Central banks raise rates as war-driven inflation persists

BSP raised its benchmark rate by 25 basis points to 4.75%, its second consecutive hike this year, as Philippine inflation hit 6.8% in May.philstar
The Czech National Bank lifted its repo rate to 3.75%, while Moldova delivered a 500-basis-point hike to 7%, the most aggressive move of the day.cnb
Switzerland held at 0% and Taiwan stayed at 2%, though Taiwan’s governor flagged board members’ concerns over rising inflation, according to Reuters.snb

Global Central Banks Hike or Hold Rates Amid War-Driven Inflation

Central banks across the world delivered a flurry of monetary policy decisions on Thursday, with several raising interest rates to combat inflation fueled by elevated energy prices stemming from the conflict involving Iran, while others held firm and signaled vigilance.

Rate Hikes From Manila to Prague to Chișinău

The Bangko Sentral ng Pilipinas raised its benchmark reverse repurchase rate by 25 basis points to 4.75%, marking its second consecutive hike this year after a similar increase in April. The central bank cited “strong” inflationary pressures driven by global oil and fertilizer prices, projecting that headline inflation would exceed its 4% tolerance threshold through 2027. Philippine inflation stood at 6.8% in May, well above the BSP’s 2-to-4% target range.philstar

The Czech National Bank also raised its two-week repo rate by 25 basis points to 3.75%, ending a period of holding steady at 3.5%. The move followed weeks of debate among board members, with CNB member Jan Prochazka telling Reuters ahead of the meeting that the decision was “50-50” between a hike and no change.reuters

Moldova’s central bank delivered the most aggressive action of the day, raising its benchmark rate by 500 basis points to 7% — the highest since May 2023 — as headline inflation climbed to 6.8%, above the upper limit of its target range.tradingview

Switzerland and Taiwan Hold Steady

The Swiss National Bank left its policy rate unchanged at 0%, the lowest globally, as a stronger Swiss franc helped offset the energy price surge. All 35 economists in a Reuters poll had forecast no change, and the SNB is expected to remain on hold through the rest of 2026.reuters

Taiwan’s central bank maintained its benchmark discount rate at 2% for a ninth straight quarter, though Governor Yang Chin-long struck a hawkish tone, noting that two board members had advocated for a hike amid rising inflation concerns. The bank raised its consumer price forecast for the year to 1.91% as inflation crossed the 2% threshold in May for the first time in a year.reuters

ECB Warns of Prolonged Price Pressures

In Europe, ECB Chief Economist Philip Lane warned on Monday that the central bank would maintain a “proactive” stance against inflation even after a recent dip in oil prices following a U.S.-Iran agreement. Lane told Nikkei that the ECB would likely raise its inflation forecast in its June projections, noting that oil prices “are likely to remain elevated for longer compared with our March assumptions”. Markets are pricing in at least one more ECB rate increase this year.investing

The coordinated wave of decisions underscores how the energy shock from the Middle East conflict continues to ripple through economies at vastly different stages of development, forcing policymakers to weigh inflation risks against slowing growth.