The Federal Reserve is preparing another round of interest rate hikes, and central banks around the world are moving in the same direction. Inflation remains stubborn, borrowing costs stay painful, and policymakers are increasingly convinced that keeping money expensive may be necessary. For anyone hoping rates would quickly return to pre-pandemic levels, the message is clear: reconsider.

Global tightening has regained momentum. Among 33 major central banks, 15 have raised interest rates within the last six months — 45% of the total, the largest share since 2023 and approaching the 55% recorded in both 2011 and 2018. In 2022, nearly 95% of major central banks were tightening monetary policy after pandemic-era stimulus packages fueled inflation worldwide. So far in 2026, 54 central banks have raised rates, and over the past three months hikes have outnumbered cuts for the first time since September 2023.

Federal Reserve officials aren't finished fighting inflation

Cleveland Federal Reserve President Beth Hammack believes the central bank should act before inflation becomes an even bigger headache. Speaking Monday at the annual National Association of Business Economists meeting, she argued that policymakers would be better off taking small steps rather than waiting until drastic action is required.

"When feasible, I generally think it's preferable to make smaller adjustments, and to do so relatively quickly, rather than to wait and risk needing a larger course correction," Hammack said.

Her position carries particular weight: she is a voting member of the Federal Open Market Committee (FOMC), the body that sets US rates, as officials prepare for their remaining meetings this year.

"Considering all the inputs that factor into my reaction function, a restrictive monetary policy stance is appropriate to a timely return to 2 percent inflation," she said.

The difficulty lies in the breadth of the problem. Price pressures are no longer confined to a few items but run throughout the economy, making the Fed's 2% inflation target harder to hit. That 2% figure, formally adopted as the Fed's long-run goal in 2012, is the benchmark the central bank uses to define price stability.

Hammack is also concerned about a scenario in which Americans begin to view high inflation as a permanent fixture of life. If businesses and households build elevated inflation into their expectations, it could feed into wages, spending, and prices.

"Long-run inflation expectations have stayed remarkably well anchored despite actual inflation being above target for more than five years. But I'm not taking that for granted. With each passing month, persistently elevated inflation raises the risks of an inflationary mindset becoming entrenched in the economy," she said.

The Fed already raised rates in September, its first increase in three years. Chair Kevin Warsh said the decision would "support a timelier return" to the central bank's inflation objective, adding: "The plain fact is that inflation is too high and has been for too long."

Minutes from September's meeting revealed that most policymakers anticipated another hike before the end of December, though they left the timing open, with future decisions dependent on economic conditions rather than a predetermined schedule.

The US economy is complicating the Fed's job

Recent figures show exactly why the Fed faces a difficult decision ahead.

August's personal consumption expenditures (PCE) price index — the central bank's preferred inflation gauge, compiled by the Commerce Department's Bureau of Economic Analysis — was recorded at 3.4% annually, while core inflation, which excludes food and energy, stood at 3%. An alternative reading of the August data put both the headline PCE rate and the core rate at 3%, each matching July's figures and coming in under forecast expectations.

Growth, meanwhile, is holding up better than initially thought. US second-quarter GDP growth was upgraded from 1.5% to 2.2%, indicating the economy performed more strongly than first estimated.

The labor market, however, looks much weaker. September's monthly change in payrolls — the net hiring figure in the Labor Department's monthly jobs report — was just 29,000, the weakest month of 2026.

Policymakers therefore face a dilemma: raising rates would help curb inflation, but further hikes risk inflicting additional damage on a softening labor market. The trade-off is embedded in the Fed's mandate: Congress directs the central bank to pursue both stable prices and maximum employment, so officials must weigh hiring conditions alongside inflation when setting policy.

Markets currently do not expect a rate hike in October. According to CME FedWatch estimates, which derive implied probabilities from trading in interest-rate futures, there is a greater than 78% chance of no change, while another estimate puts the odds at 81% — up from roughly 54% a month earlier. In December, by contrast, markets see a greater than 88% chance of a rate hike. The data published between now and the Fed's remaining meetings this year will feed into that decision, with officials having stressed that outcomes depend on economic conditions rather than a fixed timetable.

Borrowers and businesses now face the prospect of financing costs remaining elevated as the Fed considers further tightening and other central banks increasingly abandon rate cuts.