Inflation is a global problem, and here’s how central banks deal with it

The perfect storm of stimulus liquidity during the pandemic, strong demand for goods, geopolitical chaos, and supply chain kinks have sent prices up globally.

In Great Britain, the inflation rate is just under 10%, the highest in the Group of Seven. In Turkey and Argentina, annual inflation rates are expected to reach 80%.

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

Current annual consumer inflation rate: 8.3%

Reference interest rate: 2.25-2.5%

Last rate hike: 75 basis points in July

Hiking course start: March 2022

The Federal Reserve is the world’s most important central bank – the US dollar has been the world’s main reserve currency for more than 70 years. This is why the FOMC meetings, where monetary policy is enacted, are closely watched around the world.

In recent months, the Fed has taken a hard line. In July, it instituted a second consecutive rate increase of 0.75 percentage points, raising the benchmark interest rate to a range of 2.25% to 2.5%. The bank is largely expected to raise another 75 basis points Wednesday.

Federal Reserve Chairman Jerome Powell speaks during a press conference in Washington, D.C., on July 27, 2022. The US Federal Reserve again on July 27 raised its benchmark interest rate by three-quarters of a percentage point in its ongoing battle for easing.  Massive price pressures are putting pressure on American families.

Bank of England

Inflation rate: 9.9%

Reference interest rate: 1.75%

Last rate hike: 50 basis points in August

Hiking course start: December 2021

The bank launched its largest interest rate increase in 27 years in August, the first half-point increase since the bank became independent from the British government in 1997. It was the sixth consecutive rate hike in Britain. to 1.75%.

The Bank of England’s policy decision was supposed to come in September last week, but was delayed by a week due to the death of Queen Elizabeth II. The Bank is expected to rally again at its meeting scheduled for Thursday as inflation continues to stubbornly rise and the British Pound is hovering near a 37-year low against the US Dollar.

European Central Bank

Inflation rate: 9.1%

Reference interest rate: 0.75%

Last rate hike: 75 basis points in September

Hiking course start: July 2022

The eurozone raised interest rates for the first time in 11 years in July. The European Central Bank raised interest rates by 50 basis points to 0%. Yes that is correct 0%. The rate has been negative since 2014 in an effort to boost weak economic growth.

Core inflation was 8.6% in June, pushing The European Central Bank will raise interest rates and say more hikes would be appropriate. This month, the bank continued its tightening policy, rising by 75 basis points. The European Central Bank covers 19 countries, with many Very different economic conditions. Some analysts worry that debt-laden countries such as Italy and Greece will suffer greatly from the increases.

People’s Bank of China

Current inflation rate: 2.5%

Reference interest rate: 3.65%

Last rate hike: 0 basis points in September

Hiking course start: Not available

Unlike its Western counterparts, China has already 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 trying to stimulate the economy due to the ongoing recession, increasing unemployment and the real estate crisis. But investors remain surprised by the move as China also deals with the risks 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.

Bank of Japan

Current inflation rate: 2.8%

Reference interest rate: -0.1%

Last rate hike: rates remained the same in July

Hiking course start: Not available

Japan’s economic growth slowed this summer, dashing hopes for epidemic-era savings It would help boost the faltering economy. The Bank of Japan also expected inflation to exceed its target this year and raised its rate hike forecast for the fiscal year ending March 2023 to 2.3% from 1.9%.

But the Bank of Japan kept low interest rates unchanged in July and maintained its short-term target at -0.1%. Bank of Japan Governor Haruhiko Kuroda said he had “absolutely no plan” to raise interest rates.

“The economy is in the midst of recovering from the epidemic. The deteriorating Japanese terms of trade are also leading to an outflow of income,” Kuroda told a news conference. “As such, we must continue our easy policy to ensure that higher corporate profits lead to moderate wage and price growth,” he said.

Argentine Central Bank

Current inflation rate: 78.5%

Reference interest rate: 75%

Last rate hike: 550 basis points in September

Hiking Cycle Begins: Nine Increases This Year, But It’s An Ongoing Cycle

Argentina raised its key interest rate in September by about 550 basis points to 75%. The increase followed a 950 basis point hike in August. The country is grappling with a rampant inflation rate that rose to a 20-year high of nearly 80% in August.

Over the years, the Argentine government borrowed heavily to finance its budget, accumulating huge amounts of debt. The country recently agreed to a $45 billion debt deal with the International Monetary Fund.

The price of bread in Argentina has taken an inflationary blow due to fluctuations in the prices of raw materials.

Bank of Canada

Current inflation rate: 7%

Reference interest rate: 3.25%

Last rate hike: 75 basis points in September

Hiking course start: March 2022

Price growth appears to be slowing in Canada. The country’s annual inflation rate slowed to 7% in August, below analysts’ expectations of 7.3% and down from 7.6% in July. But while inflation appears to be dropping from its peak levels, it is still well above the Bank of Canada’s 2% target.

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