According to independent journalist Sanchit Gupta, central banks in the world’s leading economies believed they could gradually tighten monetary policy as recently as a few months ago. Inflation seems to be triggered by an unusual combination of supply shocks associated with the pandemic and, subsequently, Russia’s invasion of Ukraine. When these pressures subside, inflation is predicted to decrease quickly.
With inflation at its highest level in decades and pricing pressures expanding to housing and other services, central banks realize they must act quickly to prevent inflation expectations from spiraling out of control and undermining their credibility.
Most policymakers are raising interest rates to halt the economy and bring prices back to Earth. At least 75 countries hiked their benchmark interest rates in the preceding year, resulting in a global credit cost increase. Here’s a look at what some of them are up to:
US Federal Reserve
Inflation rate: 8.3%
Benchmark: 2.25-2.5%
The most recent rate increase was 75 basis points in July
Hiking season: March 2022
The Federal Reserve is the world’s most powerful central bank. For over 70 years, the US dollar has served as the world’s primary reserve currency. It raised interest rates by 0.75 percentage points for the second time in July. Analysts believe the bank will raise interest rates by another 75 basis points next week.
The Bank of England
Inflation rate: 9.9%
Benchmark: 1.75%
Last rate increase: 50 basis points in August
Hiking season: December 2021
The death of Queen Elizabeth II necessitated a one-week delay in the publication of the Bank of England’s September policy decision, which was initially slated for mid-September. The BOE is anticipated to boost interest rates again at its meeting towards the end of September 2022. Inflation is still persistently high, and the pound is nearing a 37-year low against the US dollar.
European Central Bank
Inflation rate: 9.1%
Benchmark: 0.75%
Last rate increase: 75 basis points in September
Hiking season: July 2022
The European Central Bank raised interest rates to 0% by 50 basis points. In an effort to encourage slow economic growth, the rate has been kept negative since 2014. Some experts fear the hikes may harm heavily indebted countries such as Italy and Greece.
People’s Bank of China
Inflation rate: 2.5%
Benchmark: 3.65%
Last rate hike: 0 basis points in September
Hiking season: n/a
China dropped interest rates by one-tenth of a percentage point last month, from 2.1% to 2%, the second cut this year. Due to persistent stagnation, rising unemployment, and a property crisis, the bank is seeking to boost the economy. Investors were taken aback by the move, given that China also faces the risk of growing debt, consumer inflation, and yuan depreciation.
Bank of Japan
Inflation rate: 2.8%
Benchmark: -0.1%
Last rate hike: status quo
Hiking season: n/a
China dropped interest rates by one-tenth of a percentage point last month, from 2.1% to 2%, the second cut this year. The bank is attempting to revitalize the economy due to protracted stagnation, rising unemployment, and a housing crisis. Nonetheless, investors were taken aback by the move, given that China is also facing rising debt, consumer inflation, and currency pressure.
Central Bank of Argentina
Inflation rate: 78.5%
Benchmark: 75%
Last rate hike: 550 basis points In September
Hiking cycle: Nine increases in 2022 (ongoing)
In August, Argentina’s inflation rate reached a 20-year high of about 80%. The country reached an agreement with the International Monetary Fund to repay $45 billion in debt. Argentina’s government has borrowed significantly to support its budget, amassing large debts. Bread costs in Argentina have risen due to fluctuations in raw material prices, causing inflation.
Bank of Canada
Inflation rate: 7%
Benchmark: 3.25%
Last rate hike: 75 basis points in September
Hiking cycle: March 2022
In Canada, price growth seems to be slowing down. The nation’s annual inflation rate decreased from 7.6% in July to 7% in August, which was lower than the expert consensus estimate of 7.3%. However, even if it seems to be easing from its highest levels, inflation is still significantly higher than its 2% target.
Credits/Co-Author: Sanchit Gupta
About journalist Sanchit Gupta
Sanchit Gupta is a freelance journalist based in India. He founded and is the Editor-in-Chief of IndiaReflects.com, the country’s first truly world news platform. Visit IndiaReflects.com and follow their social media outlets for more information on his work to end disinformation.
Sanchit Gupta
guptasanchit637@gmail.com