Central bank interest rates in 2026 have split into three groups: banks that raised rates to fight an energy driven rise in inflation, banks that held, and banks that kept rates near zero. As of August 27, 2026, policy rates ranged from 0% at the Swiss National Bank to 4.35% at the Reserve Bank of Australia, with the Federal Reserve at 3.50% to 3.75% [2][3]. The currencies of the hikers gained the most: from December 31, 2025 to August 21, 2026 the Australian dollar rose 7.6% against the US dollar and the Norwegian krone 8.5%, while the Swedish krona fell 2.5% and the yen 1.3% [5][6].
Central bank interest rates compared: the 2026 table
The table below lists each bank's policy rate at the end of 2025 and on August 27, 2026, the gap to the midpoint of the Fed's range (3.625%), and the change in the currency against the US dollar from December 31, 2025 to August 21, 2026, the latest week in the Federal Reserve's H.10 release [2][5][6]. A positive currency change means the currency strengthened against the dollar.
| Central bank | Rate, Dec 31, 2025 | Rate, Aug 27, 2026 | Gap to Fed midpoint | Currency vs USD, 2026 |
|---|---|---|---|---|
| Reserve Bank of Australia | 3.60% | 4.35% | +0.73 pts | +7.6% |
| Norges Bank | 4.00% | 4.25% | +0.63 pts | +8.5% |
| Bank of England | 3.75% | 3.75% | +0.13 pts | +1.5% |
| Federal Reserve | 3.50% to 3.75% | 3.50% to 3.75% | 0 | n/a |
| Reserve Bank of New Zealand | 2.25% | 2.50% | minus 1.13 pts | +4.0% |
| European Central Bank (deposit rate) | 2.00% | 2.25% | minus 1.38 pts | minus 0.4% |
| Bank of Canada | 2.25% | 2.25% | minus 1.38 pts | minus 0.4% |
| Sveriges Riksbank | 1.75% | 1.75% | minus 1.88 pts | minus 2.5% |
| Bank of Japan | 0.75% | 1.00% | minus 2.63 pts | minus 1.3% |
| Swiss National Bank | 0.00% | 0.00% | minus 3.63 pts | minus 0.9% |
Five of these banks changed rates in 2026, and every change was an increase. The RBA raised its cash rate three times, on February 4, March 18 and May 6; Norges Bank moved on May 8; the ECB and the Bank of Japan both raised rates effective June 17; and the Reserve Bank of New Zealand followed on July 9 [2]. The Fed, the Bank of England, the Bank of Canada, the Riksbank and the Swiss National Bank held all year [2]. The People's Bank of China's one year loan prime rate stayed at 3.00%, but it is a lending benchmark rather than an overnight rate and is not directly comparable [2].
Why central banks diverged in 2026
The common shock was energy. Supply disruptions in the Middle East lifted oil and gas prices, and each bank had to judge whether higher energy costs would pass into wages and core prices. The answers differed with each economy's starting point.
The hikers
The RBA moved first and furthest, taking the cash rate from 3.60% to 4.35% [2]. Norway, an energy exporter, added a quarter point in May. The ECB raised its deposit rate from 2.00% to 2.25% in June and held it there on July 23, saying the full inflationary impact of the energy shock had yet to play out [2][4]. The Bank of Japan's move to 1.00% continued a gradual exit from near zero rates [2].
The holders
The Fed kept its range at 3.50% to 3.75% on July 29, noting that inflation remained elevated partly because of supply shocks, while economic activity was expanding at a solid pace [3]. The vote was 9 to 3, and all three dissenters preferred a quarter point increase, a sign that the next Fed move is more likely up than down [3]. The Bank of Canada, the Riksbank and the Swiss National Bank also held, keeping their rates at 2.25%, 1.75% and 0% [2].
What interest rate gaps mean for currencies
A higher policy rate raises the return on short term deposits and bonds in that currency, which draws capital and supports the exchange rate. The 2026 data fit this pattern closely, with three lessons:
- Direction matters more than level. The New Zealand dollar gained 4.0% even though New Zealand's rate is still 1.13 points below the Fed's, because the RBNZ moved up while the Fed stood still [2][5][6].
