Global monetary policy is shifting back toward tightening, creating credibility tests for central banks as inflation pressures persist. The European Central Bank (ECB, the eurozone central bank) raised rates last week, while the Federal Reserve may follow. The Bank of Japan (BOJ) is widely expected to raise rates on Friday, accelerating a tightening campaign that began in 2024. The Bank of England is expected to keep rates unchanged Thursday, with attention focused on Governor Andrew Bailey's guidance as inflation pressures build. Treasury Secretary Scott Bessent has urged Japan to raise rates after the U.S. intervened to support the yen this summer, warning traders against betting on renewed weakness and saying, "I am the house now." Japanese Prime Minister Sanae Takaichi favors easy monetary policy, although her administration appears to accept the need for further increases. Higher rates could curb inflation and support the yen, but would also increase borrowing costs and complicate Takaichi's economic agenda. Clear signals that central banks are prepared to tighten further could, paradoxically, slow the rise in global borrowing costs if markets become confident inflation will be contained. Separately, the ECB's inflation fight may coincide with a leadership transition. A six-byline Financial Times report said multinational negotiations are underway to replace ECB President Christine Lagarde when she is widely expected to depart in the months ahead. National rivalries are complicating the succession, while European officials hope to reach a "grand package" by year-end covering the ECB presidency, chief economist and another executive board seat. One possible arrangement seen in Berlin would pair a non-German president with a powerful German chief economist.