Iran’s War Halts Global Rate Cuts

The Iran war has seen major central banks put interest rates on hold in April and stymied ‌an easing push in emerging economies as policymakers face inflation pressures and volatile markets.

Six of the central banks overseeing the 10 most heavily traded currencies left rates unchanged last month: the U.S. Federal Reserve, the European Central Bank and the Bank of England, but also Canada, New Zealand and Japan.

Central banks in Switzerland, Australia, Sweden and Norway held no rate-setting meetings.

“Oil prices have surged and markets are pricing higher inflation and rate hikes, even if central banks stayed on hold,” said Christian Keller, head ⁠of economics research at Barclays.

Since the Iran war began on February 28, fears of supply disruption have pushed oil prices sharply higher, with the surge in energy costs feeding into fuel and transport prices and lifting global inflation expectations.

In the year to end-April, G10 central banks have delivered no rate cuts and 50 basis points of hikes across two moves by Australia’s central bank. Australia built on those hikes when it lifted interest rates again on May 5.

In 2025 and 2024, G10 central banks delivered 850 bps and 800 bps in easing, respectively.

Graphic: The stacked bar chart shows the combined values of hikes and cuts by 10 developed market central banks in the last three years. Banks did not cut or hike in April 2026.

Graphic: The stacked bar chart shows the combined values of hikes and cuts by 10 developed market central banks in the last three years. Banks did not cut or hike in April 2026.

The trend was also visible across emerging economies.

Two central banks from a Reuters sample of 18 developing economies – Brazil and Russia – trimmed interest rates by a total of 75 bps in April, the first time the ‌monthly ⁠tally of cuts has fallen below 100 bps in a year. Of the other 11 to hold rate meetings, 10 kept rates unchanged.

Meanwhile, policy makers in the Philippines delivered a rate hike to keep a lid on rising inflation. Latest inflation data from the country blew past all expectations while its currency – like others in Asia – has flirted with or hit fresh record lows, cementing a view that more ⁠tightening is on the cards.

Emerging economies, which often have higher shares of their inflation basket exposed to energy and food, are expected to feel price pressures more keenly. However, analysts point to a better starting point for many than in recent crises, such as COVID-19 or ⁠Russia’s full-scale invasion of Ukraine in 2022.

“Monetary policy now is at not only positive levels, but there is plenty of room for central banks to ease if they need to ease, which is quite different than the policy levels versus inflation ⁠levels that we had on the last global shock,” said Carlos Carranza, from the M&G emerging market debt team.