Published on Monday, November 14, 2022

Global | Are central banks nearing the finish line?

With inflation at multi-decade highs across many countries due to various factors (pressures generated by the post-COVID recovery in spending, fiscal stimulus measures, bottlenecks) and exacerbated by the war in Ukraine, central banks have shifted towards a tighter policy stance.

Key points

  • Key points:
  • The pace of interest rate hikes in the US is the fastest in decades, almost double that of the 1999–2001 cycle. In fact, rates are already in the 3.75/4% range and the markets are acknowledging that they could exceed 4,75% in the first part of 2023.
  • Across the pond, the European Central Bank (ECB), after eight long years with interest rates in negative territory, has hiked them by 200 basis points in little more than three months, and is expected to raise them by a further 75 basis points over the next quarter.
  • Meanwhile, the central banks of emerging countries —where the exchange rate component is particularly important when it comes to monetary policy decisions— have not wanted to lag behind and have carried out sizeable interest rate hikes in the last year and a half.
  • With global inflation rates now showing signs of easing, several monetary authorities —in both developed and emerging economies— are making a similar shift towards a more pragmatic and gradual policy stance.

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