Surging inflation puts interest rates back in focus as policymakers meet in Japan, US and UK

AI desk brief

Surging inflation and higher energy prices are putting rates back in focus across the major central banks, a setup that is broadly negative for precious metals via firmer nominal yields and potentially higher real rates. US annual inflation was unchanged at 3.4%, while crude briefly topped $100/bbl, raising the odds of a hawkish Fed outcome this week despite political pressure for cuts.

In the UK, markets are pricing four rate rises over the next 12 months, up from three before the latest oil spike, while the BoE is expected to hold at 3.75% with hawkish guidance. In Japan, a 25bp BoJ hike to 1.25% is widely expected, and the ECB has already raised rates, with Lagarde warning inflation will stay well above target for an extended period.