The ECB raises its deposit rate to 2.5% as energy inflation hits 14.3%, keeping policy tight even as its balance sheet run-off drains bank liquidity.

The ECB and the Bank of Japan are both withdrawing accommodation, but the ECB's move is forced by an energy shock while the BOJ's is a deliberate step toward policy normalisation. The ECB's balance-sheet run-off is the transmission channel: as APP and PEPP holdings decline without reinvestment, excess liquidity falls and banks lean harder on full-allotment operations, which is why the central bank names credit tightening as a growth risk. The BOJ's rate rise to 1.25% and its still-expanding JGB holdings show the opposite sequencing — it is normalising rates while its balance sheet remains dominated by government bonds. Egypt's decision to hold rates with headline inflation in the mid-teens, and forecasts lowered toward single digits in the second half of 2027, illustrates a third path: maintaining a real carry to anchor local-currency debt demand while inflation stays above target. The common thread is that central banks are now managing the exit from crisis-era balance sheets, and the pace of that exit — not the level of rates alone — is what tightens credit conditions.