LONDON, Oct. 6 (Reuters) – New Zealand’s central bank on Wednesday raised interest rates for the first time in seven years, becoming the second large developed economy to raise rates and one of many to cut rates. strong incentives triggered in the wake of the coronavirus crisis.

As the economic recovery takes hold and inflationary pressures intensify, some central banks believe the time to tighten is now. 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.

Central bank balance sheets

1 / NORWAY

Norway’s Norges Bank last month raised its policy rate by 25 basis points to 0.25% and expects four more hikes by the end of 2022. Read more

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.

Norwegian krone rallies to rate hike outlook

2 / NEW ZEALAND

The Reserve Bank of New Zealand just raised spot rates by 25 basis points to 0.5% and announced further tightening ahead to weather inflationary pressures and cool a boiling real estate market. Read more

Economists expect the benchmark rate to reach 1.50% by the end of next year and 1.75% by the end of 2023, according to a Reuters poll.

RBNZ raises rates

3 / CANADA

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. Read more

The central bank reduced 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. It is expected to reduce that amount to C $ 1 billion at its October 27 meeting. Read more

4 / UNITED STATES

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. Read more

The job market remains the key to whether the Fed moves sooner rather than later, so Friday’s nonfarm wage report will be closely watched. Many economists believe the Fed is unlikely to rise until 2023, but some expect a move sooner.

“The bar for a phased-down 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 economist worldwide at BNP Paribas Markets.

fed

5 / BRITTANY

A hawkish turn by the Bank of England last month alerted markets that rates in the world’s fifth largest economy could rise sooner rather than later.

Soaring gas prices have led to a massive sell-off of UK government bonds as investors fear continued inflationary pressure will accelerate policy makers’ rate debate.

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

Policymakers have said inflation could temporarily exceed 4% by this year. Markets forecast a high probability of a rate hike by February 2022.

The yield of British gilts at two years

6 / AUSTRALIA

Unlike the RBNZ, Australia’s central bank is firmly in the dovish camp.

On Tuesday, the Reserve Bank of Australia (RBA) kept rates at an all-time high of 0.1% for an 11th consecutive month and appeared poised to hold them for a few years.

It cut its A $ 1 billion ($ 727 million) bond buying program to A $ 4 billion a week last month, but will keep bond purchases at that level until February at less.

7 / SWEDEN

Sweden is also firmly in the accommodating camp, with no plans to increase its rate by 0% until the third quarter of 2024. Nonetheless, it decided last month to end pandemic-era lending facilities, to reinstate normal guarantee provisions by the end of the year and to end asset purchases by the end of the year. so.

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.

8 / EURO ZONE

The European Central Bank has taken a small first step towards unwinding emergency stimulus 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. Read more

It last hiked rates in 2011 and is not expected to raise them for years.

Weekly purchases of bonds by the ECB

9 / JAPAN

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, at its last meeting, kept its short-term interest rate target at -0.1% and that of 10-year bonds around 0%. Read more

10 / SWITZERLAND

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

He reiterated his commitment to intervene in currencies “if necessary” to curb the appreciation of the Swiss franc, a safe haven, which he continued to describe as “very appreciated”.

Read more

BNS

Reporting by Tommy Wilkes, Saikat Chatterjee, Sujata Rao and Dhara Ranasinghe in London; Compiled by Dhara Ranasinghe; Editing by Alex Richardson

Our Standards: The Thomson Reuters Trust Principles.


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