Four central banks raised rates in one week. Why some still held

What happened

In the space of three days, four central banks raised their main interest rate by a quarter point:

• Australia (3 November): to 4.85%, its fifth rise this year, in a 6–3 vote.
• Sweden (4 November): to 2%, its first rise since 2023.
• United Kingdom (5 November): to 4%, its first rise since 2023, in an 8–1 vote.
• Czech Republic (5 November): to 4%, its second rise this year after June, by four votes to three.

Two others held. Norway's central bank kept its rate at 4.5% after rises in May and September, and Brazil's at 13.75%, pausing after five cuts.

The common cause

The war involving Iran and the disruption around the Strait of Hormuz have raised the cost of energy, shipping and raw materials for every importing country. A central bank cannot bring those world prices down. What it tries to stop is the second round, when firms raise other prices and workers ask for higher pay to keep up, which would make inflation last. Several banks this week pointed to exactly that risk: the Czech National Bank, for example, raised its inflation forecast for 2027 to 3.2% from 2.5%.

Why some held

Each bank starts from a different place. Norway's rate was already 4.5% after two rises, and its central bank said a stronger crown is expected to dampen inflation: a stronger currency makes imports cheaper. Brazil's rate, at 13.75%, is already very high in real terms; it paused cutting because its currency weakened after the election, which works the other way, making imports dearer. Votes were also close: three of nine in Australia and three of seven in the Czech Republic wanted to wait.

Where it sits in the chain

This is Link 2, central banks reacting to inflation (Link 1). The exchange rate is the bridge between the two: it decides how much of a world price shock becomes local inflation.

What to watch

• The US jobs report on 6 November, and the Fed's December decision.
• The ECB's December meeting, where several policymakers have signalled a rise.
• Oil prices: a lasting fall would ease the pressure on all of them.