Global Rate-Hike Wave Returns: Major Central Banks Expected to Maintain Higher Rates into 2027

Major central banks, including the Federal Reserve, European Central Bank, and Bank of Japan, are collectively shifting towards a more restrictive monetary policy stance, reversing earlier market expectations of a global rate-cut wave in 2026. This pivot is attributed to rising energy prices due to Middle East geopolitical conflict, multi-year highs in long-end sovereign yields, and economic resilience underpinned by AI infrastructure investment. Bloomberg Economics models indicate developed-economy aggregate borrowing costs now price in nearly 25 basis points of additional hikes, with the Fed expected to hold rates near 4% through end-2026, the ECB facing rising odds of a December hike, and the Bank of Japan's probability of another hike before year-end approaching 90%. The IMF has urged central banks to remain 'cautiously hawkish'.