Central banks take a breather, though more hikes are to come

By Sophie Kiderlin and Stefano Rebaudo

LONDON, Oct 29 (Reuters) - Major central banks took a break from interest rate rises this week, but they are by no means done, with energy prices near multi-month highs and no resolution in sight to the conflict in the Middle East.

The Federal Reserve and European Central Bank both kept rates steady this week, but signalled that with inflation above target they still have work to do. The ECB is also in focus after President Christine Lagarde announced she would step down early.

The Bank of Japan also stayed on hold, but next week's central bank meetings should see increases, including from the Bank of England, its first of 2026.

Here's where central banks in the Group of 10 developed economies stand, ranked from highest to lowest policy rate:

1/ AUSTRALIA

The Reserve Bank of Australia has raised interest rates four times this year. Its next policy decision is on November 3, and markets see a high chance of another hike, boosted by a hot inflation print and hawkish comments from Governor Michele Bullock.

2/ NORWAY

Norges Bank also meets next week after catching markets off guard with a hike in May and repeating the move in September, when it left the door open for additional tightening.

The country's annual core inflation held at 3.0% in September, slightly above the central bank's 2.9% forecast.

3/ UNITED STATES

The Federal Reserve left rates unchanged on Wednesday ahead of next week's U.S. midterm elections, while awaiting further evidence on inflation, which “remained elevated.”

President Donald Trump has repeatedly called for rate cuts and recently accused policymakers of being "hostile" and "partisan" after September's rate increase. Fed Chair Kevin Warsh rejected those accusations, stressing the central bank's independence.

Traders price an 80% chance of a hike in December and see at least one, likely two, further moves in 2027.

4/ BRITAIN

The Bank of England has not raised rates so far this year, but that will likely change next week.

Markets are almost fully pricing a hike, backed by recent data including hotter-than-expected September inflation and a pickup in wage growth.

Governor Andrew Bailey has long warned the likelihood of a hike grows the longer energy prices stay high.

5/ NEW ZEALAND

The Reserve Bank of New Zealand surprised on Wednesday by keeping its benchmark official cash rate at 2.75% in a narrow vote rather than hiking for the third time in a row.

Governor Anna Breman said on Thursday chances the bank will raise the official cash rate in December are "high"

Markets see roughly an 80% probability of that.

6/ EURO AREA

The European Central Bank delivered what market participants deem a hawkish hold, leaving rates unchanged but warning that inflation risks were rising.

The central bank's most immediate challenge is the sharp rise in France's debt-risk premium, driven by growing investor concerns over the country's debt burden and uncertain fiscal trajectory.

President Christine Lagarde resigned on Thursday so she could weigh in on political matters in France and globally.

7/ CANADA

The Bank of Canada raised its key rate for the first time in more than three years on Wednesday, as widely expected, but Governor Tiff Macklem said policy remained slightly accommodative.

The central bank hiked by 25 basis points to 2.5%, still below the 2.75% the BoC estimates is neither restrictive nor expansionary for the economy.

The BoC also raised its inflation forecast for 2027 to 3.1% from the 2.0% predicted in July.

8/ SWEDEN

Sweden's Riksbank, long in the dovish camp, now looks set for a rate hike, with markets pricing around an 80% chance of one next week.

Sweden's central bank chief earlier this month said that there was a strong case for a hike as the economy has been performing better than expected, and the risk of inflation overshooting its target has grown.

9/ JAPAN

The Bank of Japan also kept rates steady, as expected, on Friday.

The central bank declared victory in a nearly 14-year battle to hit its price target and signalled vigilance against inflation risks, suggesting another rate hike could come soon.

It also slightly revised up its inflation forecast. Recent data has pointed to broadening price pressures.

10/ SWITZERLAND

The Swiss National Bank (SNB) is set to keep its policy rate at 0% for the coming months. Minutes of its September meeting showed policymakers thought monetary conditions are "appropriate" to keep inflation within its target range over the medium term.

Low yields should prevent the franc currency from appreciating too sharply, even though geopolitical tensions have often driven investors towards safe-haven assets in 2026.

(Reporting by Sophie Kiderlin in London and Stefano Rebaudo in Milan; Editing by Nick Zieminski and David Holmes)