- Positive carry plus hikes produced the biggest gains. The Australian dollar and Norwegian krone, the only two currencies with rates above the Fed's midpoint and rising, led the group [2][5][6].
- Low yielders weakened. The yen, franc and krona, the currencies of the three lowest rate economies in the table, all lost ground to the dollar despite the Fed's pause [5][6].
The euro is the exception worth noting. The ECB hiked, yet the euro slipped 0.4%, from $1.1736 to $1.1684, because its deposit rate still sits 1.38 points under the Fed's midpoint and the euro area is a net energy importer [4][5][6]. Across the nine currencies in the table, four gained against the dollar and five lost ground, so the dollar's 2026 record depends on which currency it is measured against: it fell against the Australian dollar, krone, New Zealand dollar and pound, and rose against the euro, Canadian dollar, krona, yen and franc [5][6].
Where exchange rates stand in late August 2026
Daily quotes on DataPorium's forex page show USD/JPY at 159.39, GBP/USD at about 1.359, USD/CAD at 1.385 and USD/CHF at 0.804 at the close on August 27, 2026 [1]. The yen remains close to 160 per dollar even after the Bank of Japan's hike, which shows how large the remaining gap of more than 2.5 points is [1][2].
From a market oriented view, the 2026 divergence is a healthy sign: central banks are setting rates for their own inflation conditions rather than following one another, and exchange rates are doing the work of adjustment. The counterpoint is that higher rates in the hiking economies will slow borrowing and housing activity, and if energy prices ease, the same currencies could give back part of their gains as markets price cuts. Investors may consider tracking the direction of the next decisions, especially the Fed's, since the three July dissents raise the possibility that the US gap widens again [3].
In 2026 the currencies of central banks that raised rates, led by the Australian dollar and Norwegian krone, rose the most against the dollar, while the low yielding yen, franc and krona fell.
Key takeaways
- As of August 27, 2026, policy rates ranged from 0% (Swiss National Bank) to 4.35% (RBA), with the Fed at 3.50% to 3.75% [2][3].
- Five major central banks raised rates in 2026 and none cut: the RBA, Norges Bank, ECB, Bank of Japan and RBNZ, the RBA three times [2].
- From December 31, 2025 to August 21, 2026 the krone rose 8.5% and the Australian dollar 7.6% against the dollar, while the krona fell 2.5% [5][6].
- The Fed's July 29 hold came with three dissents in favor of a hike [3].
Frequently asked questions
Which central banks raised interest rates in 2026?
Through August 27, 2026, the Reserve Bank of Australia (three times, to 4.35%), Norges Bank (to 4.25%), the ECB (deposit rate to 2.25%), the Bank of Japan (to 1.00%) and the Reserve Bank of New Zealand (to 2.50%) raised rates, and no major central bank cut [2].
What is the Fed interest rate in August 2026?
The federal funds target range is 3.50% to 3.75%, held at the July 29, 2026 meeting by a 9 to 3 vote, with three members preferring a quarter point increase [3].
How do interest rate differences affect exchange rates?
Higher rates raise the return on holding a currency, which attracts capital and tends to lift its exchange rate; in 2026 the currencies of the hiking central banks, such as the Australian dollar and Norwegian krone, gained the most against the dollar [2][5][6].
Why is the Swiss franc weaker against the dollar in 2026?
The Swiss National Bank kept its policy rate at 0%, 3.63 points below the Fed's midpoint, and the franc slipped 0.9% against the dollar from December 31, 2025 to August 21, 2026 [2][5][6].
Sources & References
- [1] DataPorium Forex: daily USD/JPY, USD/GBP, USD/CAD and USD/CHF exchange rates
- [2] BIS: Central bank policy rates (WS_CBPOL), daily, December 31, 2025 to August 27, 2026
- [3] Federal Reserve: FOMC statement, July 29, 2026
- [4] ECB: Monetary policy decisions, 23 July 2026
- [5] Federal Reserve H.10: Foreign Exchange Rates, week ending August 21, 2026 (released August 24, 2026)
- [6] Federal Reserve H.10: Foreign Exchange Rates, week ending January 2, 2026 (released January 5, 2026)
