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[INTRO: AMINE LAOUEDJ, INVESTMENT BANKER]
Welcome! Once a week from London, we break down the global economic event that mattered most, and we analyze what it means for business.
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[LAST WEEK'S KEY ECONOMIC EVENT]
Over the past few weeks, the world's major central banks each set new interest rates, and they did not move together. The European Central Bank and the Bank of Japan raised. The Federal Reserve and the Bank of England held. Switzerland held at zero. And not one of them cut.
As a reminder, a central bank sets the basic interest rate for the economy. Commercial banks add their margin and pass that cost on to households and companies. A lower rate makes credit cheaper and supports activity, while a higher rate makes credit more expensive and slows an overheating economy that generates too much inflation. Central banks use this tool mainly to control inflation.
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To see why one period produced different decisions, start with the cause of the inflation.
The Iran war restricted the Strait of Hormuz, and with it the supply of oil, gas, and fertilizer. Oil rose from the low 70s before the war to a peak near 126 dollars a barrel, and gas, shipping, insurance, and fertilizer costs rose with it.
This inflation comes from scarcity, not from people spending too much, and that distinction decides what follows. Higher interest rates work by cooling demand, but they cannot produce missing oil, reopen a shipping lane, or replace lost fertilizer.
So at the start of a supply shock, raising rates mostly damages an economy that is already absorbing higher costs, which is why most central banks first chose to wait.
But waiting has a limit. If high input costs last long enough, companies raise prices to protect margins, workers ask for higher wages, and suppliers write higher costs into new contracts. Inflation then stops being only about the original shortage and spreads into wages, contracts, and everyday pricing, where it sustains itself. These are called second-round effects, and once they appear higher rates matter again, because they can cool demand and make that spiral harder to continue.
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So each bank faced the same hard choice. Cut, and you risk feeding an inflation that is already high. Raise, and you squeeze an economy that is barely growing and already paying more for everything. Wait, and you gamble that the shock fades before those second-round effects set in. Each one weighed that same trade-off and landed differently, and the deciding factor was how exposed its economy was to the shock in the first place.
The eurozone is among the most exposed, because it imports most of its energy and inputs. Its inflation reached 3.2 percent in the year to May, and even the part that excludes energy and food rose, a sign the shock was spreading. So on 11 June the European Central Bank raised by a quarter point, its first increase since 2023, while expecting growth of only 0.8 percent this year.
Japan is exposed through its currency. A weak yen makes every imported barrel and component more expensive at home, and those costs were already passing from company to company. So on 16 June the Bank of Japan raised its rate to 1 percent, the highest since 1995, in a country that spent a generation near zero.
The United States is different. It produces much of its own energy, so the shock hits it less, and its economy is still growing solidly. So even with inflation at 4.2 percent in the year to May, its highest in three years, the Federal Reserve held on 17 June. But it dropped the language that had pointed to future cuts, and its own projections now show most officials expecting a rise, not a cut, before year end.
The United Kingdom held too, on 18 June, because its inflation, at 2.8 percent in the year to May, is closer to target and its economy is weak. But two of its nine policymakers voted to raise at once, up from one before, so the pressure there is moving toward higher rates, not relief.
Switzerland sits at the other extreme. It relies far less on the energy caught up in the war, and its strong franc makes what it does import cheaper, so almost none of the shock reached its prices. With inflation at just 0.6 percent, it kept its rate at zero.
So this is not a coordinated tightening. It is a shared refusal to cut while the inflation risk is alive, with the most exposed economies already moving up.
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One thing genuinely improved over these weeks, and the central banks did not control it. Oil fell back toward 80 dollars, well below its wartime peak though still above the pre-war level, as the fighting de-escalated and some traffic returned through the strait. That fall was already underway as these decisions were taken, which is part of why the banks that held felt able to wait, and why even the two that raised moved only once.
But the relief is fragile. On 17 June the United States and Iran signed a Memorandum of Understanding meant to end the war and reopen the strait, and oil fell further. Then on Saturday Iran declared the strait closed again over Israel's strikes in Lebanon, while the United States said traffic kept flowing.
So the reopening that pulled oil down is already disputed. And even where it holds, the earlier spike already sits inside many contracts and prices, and the effects on fertilizer and food arrive later.
