Country acts amid Iran war inflation pressures, but US Fed and Bank of England expected to hold rates

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The Bank of Japan (BoJ) has raised interest rates to a 31-year high as it tries to dampen inflationary pressures created by the Iran war.

Policymakers in Tokyo raised the BoJ’s short-term policy rate by a quarter of one percentage point, to 1% from 0.75%, and warned that companies were passing on rising oil costs to each other at a “relatively fast pace”.

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© Photograph: Franck Robichon/EPA

© Photograph: Franck Robichon/EPA

© Photograph: Franck Robichon/EPA

Before the conflict began, inflation was at 2.4%, but the closure of the strait of Hormuz has affected energy prices

US inflation jumped to an annual rate of 4.2% in May, the third consecutive monthly increase since the start of the Iran war and a three-year high, as Americans continue to face steep oil prices.

Prices have increased sharply over the past several months, rising at an annual rate of 3.3% in March before going up to 3.8% in April. In February, before the conflict began, inflation was at 2.4%.

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© Photograph: Bonnie Cash/UPI/Shutterstock

© Photograph: Bonnie Cash/UPI/Shutterstock

© Photograph: Bonnie Cash/UPI/Shutterstock

The Bank of Canada held it's key policy rate unchanged Wednesday, with the benchmark interest rate staying at 2.25 per cent after a turbulent period of economic data.

Reserve Bank of Australia decision on Tuesday comes after three consecutive cash rate hikes this year

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The Reserve Bank has warned it is ready to raise interest rates further despite leaving its official interest rate on hold at 4.35%.

The widely expected decision on Tuesday will bring little relief to mortgage holders, already strained by the RBA’s three consecutive rate hikes earlier in 2026.

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© Photograph: Dean Lewins/AAP

© Photograph: Dean Lewins/AAP

© Photograph: Dean Lewins/AAP

Welcome to The Hill's Business & Economy newsletter {beacon} Business & Economy Business & Economy   The Big Story Warsh faces bind between Trump, inflation Federal Reserve Chair Kevin Warsh is facing a major challenge ahead of his first monetary policy meeting leading the central bank on the heels of an alarming May inflation report....

Governor Michele Bullock delivers a strong message after the Reserve Bank holds the cash rate at 4.35%, ending a run of three rises

• RBA interest rates: Reserve Bank holds official cash rate at 4.35%

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It will take more than a ceasefire in the Middle East to prevent the Reserve Bank from hiking interest rates again.

That was the strong message from the RBA governor, Michele Bullock, after the central bank held its cash rate at 4.35%, putting an end to a run of three increases.

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© Photograph: Dean Lewins/AAP

© Photograph: Dean Lewins/AAP

© Photograph: Dean Lewins/AAP

The U.S. Federal Reserve kept its key rate unchanged Wednesday yet almost half the central bank’s policymakers said they could support a rate hike later this year.

War’s impact on UK cost of living more muted than first forecast suggesting fuel price rises have failed to spill out more widely across UK plc

• UK inflation stays at 2.8% as slowing food prices offset transport costs

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As soon as Iran choked off oil supplies through the strait of Hormuz at the start of March, there were dire warnings about rocketing UK inflation and the drastic action the Bank of England might take to rein it in.

At one point, investors were expecting as many as three quarter-point rises in interest rates before the end of the year – a sharp turnaround from earlier forecasts of rate cuts.

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© Photograph: Ceri Breeze/Alamy

© Photograph: Ceri Breeze/Alamy

© Photograph: Ceri Breeze/Alamy

European Central Bank increases main deposit rate to 2.25%, with two further rises expected by next spring

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The European Central Bank has raised interest rates for the first time since 2023 in response to higher inflation caused by the war in Iran.

The ECB raised its main deposit rate from 2% to 2.25% in a move that financial markets expect to be the first of three rises by next spring.

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© Photograph: Kirill Kudryavtsev/AFP/Getty Images

© Photograph: Kirill Kudryavtsev/AFP/Getty Images

© Photograph: Kirill Kudryavtsev/AFP/Getty Images

The Federal Reserve kept its key rate unchanged Wednesday yet almost half the central bank's policymakers said they could support a rate hike later this year.