FMDA Pre-MPC Analysis-September 2026

The BIS’s September 2026 Quarterly Review （published September 14） offers the most current read on global conditions. It notes that flare-ups in geopolitical tension, chiefly hostilities around the Strait of Hormuz, tested the positive momentum that had characterised the first half of the year, while sovereign yields climbed on fiscal sustainability concerns and rising term premia, even as broader risk appetite stayed resilient despite faltering AI-driven equity momentum.

Monetary policy among major central banks turned notably more hawkish in September, a shift from the wait-and-see posture that had prevailed through mid-2026. The U.S. Federal Reserve raised its policy rate by 25 basis points to 3.75%–4.00% on September 16, its first hike since 2023, in a unanimous vote, with Chair Kevin Warsh citing inflation that “is too high and has been for too long”; the Committee’s dot plot points to one further hike before year-end. The European Central Bank also hiked 25 basis points, lifting its main refinancing rate to 2.65%, citing intensifying inflation pressure from the Middle East conflict, with 2026 headline inflation now projected around 3.0%. The Bank of Japan joined the hawkish shift too, raising its policy rate to 1.25% on September 18, a 31-year high, citing rising inflation, making this the first time in years that the Fed, ECB and BOJ have all tightened within the same two-week window.

Tracking of central banks that have met recently shows 144 institutions with decisions recorded: 113 (78.47%) held rates, 21 (14.58%) raised them, and 10 (6.94%) cut, broadly similar proportions to the May–July window (80.3% hold / 11.7% hike / 8.0% cut), but with an important compositional shift: the Fed and BOJ, previously among those holding, has now joined the ECB in the hiking camp, marking the first time since 2023 that the Fed, ECB and BOJ have all tightened policy in the same window.

Overall, global monetary conditions have tightened further since July as major central banks resume hikes to contain inflation stemming from the Middle East-driven energy shock, keeping financing conditions restrictive and sustaining investor preference for safe-haven assets.

Download the full report here.