Inflation is a global problem, that’s how central banks are dealing with it

New York
CNN business

Just like misery, inflation loves company. And as price increases approach the highs of the last 40 years, the United States it has plenty of it.

A perfect stimulus money storm during the pandemic, strong demand for goods, geopolitical chaos and supply chain difficulties have led to a rise in prices globally.

In Britain, inflation is just under 10%, the highest in the G7. In Turkey and Argentina, annual inflation rates are projected to reach a whopping 80%.

The Federal Reserve announces its next interest rate decision later on Wednesday, but central banks around the world are also raising rates in an effort to slow the economy and bring prices back to earth. At least 75 have raised benchmark interest rates in the past year, raising the price of credit around the world. Here’s what some of them are doing.

Current annual consumer inflation rate: 8.3%

Reference interest rate: 2.25-2.5%

Latest rate hike: 75 basis points in July

Beginning of the hiking cycle: March 2022

The Federal Reserve is the world’s most important central bank – the US dollar has been the world’s leading reserve currency for over 70 years. That is why the meetings of the Federal Open Market Committee, where monetary policy is enacted, are followed so closely around the world.

The Fed has taken a hawkish stance in recent months. In July, it instituted the second consecutive interest rate hike of 0.75 percentage points, bringing the benchmark rate into a range of 2.25% to 2.5%. The bank is largely expected to institute another 75 basis point increase Wednesday.

Inflation rate: 9.9%

Reference interest rate: 1.75%

Latest rate hike: 50 basis points in August

Beginning of the hiking cycle: December 2021

The bank launched its largest interest rate hike in 27 years in August, the first half-point hike since the bank was made independent by the UK government in 1997. This was the sixth consecutive hike and took the lead. British benchmark rate 1.75%.

The BoE’s September policy decision was supposed to be released last week, but was delayed for a week due to the death of Queen Elizabeth II. The bank is expected to rise again during the rescheduled meeting on Thursday with inflation remaining stubbornly higher and the pound hovering near a 37-year low against the US dollar.

Inflation rate: 9.1%

Reference interest rate: 0.75%

Latest rate hike: 75 basis points in September

Beginning of the hiking cycle: July 2022

The Eurozone raised interest rates for the first time in 11 years in July. The ECB raised interest rates by 50 basis points to 0%. Yes, that’s right, 0%. The rate had been negative since 2014 in an effort to stimulate weak economic growth.

Core inflation hit 8.6% in June, pushing the The ECB will raise rates and say further hikes would be appropriate. This month, the bank continued its tightening policy, climbing 75 basis points. The ECB covers 19 countries, many with very different economic conditions. Some analysts fear that heavily indebted countries like Italy and Greece will suffer significantly from the hikes.

Current inflation rate: 2.5%

Reference interest rate: 3.65%

Last rate hike: 0 basis points in September

Beginning of the excursion cycle: n / a

Unlike its Western counterparts, China actually cut interest rates by a tenth of a percentage point from 2.1% to 2% last month, the second cut this year. This month, the bank kept rates the same.

The bank is attempting to stimulate the economy due to ongoing stagnation, rising unemployment and the housing crisis. But investors were surprised by the move as China is also facing the risk of rising debt, consumer inflation and pressure on the yuan.

A man walks past the People's Bank of China (PBOC) building on July 20, 2022 in Beijing, China.

Current inflation rate: 2.8%

Reference interest rate: -0.1%

Latest rate hike: rates remained unchanged in July

Beginning of the excursion cycle: n / a

Economic growth in Japan slowed this summer, dashing hopes that pandemic-era savings it would help strengthen the failing economy. The Bank of Japan also predicted that inflation would exceed its target this year and raised its price hike forecast for the fiscal year ending March 2023 to 2.3% from 1.9%. .

But the BOJ kept its minimum interest rates unchanged in July and maintained its short-term target of -0.1%. BOJ Governor Haruhiko Kuroda said he has “absolutely no plans” to raise interest rates.

“The economy is recovering from the pandemic. Japan’s worsening terms of trade is also leading to an outflow of revenue, ”Kuroda said at a news conference. “As such, we must continue with our easy policy to ensure that increased corporate profits lead to moderate wage and price growth,” he said.

Current inflation rate: 78.5%

Reference interest rate: 75%

Latest rate hike: 550 basis points in September

Beginning of hiking cycle: nine increases this year, but cycle in progress

Argentina raised its benchmark interest rate in September by around 550 basis points to 75%. That increase came in the wake of a 950 basis point increase in August. The country is struggling with rampant inflation which in August rose to a 20-year high by nearly 80%.

For years, the Argentine government has been borrowing heavily to finance its budget, amassing huge amounts of debt. The country recently agreed on a $ 45 billion debt settlement with the International Monetary Fund.

The price of bread in Argentina has suffered an inflationary blow due to the fluctuation in commodity prices.

Current inflation rate: 7%

Reference interest rate: 3.25%

Latest rate hike: 75 basis points in September

Beginning of the hiking cycle: March 2022

Price growth appears to be slowing in Canada. The country’s annual inflation rate slowed to 7% in August, below analysts’ forecasts of 7.3% and from 7.6% in July. But while inflation appears to drop from its all-time highs, it’s still much higher than the Bank of Canada’s 2% target.


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