Interest rates set for further hikes in coming months -
interest rate hikes

Interest rates set for further hikes in coming months

A recent analysis of central banking data by the Financial Times suggests we’ll see continuing, widespread interest rate hikes in the coming months. According to the data, central banks worldwide are increasing rates rapidly, which is in stark contrast to the stance they have generally been taking since the 2008 global financial crisis.

According to the report, these moves represent the most ‘widespread tightening of monetary policy for more than two decades.’ Global policymakers have announced more than 60 rate increases in the last three months alone. This is the highest number in more than 20 years.

For well over a decade, far looser monetary policies have been kept in place by central banks in response to various situations ranging from the 2008 global financial crisis to the more recent Covid-19 pandemic. However, this is now set to go into reverse as widespread rate hikes come into effect.

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interest rate inflation

Soaring inflation and the Russian invasion of Ukraine

Many people have become accustomed to seeing rates at historic lows over the past decade, but as inflation soars, central banks are being forced to respond accordingly. Inflation is now at its highest level in decades in many countries around the globe. Moreover, while inflation was rising anyway, both energy and food costs have rocketed further since the Russian invasion of Ukraine.

Jennifer McKeown, head of global economics service at Capital Economics, said, “The world’s central banks have embarked on the most coordinated tightening cycle in decades.”

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Another industry official, Christian Keller, an economist at Barclays, stated, “The tightening cycle is truly a global phenomenon.”

The Bank of England is among those that have recently increased interest rates, bringing an end to its record low interest rates amid surging prices and soaring inflation. The Federal Reserve has also raised rates, and the European Central Bank is set to increase rates for the first time in more than a decade in July, with another raise in September almost certain to follow.

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interest rate low

Rates are still low but set to continue increasing

Despite rates already rising in some countries, they are still deemed to be low based on historical interest rate trends. However, economists have warned that the recent hikes are just a sign of things to come and that further hikes will occur over the coming months.

In the weeks to come, central banks in countries including Canada, Australia, Poland, and India are expected to increase their interest rates. Officials expect 16 of 20 global central banks to raise interest rates in the coming six months. However, monetary policy tightening is likely to be fastest in the UK and the United States.