Merakyat.org – The world’s major central banks are approaching the culmination of their rate hiking cycles, with varying perspectives on the timing and manner of ending their monetary tightening.
The U.S. Federal Reserve recently maintained its interest rates at a range of 5.25 percent to 5.5 percent. Despite this, there’s speculation about another potential rate hike this year to manage inflation. Market analysts are divided, with some believing that the rate hiking cycle might have already reached its end, even as the Federal Reserve remains cautiously optimistic.
In contrast, Switzerland’s central bank took markets by surprise, deciding to keep its rates unchanged. The Bank of England followed suit, leaving rates untouched as recent data indicates a potential easing in inflationary pressures. To date, nine developed economies have increased their rates in this cycle, with Japan being the notable exception.
A closer look at some of the central banks’ stances:
- United States: The Federal Reserve’s decision to hold rates has led to market speculation, with futures indicating a 50 percent likelihood of another quarter-point hike by the end of the year.
- New Zealand: The Reserve Bank of New Zealand has elevated its cash rate to a 14-year peak of 5.5 percent and has since maintained this level. The bank has also deferred its plans to reduce borrowing costs until 2025.
- Britain: The Bank of England kept its rates at 5.25 percent, pointing to signs of a decelerating economy. However, it hasn’t ruled out potential future hikes.
- Canada: The Bank of Canada’s key rate remains at 5 percent. The bank’s Governor, Tiff Macklem, hinted that the current monetary policy might need tightening to achieve its target.
- Euro zone: The European Central Bank (ECB) increased its key rate to 4 percent, its highest since the euro’s inception in 1999. However, many economists believe the ECB has concluded its rate hikes for the foreseeable future.
- Norway: The Norges Bank upped its key rate by 25 basis points to 4.25 percent and hinted at another potential hike in December.
- Sweden: The central bank of Sweden raised its policy rate by 25 basis points to 4 percent and indicated that further tightening might be necessary.
- Australia: The Reserve Bank of Australia contemplated a rate hike but decided to maintain its 4.1 percent rate.
- Switzerland: The Swiss National Bank chose to keep its rates steady at 1.75 percent, aligning with its inflation targets.
- Japan: The Bank of Japan, known for its dovish stance, is set to announce its decision soon. The general expectation is for the bank to maintain its current policy.
In conclusion, while central banks globally are nearing the end of their rate hiking cycles, the strategies and timelines vary, reflecting the unique economic challenges and outlooks of each region.