Policymakers from the three major central banks of the UK, US and euro area gathered in London and together signaled the possibility of further monetary tightening. Bank of England Deputy Governor Clare Lombardelli said bluntly that with no evidence of easing inflation pressure, rates may still need to rise in the near term; Federal Reserve Governor Christopher Waller went further, warning that a 50-basis-point hike next month could not be ruled out. A heavyweight British think tank argued that the Bank of England may have to push its benchmark rate all the way up to 5% next year to bring inflation back to target.

The Bank of England Watchers’ Conference in London became a key venue for markets to gauge the direction of policy toward year-end. Lombardelli said the UK labor market is stuck in a “low hiring, low firing” state that may make wage pressure harder to dissipate, and after the Bank of England’s first rate hike in more than three years last week, she did not rule out another increase in December. “In the absence of evidence that inflation pressures are abating, I still think further rate increases may be needed in the near term,” she said.

Waller struck an equally hawkish tone at the same conference, saying a 50-basis-point hike next month was necessary. He noted that although oil prices have retreated, lingering Middle East supply concerns mean diesel prices are unlikely to fall by the same magnitude. He said outright that monetary policy is not “as restrictive as I thought 18 months ago,” adding: “We may indeed need to raise rates to put downward pressure on inflation, and I think simply standing pat will not work.”

European Central Bank Chief Economist Philip Lane, speaking to reporters in London, said that if the data do not change before the next meeting in December, raising euro-area borrowing costs would be a “prudent” move.

The short-term pullback in energy prices has not let policymakers breathe easier. After the US midterm elections, expectations grew that the Iran conflict could end earlier than feared, briefly pushing Brent Crude futures below $90 a barrel (about NT$3,000). Officials, however, believe energy-cost pressures have built up too much, and a key US consumer price gauge rose strongly again in October, above market expectations, prompting traders to increase bets on further policy tightening before year-end.

Think Tank Warns: Falling Behind Could Force Large Catch-Up Hikes

The National Institute of Economic and Social Research (NIESR) said in a report that even if the Bank of England raises rates once more, inflation will still be above the 2% target by the end of 2030, far beyond the two-to-three-year horizon set by the Monetary Policy Committee. The think tank called on the Bank of England to raise rates to 5% next year, which would bring inflation under control about 18 months earlier.

“There is a real risk here that the central bank has fallen behind the curve, and if it continues to fall behind, it will eventually have to raise rates sharply, which would tighten financial conditions further,” NIESR Chief Economist James Smith said at a news conference. The think tank warned that delaying hikes will entrench inflation more deeply and increase the likelihood of large rate increases later. The report also projected that UK inflation will exceed 4% next year, and that an adjustment to the energy price cap could raise households’ gas and electricity bills by about 25% in January, with the risk that energy price increases spill over into other sectors.

Both Lombardelli and Waller argued that the resilience many economies have shown in the face of the energy shock, in turn, suggests policy tightening has not been strong enough to effectively curb inflation. “In terms of policy restrictiveness, the economy has been more resilient than expected, which in turn means monetary policy may not be as tight as we previously thought,” Lombardelli said.

Markets Bet on December Moves; Sterling and Bonds in Focus

Interest-rate futures markets currently reflect about a 70% probability that the Bank of England will raise its benchmark rate by a quarter point to 4.25% at its December 17 meeting. If NIESR’s 5% scenario materializes, it would mean UK borrowing costs have nearly another full percentage point to climb, putting pressure on British mortgage holders and corporate financing costs.

The policy paths of the major central banks compare as follows:

Central BankOfficial’s RemarksPossible Move at Next MeetingBank of EnglandDeputy Governor Lombardelli: further rate increases may be needed in the near term; another December hike not ruled outAbout 70% chance of a quarter-point hike on December 17Federal ReserveGovernor Waller: a 50-basis-point hike may be needed next month; standing pat will not work50-basis-point hike not ruled out in DecemberEuropean Central BankChief Economist Lane: if data do not change, a December hike is a “prudent” moveDecember meeting may raise borrowing costs

Note: Market probability data are derived from interest-rate futures pricing; actual decisions remain subject to the outcomes of each central bank’s meeting.

For investors, this round of hawkish signals delivered simultaneously by the UK, US and euro-area central banks means the global “higher for longer” rate environment is unlikely to reverse in the near term. Although energy prices have cooled on expectations about the Middle East situation, the stickiness of wage growth and services inflation is becoming the variable policymakers care about more. If the three major central banks do tighten in unison in December, government bond yield curves and valuations of risk assets will face a new round of repricing pressure.