Four of the world’s largest central banks tightened policy within a nine-day span in September, as an oil shock from the war between the United States and Iran keeps inflation elevated from Washington to Tokyo
The Federal Reserve raised its benchmark interest rate for the first time since 2023 on September 16, 2026, lifting the federal funds target range by a quarter point to 3.75%-4% in a unanimous vote. The decision landed in the middle of a nine-day stretch in which the European Central Bank and the Bank of Japan also raised rates and the Bank of England came within three votes of doing the same, the closest four major central banks have come to moving in lockstep since the post-pandemic inflation surge.
The Fed’s move followed an August consumer price index that rose 3.4% year-over-year, with core inflation at 2.4%, still above the central bank’s 2% target. Fed Chair Kevin Warsh told reporters after the meeting that inflation remained too high, and the Federal Open Market Committee’s own projections showed the median policymaker expecting at least one more increase before the end of 2026, toward a target of roughly 4.1%. The Dow Jones Industrial Average, which had traded higher earlier in the session, reversed after Warsh’s remarks and closed down 631.21 points, or 1.21%, at 51,461.90.
President Trump, who nominated Warsh to the Fed earlier in 2026, criticized the increase on September 17, 2026. “Interest Rates in the United States should be 1%, or less, because we are the Best Credit in the World, BY FAR,” he wrote on Truth Social, adding that he retained confidence in Warsh.
The Bank of Japan moved two days after the Fed, on September 18, 2026, raising its policy rate by a quarter point to 1.25%, the highest level since 1995. The board split 7-2, with two members voting to hold, citing the risk that inflation could overshoot its 2% target. The new rate took effect on September 24, 2026.
The European Central Bank had already acted on September 10, 2026, lifting its deposit facility rate by a quarter point to 2.50% after eurozone inflation accelerated to 3.3% in August, its highest reading in three years. The Bank of England held its rate at 3.75% on September 17, 2026, but only after a 6-3 vote in which three of the nine Monetary Policy Committee members pushed for an immediate increase to 4%; UK inflation reached 3.1% in August. The Bank’s next scheduled decision, on November 5, 2026, is now seen by traders as the more likely moment for a move.
Behind all four decisions sits a common driver: Brent crude climbed above $100 a barrel in September 2026 as the war between the United States and Iran disrupted shipping through the Strait of Hormuz, an event the International Energy Agency has called one of the largest supply shocks in the history of the global oil market. Both the Bank of England and the European Central Bank cited energy costs directly as drivers of the inflation readings that shaped their decisions, and the same pressure pushed the Fed toward a rate increase it had avoided for three years.