Oil Goes Past $100, So Three Central Banks May Raise Interest Rates, Not Cut Them

Oil went past $100 a barrel last week, for the first time since July. The conflict in the Middle East made it hard for oil ships to travel, so prices jumped. Now the Federal Reserve, the Bank of England and the Bank of Japan must all decide what to do about interest rates within one week of each other.

A central bank sets the interest rate, which is the price of borrowing money in a country. When energy costs rise, prices in shops rise too, and that is inflation. Central banks want inflation to be low, but it has stayed high. So the question has changed: not when to cut rates, but whether to raise them.

The Federal Reserve decides on Wednesday, and a rise is possible. Jobs are stronger than expected, and prices are 3.4% higher than a year ago, above the Federal Reserve's 2% goal for more than five years. Its new chair, Kevin Warsh, was chosen by Donald Trump, who wants lower rates. But Warsh said that without more progress on inflation, the bank would have "work to do".

The European Central Bank has already raised its rate by a quarter of a point (0.25%), its second rise this year. In London, the Bank of England is expected to keep its rate at 3.75%, but three of its nine members voted for a rise in July. In Tokyo, the Bank of Japan may raise its rate to 1.25% on Friday, a level not seen for more than 30 years.

For years, borrowing money kept getting cheaper. For now, that has stopped.