Norway has become the first large developed economy to raise interest rates as growth rebounds following a pandemic that has triggered an extraordinary stimulus around the world.

As the economic recovery takes hold and inflationary pressures intensify, some central banks are convinced that now is the time to head out. Others are cautious given the still uncertain outlook, exacerbated by COVID-19 variants.

Here is an overview of the position of major central banks on the path to relaunching the pandemic era.


In addition to the 25 basis point rate hike to 0.25% on Thursday, Norway’s central bank is forecasting four more hikes by the end of 2022.

This makes Norges Bank the most aggressive of the major developed economies in normalizing ultra-accommodative politics – a prospect that should strengthen the Norwegian krone.

“We now expect them (the rate-makers) to raise rates to pre-virus levels (1.50%) by the end of next year, which is faster than expected. investors expect it, “said David Oxley, senior European economist at Capital Economics.


Markets are assessing the chances of the Reserve Bank of New Zealand to hike rates by 25 basis points at its October 6 meeting at 100% after the central bank backed down from an expected hike in August as the rise in COVID-19 infections has triggered another lockdown.

New Zealand’s economy saw stronger-than-expected growth of 2.8% in the three months leading up to June. The RBNZ has forecast a cash rate above 0.5% by the end of 2021 and above 2% in 2024.


Bank of Canada Governor Tiff Macklem believes the economy is approaching the point where the central bank will no longer need to continue adding stimulus through quantitative easing.

The central bank cut its asset purchases in April and, in July, reduced its weekly net purchases of government bonds to a target of C $ 2 billion ($ 1.6 billion), from C $ 3 billion. Canadian dollars. This figure is expected to drop to C $ 1 billion in October.


The Federal Reserve’s message is clear: it will likely start cutting its monthly bond purchases by $ 120 billion in November and rates could rise faster than expected.

The labor market remains the key to whether the Fed moves sooner rather than later, so the next non-farm payroll report in early October will be closely watched. Many economists believe the Fed is unlikely to increase until 2023, but some expect a move sooner.

“The bar for a cut announcement in November has been set relatively low and that is now our central case. We continue to expect the first rate hike in the fourth quarter of 2022,” said Luigi Speranza, chief global economist at BNP Paribas Markets.


The Reserve Bank of Australia continued its plans this month to cut A $ 1 billion ($ 727 million) from its bond buying program to A $ 4 billion a week, but in a With an accommodative outlook, she said she plans to keep bond purchases at that level. at least until February.

The RBA, which will meet on October 5, said that while the economy would recover from a lockdown-induced slowdown, it expects to keep rates at 0.1% until 2024, as it is low. inflation likely to rise and stay within its 2 3% target band.


The Bank of England rate-setters meeting on Thursday rejected an early end to the COVID-19 stimulus, although another policymaker voted to cut it. The central bank also said the case for a modest tightening of monetary policy during its forecast period had strengthened somewhat.

UK economic growth unexpectedly slowed in July and consumer price inflation surged to a nine-year high, well above its 2% target.

Policymakers have said inflation could temporarily exceed 4% by this year.

Markets are now anticipating a high probability of a rate hike by February 2022.


Sweden is firmly in the accommodating camp, and has no plans to increase its 0% rate until the third quarter of 2024. Nonetheless, it decided this week to end pandemic-era lending facilities. , restore normal guarantee provisions by the end of the year and end asset purchases by then.

The Riksbank could tighten policy sooner if inflation consistently exceeds the 2% target – inflation is expected to exceed 3% in the coming months. But Gov. Stefan Ingves seems calm about the prospect, saying it’s easier to tackle an inflation overshoot than an undershoot.


The European Central Bank has taken a small first step towards unwinding emergency measures – it will cut emergency bond purchases in the next quarter.

But the ECB stresses that this is not a decrease and that asset purchases of one form or another will remain in place for some time to boost inflation in the long run.

It last hiked rates in 2011 and isn’t expected to raise them for years.


A cautious view of exports and production resulting from supply bottlenecks suggests that the Bank of Japan will be lagging behind its peers in scaling back pandemic-era stimulus policies.

Supply chain disruptions are adding to Japan’s economic woes as the recovery is hampered by weak consumption. It is therefore not surprising that the BOJ on Wednesday kept its short-term interest rate target at -0.1% and that of 10-year bonds around 0%.


The Swiss National Bank has the lowest interest rates in the world, at -0.75%, and is unlikely to change its ultra-expansionary monetary policy anytime soon.

He remained in this position Thursday and reiterated his commitment to intervene on currencies “if necessary” to slow the appreciation of the Swiss franc, a safe haven, which he continued to describe as “very appreciated”.
Source: Reuters (Reporting by Tommy Wilkes, Saikat Chatterjee, Sujata Rao and Dhara Ranasinghe in London; Compiled by Dhara Ranasinghe; Editing by Toby Chopra)

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