100 Days After the Iran War: The Federal Reserve and Bank of England Balance Between Inflation and Growth

SadaNews - Several global central banks will face a critical question next week: Does the Iran War pose a more immediate threat to inflation or to growth?

Central bank officials in seven of the world's most traded currency regions are mostly expected to keep monetary policy settings unchanged once again.

The likely exceptions are the widely anticipated interest rate hike from the Bank of Japan, as it continues to exit its low borrowing cost policy, and an undecided decision in Norway. However, the U.S. Federal Reserve and its counterparts in the UK and Sweden are widely expected not to make any adjustments to interest rates.

Efforts to delay further to assess the impact of a conflict that has just exceeded 100 days may bolster U.S. President Donald Trump's efforts to reach a peace agreement with Iran. This process will unfold against the backdrop of his expected attendance at the G7 summit in France on Monday.

Divergence in Monetary Policies

However, divergence within the club of advanced economies has already begun to show, after the European Central Bank implemented its first interest rate hike since 2023 on Thursday.

Central banks in Norway and Australia have already raised interest rates, but they do not seem compelled to repeat the step soon. At the same time, the Swiss National Bank, which is affected by safe-haven flows to the franc, is likely to keep its interest rate at zero.

Overall, more than 20 central banks, collectively representing over 40% of global output, are scheduled to make decisions regarding interest rates, indicating that the week could largely serve as a conclusion to the first half of 2026. Among the notable further milestones, officials in Brazil and Russia may lower borrowing costs, while a rate hike may also materialize in the Czech Republic.