The relief is real, but partial, and it could reverse quickly.
[WHAT IT MEANS FOR BUSINESS]
So, what does this mean for business?
The overall impact splits by where you operate. It is negative for the eurozone and Japan, and broadly neutral for almost everyone else. Let me take it group by group.
If you run a company in the eurozone or Japan, this is a real negative, and it has already happened. Your central bank raised rates, so your cost of borrowing went up this month. It is not a risk to plan for any more. It is sitting in the interest you are paying right now. That said, it does not land evenly. If your borrowing is on fixed rates, or you run on cash rather than debt, you barely feel the change. The pressure falls on companies carrying floating-rate debt or facing a refinancing this year.
The squeeze is worst in the eurozone, where companies are also paying more for imported energy and seeing almost no growth at the same time. In Japan it is more mixed, because the weak yen that makes the increase sting for importers also flatters exporters when their foreign earnings come home.
If you run a company almost anywhere else, very little changed for you. Your own central bank looked at the same war and chose to wait, so your cost of money is where it was last month. The decisions made plenty of noise, but the ground under you did not move. That includes the United States and the United Kingdom, where the rate cut people wanted still did not arrive, and where the talk now is of the next move being up rather than down.
There is some good news pulling the other way.
Oil has come back down toward 80 dollars from its wartime peak, which lifts a little weight off fuel, freight, and power. But the relief is partial and slow, because food and fertilizer prices ease only slowly, the old highs are still written into contracts signed months ago, and the calm that let oil fall is already being disputed.
So most companies will feel dearer borrowing well before they feel cheaper energy. The companies that gain most here are the energy-intensive ones and those able to pass costs on, because for them cheaper oil is close to pure relief.
And if you operate across borders, there is one quieter shift.
Until this month the big central banks were all sitting still together. Now they have moved apart, so borrowing in euros and yen costs more than it did while borrowing in dollars and pounds does not. Money has always carried a different price in different currencies, so the gap itself is nothing new. What is new is that it has just widened in one clear direction, which changes the relative cost of funding for any company that borrows across more than one of these currencies.
[WHAT SHOULD BUSINESS LEADERS DO NOW]
So, what to do now?
If you are in the eurozone or Japan, the first job is to stop running your numbers on the rate you assumed back in January. Reprice your plans at the rate you are actually paying now, because the increase has already happened. Start with any debt that floats with rates and anything you have to refinance this year, and decide how much of it to lock down at a fixed cost while you still can.
If you raise money in more than one currency, look hard at where you borrow next. Euros and yen got dearer this month and dollars and pounds did not, so the cheaper option may have changed. Just borrow where you also earn, because chasing a lower rate in a currency you do not take revenue in usually disappears once you pay to cover the exchange risk.
For everyone else, the main move is to stop waiting for a rate cut this year and take it out of your plan. Not one of these banks cut, and several are signaling that their next step could be up, so build your plan on money staying expensive rather than getting cheaper.
And whatever you do, treat the drop in oil as a window, not a new normal. Use it to rebuild some cash or to lock in supply at today's better prices, but do not rebuild your whole cost base around cheap energy, because the very same waterway that let prices fall was declared shut again this weekend. None of these banks has tied itself to a path, so keep enough room to move if the war, or the cost of these inputs, turns again.
[OUTRO: AMINE LAOUEDJ, INVESTMENT BANKER]
Thank you for listening to this episode of What It Means for Business. Have a good week.
Over the past few weeks, the European Central Bank and the Bank of Japan raised their interest rates, while the Federal Reserve and the Bank of England held. None of them cut, and several signaled their next move could be up rather than down.
Behind these decisions is the same pressure: the inflation set off by the Iran war and the disruption of the Strait of Hormuz. This is a shortage of supply, not an overheating economy, so higher rates cannot fix its cause. The most exposed economies raise them anyway, to stop the price rises from spreading into wages and contracts, while none of the others can risk a cut with inflation still this high.
Every week on the What It Means for Business podcast, Glenshore's Amine Laouedj cuts through the noise of global economic headlines to explain what is happening, why it matters, and what business leaders should do to adapt.
Available on Spotify and Apple.
Date of production: 22 June 2026
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