The United States (US) Federal Reserve (the American central bank, also called the Fed) raised interest rates by 25 basis points yesterday, taking its target range to between 3.75% and 4.00%.

On Monday, The Common Sense’s economist Bheki Mahlobo forecast interest rates to rise in the US and Japan this week as central banks continue to contend with inflationary pressure.

Mahlobo expected a 25-basis-point increase from the Fed, stating that “US inflation stood at 3.4% in August, remaining above the Federal Reserve’s 2.0% target, while unemployment was 4.1%”. This is very good and means the economy does not need the support of cheap money.

He also warned that “another [additional] 25-basis-point increase before the end of the year remains possible, depending partly on geopolitical developments and their effect on inflation”.

The US hike was in line with Mahlobo’s argument that in Federal Reserve chair Kevin Warsh, US President Donald Trump had appointed a “hawk in dove’s clothing” on a mission to tame any and all inflationary risks.

Read his broader analysis of what Warsh may be up to here.

The Bank of England met yesterday and, in line with Mahlobo’s expectations, left rates unchanged at 3.75%.

But Mahlobo expects Japan to move in the opposite direction when its central bank meets tomorrow, and is forecasting a 25-basis-point increase to 1.25%.

In South Africa, Mahlobo expects the Reserve Bank to raise the policy rate by 25 basis points from 7.00% to 7.25% when it meets next week, and that a further 25-basis-point increase before the end of 2026 also remains possible. A hike, says Mahlobo, is critical to defend the value of the rand, given that rand weakness will spike domestic prices in South Africa, causing much hardship for ordinary people.

For more on that argument, read The Common Sense’s July assessment here of why South Africa’s central bank screwed up in not hiking rates in that month, and what this cost the country.