Overview
- The Federal Reserve told Congress on July 10 that U.S. inflation “stepped up” this spring and that its preferred PCE gauge ran about double the 2% target, leaving officials split and prepared to tighten if inflation stays persistent.
- FOMC minutes showed an even divide at the June meeting between officials content to hold rates and others ready to raise them, and the Fed’s dot‑plot now projects a higher year‑end policy rate.
- The European Central Bank’s June projections show headline inflation staying above target into early 2027 even with nearly three 25‑basis‑point hikes built in, and markets have repriced a greater chance of further ECB moves after recent energy price swings.
- The Bank of Japan has begun normalizing policy, raised its short‑term rate in June to 1.0%, and reported a 7.1% jump in producer prices for June that strengthens the case for more tightening later in 2026.
- Higher oil and fuel costs from renewed Middle East hostilities, tariffs and strong AI-driven demand for chips and data‑centre equipment are the main drivers of the renewed inflation risk and the chief factors policymakers and markets will watch in coming weeks.