Fed, 15 major central banks raise rates as inflation remains elevated

Central banks shift to higher rates

Out of 33 major central banks worldwide, 15 have increased interest rates within the past six months. This represents 45% of the group, marking the largest share seen since 2023 and approaching the highs reached in 2011 and 2018, when the rate was as high as 55%.

Back in 2022, nearly all central banks—around 95%—had embarked on monetary tightening after expansive stimulus measures during the pandemic pushed inflation upward. In 2026 so far, 54 central banks have raised their policy rates, with more hikes than reductions since September 2023.

Federal Reserve officials maintain hawkish stance

Beth Hammack, President of the Cleveland Federal Reserve and a voting member of the Federal Open Market Committee (FOMC), emphasized the importance of proactive action to keep inflation from becoming a more severe and sustained challenge. The Federal Open Market Committee sets US monetary policy and consists of twelve members, including Federal Reserve Bank presidents and members of the Federal Reserve Board of Governors.

Speaking at the annual National Association of Business Economists meeting, Hammack called for incremental steps rather than risking the need for stronger measures later. She stated:

When feasible, I generally think it’s preferable to make smaller adjustments, and to do so relatively quickly, rather than to wait and risk needing a larger course correction.

Hammack stressed that a restrictive monetary policy remains essential to return inflation to the 2% target. She warned that persistent price pressures are now broader in scope, complicating efforts to achieve the Federal Reserve’s inflation goal.

Another concern is that Americans could begin to see high inflation as a lasting reality, which might influence business and household expectations regarding wages, spending, and pricing behavior. Hammack commented:

Long-run inflation expectations have stayed remarkably well anchored despite actual inflation being above target for more than five years. But I’m not taking that for granted. With each passing month, persistently elevated inflation raises the risks of an inflationary mindset becoming entrenched in the economy.

The Federal Reserve raised rates for the first time in three years in September. Fed Chair Kevin Warsh said the move aimed to support a quicker return to the central bank’s inflation objective, adding: “The plain fact is that inflation is too high and has been for too long.”

Minutes from the Fed’s September meeting showed most officials expecting at least one more rate hike before the end of December, although further decisions will depend on ongoing economic conditions rather than a preset schedule.

US economy complicates policy choices

Recent data has highlighted the complexity facing Fed policymakers. The annual personal consumption expenditures (PCE) price index for August was 3.4%, while core inflation, excluding food and energy, remained at 3%. This matched July’s figures and fell short of earlier forecasts.

Meanwhile, US GDP growth for the second quarter was revised upward from 1.5% to 2.2%, suggesting stronger economic activity than previously estimated.

However, the labor market has shown signs of strain. September’s increase in nonfarm payrolls stood at only 29,000, making it the weakest monthly gain so far in 2026.

Policymakers now face a difficult choice: raising rates could help bring down inflation but carries the risk of further dampening an already slowing jobs market.

Market participants currently estimate a more than 78% probability that rates will remain unchanged at the Fed’s October meeting. CME FedWatch data also puts the chance of no change at 81%, compared to roughly 54% a month earlier.

By December, odds of another rate hike rise to more than 88%. Borrowers and businesses are preparing for a prolonged period of high financing costs as the Federal Reserve considers further tightening in light of persistent inflation and other central banks move away from rate cuts.