Three more major central banks made interest rate announcements from Wednesday night into yesterday morning. The Bank of Japan (BoJ), Bank of England (BoE) and European Central Bank (ECB) all held their policy interest rates steady, while signalling concerns over higher prices and the economic impact of the conflict in the Middle East. Oil prices have risen sharply higher amid tensions in the Middle East, which have effectively closed the Strait of Hormuz. Higher energy prices could increase the cost to produce and ship consumer goods, which could push prices higher.

• The BoJ held its policy interest rate steady at 0.75% at its March meeting. The BoJ has raised interest rates over the past year amid elevated inflationary pressures. The BoJ expects inflation to pick up due to rising oil prices.
• In the UK, the BoE left its Bank Rate unchanged at 3.75%. The UK central bank expects inflation to rise to between 3.0% and 3.5% in response to higher energy prices. The BoE said it would be willing to shift its policy interest rate to maintain price stability and support the UK economy.
• The ECB also held its policy interest rates steady. Europe’s central bank said that the Middle East conflict will have a significant impact on inflation, particularly in the short term.    
• Earlier this week, it was reported that Europe’s annual inflation rate rose to 1.9% in February from 1.7% in January, just below the ECB’s 2% target. Core inflation did pick up to 2.4% year-over-year in February.

On Wednesday, the Bank of Canada and US Federal Reserve Board made their interest rate decisions, with both holding steady. All five of the central banks said they are closely developing the situation in the Middle East and how it is impacting their economy and prices. The banks have signalled that geopolitical tensions have muddied their economic outlook. Investors are increasingly concerned that interest rates could go higher.

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