Three of five major central banks raised interest rates in September 2026: the Federal Reserve lifted its target range to 3.75% to 4.00% on September 16, the European Central Bank raised its deposit rate to 2.50% effective the same day, and the Bank of Japan raised its policy rate to 1.25% on September 18 [1][2][3]. The Bank of England held Bank Rate at 3.75% in a 6-3 vote and the Bank of Canada held at 2.25% [4][5]. All cited higher energy prices from the Middle East conflict as a source of inflation risk [1][3][4][6].
What did central banks decide in September 2026?
| Central bank | Decision date | Action | Policy rate after | Vote | Next decision |
|---|---|---|---|---|---|
| Federal Reserve (US) | September 16 | Raised 0.25 point | 3.75% to 4.00% | 12-0 | October 28 |
| European Central Bank | September 10 (effective September 16) | Raised 0.25 point | 2.50% deposit rate | not published | October 29 |
| Bank of Japan | September 18 (effective September 24) | Raised 0.25 point | 1.25% | 7-2 | October 30 |
| Bank of England | September 17 | Held | 3.75% | 6-3 (3 for a hike) | November 5 |
| Bank of Canada | September 2 | Held | 2.25% | not published | October 28 |
Source: statements and rate tables of each central bank [1][2][3][4][5]; meeting calendars [9][10]. The ECB announced its decision at a press conference on September 10 [9]. Bank of Canada schedule [11].
Why did the Fed, ECB and Bank of Japan raise rates?
Federal Reserve
The Fed's September 16 increase was its first since July 2023. Its statement said "Inflation remains elevated" and that the move "will support a timelier return" to its 2% goal [1]. The minutes, released October 7, show officials worried that energy prices from "ongoing geopolitical developments" and AI-related investment were adding to inflation, and that most saw another increase as likely by year-end [7].
European Central Bank
The ECB's deposit facility rate, the rate it pays banks on overnight deposits and its main policy tool, rose from 2.25% to 2.50% with effect from September 16, 2026 [2]. It was the second increase of 2026, after a hike to 2.25% effective June 17; the ECB had cut rates as low as 2.00% in June 2025 [2]. The main refinancing rate is now 2.65% and the marginal lending rate 2.90% [2]. The Fed's minutes noted that the ECB raised rates "citing continued inflationary pressures from the Middle East conflict" [7].
Bank of Japan
The Bank of Japan's board voted 7-2 to raise its target for the overnight call rate to around 1.25%, effective September 24 [3]. Two members dissented [3]. Japan is in a different position from the US and Europe: after decades of near-zero rates, the BoJ has been raising rates gradually as inflation and wages rise.
Why did the Bank of England and Bank of Canada hold?
The Bank of England's Monetary Policy Committee voted 6-3 to keep Bank Rate at 3.75%, with Megan Greene, Catherine Mann and Huw Pill voting for an increase to 4% [4]. The committee said UK CPI inflation rose to 3.1% in August and "is likely to rise further over coming quarters," but that there was "little evidence so far of material second-round effects in price and wage-setting" [4]. It judged the risks to inflation "tilted to the upside, and more so than at the time of the July Monetary Policy Report" [4]. The MPC also voted unanimously to reduce its stock of government bonds held for monetary policy to zero, at an average pace of £46 billion a year through 2034 [4].
The Bank of Canada held its target for the overnight rate at 2.25% on September 2, with the Bank Rate at 2.5% and the deposit rate at 2.20% [5]. It said Canada's economy "has been weak but is showing signs of improvement" and that inflation is projected to ease to around 2% [5].
How did currencies move in Q3 2026?
Exchange rates respond to the gap between countries' interest rates and to expectations about future moves. Because the major central banks moved in the same direction, the US dollar ended the third quarter almost unchanged against a broad basket of currencies [8].
| Currency pair | June 30, 2026 | September 30, 2026 | Q3 change | Change in 2026 |
|---|---|---|---|---|
| Euro (dollars per euro) | 1.1417 | 1.1345 | -0.6% | -3.3% |
| Japanese yen (yen per dollar) | 162.61 | 157.25 | -3.3% | +0.3% |
| British pound (dollars per pound) | 1.3259 | 1.3267 | +0.1% | -1.3% |
| Canadian dollar (Canadian dollars per US dollar) | 1.4205 | 1.4210 | 0.0% | +3.6% |
| Nominal broad dollar index | 120.92 | 120.97 | 0.0% | +1.0% |
Source: Federal Reserve H.10 noon buying rates and nominal broad dollar index, via FRED [8]. A falling yen-per-dollar figure means the yen strengthened; a falling dollars-per-euro figure means the euro weakened.
The yen was the biggest mover, gaining 3.3% against the dollar in the quarter. The Fed's minutes said a "joint U.S.-Japan intervention to support the yen in late July" contributed to dollar weakness, with the New York Fed acting as fiscal agent for the US Treasury [7]. The euro slipped 0.6% despite the ECB hike, and the pound and Canadian dollar were almost unchanged [8].
The common thread is energy. CNN reported that "higher energy prices push central banks to raise interest rates to tamp down inflation," and that 10-year yields in Germany, France and the United Kingdom reached levels not seen in more than a decade [6].
In September 2026 the Fed, ECB and Bank of Japan each raised rates by a quarter point while the Bank of England and Bank of Canada held, and the dollar ended the quarter almost unchanged.
Frequently asked questions
Did the ECB raise rates in September 2026?
Yes. The ECB raised its deposit facility rate by 0.25 point to 2.50%, with effect from September 16, 2026, after a June increase to 2.25% [2]. Its next monetary policy meeting ends on October 29 [9].
What is the Bank of England interest rate in 2026?
Bank Rate is 3.75% after the September 2026 meeting, where three of nine members voted for 4% [4]. The next decision is due on November 5, 2026 [4].
What is the Bank of Japan interest rate now?
The Bank of Japan's target for the overnight call rate is around 1.25%, effective September 24, 2026 [3]. Its next meeting is October 29-30 [10].
Why are central banks raising rates in 2026?
Higher oil and fuel prices linked to the Middle East conflict pushed inflation above target in the US, the euro area and the UK, and central banks want to keep it from spreading to wages and other prices [1][4][7].
Sources & References
- [1] Federal Reserve, FOMC statement, September 16, 2026
- [2] European Central Bank, Key ECB interest rates (accessed October 13, 2026)
- [3] Bank of Japan, Change in the Guideline for Money Market Operations (September 18, 2026)
- [4] Bank of England, Bank Rate maintained at 3.75%, September 2026 Monetary Policy Summary and Minutes
- [5] Bank of Canada, Press conference, policy rate announcement, September 2026
- [6] CNN Business, 10-year Treasury yield hits 5%, critical threshold for US economy and markets (September 14, 2026)
- [7] Federal Reserve, Minutes of the FOMC, September 15-16, 2026 (released October 7, 2026)
- [8] Federal Reserve Bank of St. Louis, FRED, daily exchange rates from the Federal Reserve H.10 release and nominal broad dollar index
- [9] European Central Bank, Governing Council meeting calendar
- [10] Bank of Japan, Monetary Policy Meeting schedule
- [11] Bank of Canada, Key interest rate and 2026 announcement schedule
