The Bank of England's decision to raise interest rates after its fifth straight meeting sent its strongest signal yet that it is ready to take more action if necessary to curb inflation. The nine-member Monetary Policy Committee voted 6-3 to raise the benchmark lending rate by 25 basis points to 1.25%. A handful of officials continued to advocate for a 50 basis point hike. Policymakers, led by Governor Bailey, signaled that if inflation continues to soar, they may join a wave of sharp global interest rate hikes, saying they "will be extra vigilant for signs of persistent inflationary pressures and will take strong action if necessary. Crucially, the language was supported by all voting members of the Bank of England, a change from May, when two declined to support guidance that further rate hikes were needed. The central bank also raised its forecast for this year's peak inflation to "just over" 11% to reflect plans to raise the energy price cap in October, and said it now expects the economy to contract in the current quarter.

The Swiss National Bank unexpectedly raised interest rates for the first time since 2007 in response to rising inflation. Following the news, the Swiss franc rose strongly, euro zone bonds such as Germany fell, and bets that the European Central Bank would raise interest rates also increased. Policymakers, led by Governor Thomas Jordan, joined central banks around the world in tightening policy on Thursday, raising policy rates by 50 basis points to -0.25%. They also said further tightening may be needed. "The need for further increases in policy rates to stabilize inflation for the foreseeable future cannot be ruled out," the SNB said in a statement. The Swiss franc strengthened after the Swiss National Bank unexpectedly raised interest rates, with the euro posting its biggest drop against the Swiss franc since the Brexit referendum in June 2016. EUR/CHF fell as much as 2.1% to 1.01694, its lowest level since April. But the SNB said it would remain "active" in the foreign exchange market. Jordan also said that if the Swiss franc depreciates, the Swiss National Bank will consider selling foreign currency.

Currency options traders are betting the Bank of Japan will join global peers such as the Swiss National Bank this week in roiling markets with a surprise monetary policy decision. Ahead of the Bank of Japan meeting on Friday, demand to hedge against one-day price swings in the yen hit its highest level since March 2020, with traders also betting that the already surging yen could post its biggest gain since then. On Thursday, the Swiss National Bank unexpectedly raised interest rates for the first time in 15 years, putting the Swiss franc on track for its biggest gain since January 2015. While policymakers in Japan are expected to continue to ease monetary policy, global markets are increasingly speculating that a surprise move could be on the way. The Bank of Japan has been limiting bond yields since 2016 and has stepped up its efforts in recent days. But with the Federal Reserve raising interest rates by the most since 1994, pressure is mounting on the Bank of Japan to either change its policy stance or explain when it will end yield curve control. The yen rose as much as 1.1% on Thursday.

U.S. mortgage rates rose by the most in more than three decades, putting more pressure on potential homebuyers and potentially cooling the housing market. In a report, Freddie Mac said the average 30-year mortgage rate jumped to 5.78% from 5.23% last week, the biggest weekly gain since 1987. "The higher mortgage rates are the result of inflation expectations and a shift in monetary policy," said Sam Khater, chief economist at Freddie Mac. "A rise in mortgage rates will lead to a slowdown in the housing market and eventually a more balanced state." The latest home loan interest rate data is the highest since 2008 and almost double the 2.93 per cent a year earlier.

European gas prices have surged as Russia curbs European gas supplies, forcing consuming countries to face the prospect of supply disruptions. Benchmark natural gas futures jumped as much as 24%, having climbed as much as 46% this week. The cut in supply affects all parts of Europe, including Eni, Engie SA and Uniper SE, all of which have indicated a reduction in supply. Germany sees the drop in the Nord Stream pipeline as "politically motivated" to disrupt the market, rejecting Gazprom's assertion that the suspension was due to a technical problem. Europe has feared for months that Russia would cut supplies in retaliation for sanctions. The latest crisis could hit key industries such as chemicals and steel, adding to the woes for Europe already facing soaring inflation and sluggish growth. The possibility of implementing natural gas rationing is not low. The Kremlin said on Thursday that the supply cuts were "not intentional".

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