but are reluctant to return to negative interest rates. They say they stand ready to step into currency markets to ease pressure on the Swiss franc if necessary.
