Two sources told Reuters last week that further tightening was now on the cards. While a hike at the next meeting in October could be in play, a move in December — which would be the ECB's third hike this year — is more likely.
"The peak in rates is uncomfortably dependent on events in the Middle East; a hike above 3% cannot be ruled out entirely," said Greg Fuzesi at JPMorgan.
Defying the very public demands of U.S. President Donald Trump for a cut in rates, new U.S. central bank chief Kevin Warsh joined his Federal Reserve colleagues in a move to raise rates on Wednesday.
In his post-meeting press conference, he noted he would be "hard-pressed to describe broad financial conditions as restrictive", a formulation that counters the argument that monetary policy is hurting the economy.
The Fed's unanimous decision to raise rates, coupled with Warsh's comments on Wednesday, were seen as laying the groundwork for further tightening and helped reassure investors about the central bank's commitment to fighting inflation.
"The Fed has regained some credibility after raising rates," said Andrew Lake, chief investment officer at Mirabaud Asset Management.
Updated quarterly economic projections showed 16 of 18 policymakers anticipate at least one more quarter-percentage-point hike by the end of this year.
Even as it held rates on Thursday, the Bank of England said that they might have to go up if the war continues in a commentary interpreted by observers as a clear shift in tone that positions it to follow the Fed and ECB higher.
"The longer this goes on, the more difficult this becomes," said Governor Andrew Bailey, one of three members of the bank's Monetary Policy Committee who signalled they could back a rise, after he voted to hold at this meeting.
Some analysts said they expected the BoE to raise rates only once. But financial markets after the meeting were pricing almost four quarter-point hikes over the next year.
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