Although a few G10 central banks will be able to resist pressure for rate hikes, such as the Swiss National Bank, more are likely to succumb to the need for monetary action to keep inflation targets in sight. In Steven Barrow, head strategist of the Standard Bank’s view, this includes the Fed.

For while new Fed Chair Warsh is undoubtedly tarred with a dovish brush as an appointee of President Trump, there is little doubt that he has put more focus on achieving the Fed’s 2% inflation target than many might have anticipated. This seemingly reflects his own bias, but there is also little doubt that most FOMC members seem concerned that they have not been able to hit the target for five years and their own forecasts still miss the target this year and next.

In addition to this, renewed fighting in Iran threatens to lift US gasoline and diesel prices, while rapid AI-related datacentre construction is keeping electricity prices elevated. The FOMC might try to look through these increases, but in Steven Barrow’s view, they threaten to elevate goods price inflation at a time when services inflation is already a concern for the Fed.

“The bank could lift rates quickly, but we still think it more likely that the Fed starts to hike from late in the year, probably December. The bond market is unlikely to wait around for the Fed to act. We continue to believe that 10-year yields will rise to 5% over the course of 2026. Indeed, the longer the Fed leaves it to hike rates, the more likely longer-term treasury yields are to rise," said Steven Barrow.

The ECB is one G10 central bank that’s already moved to lift rates, and on Thursday it has a second chance to act. It seems unlikely it will take it. For while the ECB’s stance at the moment is that it is giving the market no guidance, it seems clear from the tone of officials’ comments that they lean towards waiting.

Steven Barrow doubts that the wait will be too long as we’d look for another 25-bps rate hike in September after the summer break. In contrast, the Bank of England has eschewed the chance to hike rates. There remains a discrepancy between the views of most analysts and market pricing in the UK. For, just like the US, the market is priced for the BoE to hike rates but the vast majority of analysts see no change in rates this year. He still leans towards market pricing and hence away from the views of most analysts. The resumption of fighting in Iran strengthens the case for higher rates if it persists and produces a continued rise in prices and possibly even supply shortages.

The difficulty for the BoE at the moment is that it is hard to understand how the recent rise in inflation has impacted wages. For while wage data is produced on a monthly basis, the key periods for annual wage awards are January and April. That’s still some way off, and the doves on the MPC may try to dig in until, or unless, there are clear signs that wage pressure is increasing.

A secondary issue that MPC members have to consider is how a new Burnham-led government might impact the economy and, in particular, the gilt market. The bank is already being accused of being too zealous in its quantitative tightening, something that could redouble pressure on the market should the shift in the government lead to an easing of fiscal policy that unnerves investors. Steven Barrow doesn’t think that will happen, although we do believe that gilt yields will drift higher in line with those in the US.

As mentioned earlier, there are likely to be some G10 central banks that resist the trend of increasing policy rates. The SNB certainly seems comfortable with rates at zero as price pressures remain muted. The Bank of Canada and the Reserve Bank of Australia may also be added to the list of banks that can leave policy unchanged at least through the remainder of 2026. However, even with stable policy rates, Steven Barrow doubts that any of these countries can resist the trend of rising bond yields.