Central banks moved into tightening mode this week as an energy-driven inflation pulse from the Middle East conflict rippled across advanced economies.
The Bank of England raised Bank Rate 25bp to 4% in an 8-1 vote (with one member pushing for 50bp), with staff now projecting UK CPI to peak near 5% by mid-2027. Sweden's Riksbank also hiked 25bp to 2%, signalling further moves likely, while Norway held at 4.5% with an explicit hike bias. Canada's central bank lifted its policy rate 25bp to 2.5% — its first hike since 2023 — citing spillover risk from elevated oil and refining margins.
ECB President Lagarde noted headline euro area inflation hit 4% in October on a 20.8% energy print, though core held at 2.5%; she stressed a meeting-by-meeting stance into December. Separately, published research flagged rising global long-end yields as a pressure point for high-debt sovereigns like France, and raised concerns about circular financing in AI infrastructure debt.
A recurring theme: policymakers see limited second-round effects so far, but the risk is building as firms exhaust cost buffers.