CHART OF THE WEEK ๐
Inflation has been a problem across the globe. However, central banks have exhibited differing ways to deal with it. We hear of the Fed and RBI most often, but what are the others doing?
๐ท๐บ Russia - Russiaโs interest rate decisions have been rather drastic. When Russia invaded Ukraine, the Ruble collapsed and inflation shot up. The central bank raised rates from 9.5% to 20% in February. However, now, the Ruble has regained its losses, and Russia said weekly data showed a slowdown in price increases. This has led to a rate cut from 20% to 17%.
๐ง๐ท Brazil - After Russia, the most increase in interest rates has been seen in Brazil. The increase in raw material prices has been fuelling inflation in the commodity-exporting nation.
๐บ๐ธ USA - The Fed has been spoken about enough. It first cut rates and indicated rate cuts and balance sheet lightening over the course of the year. Fears are that with growth estimates till high, and employment rates at their highest, the Fed may go a little more aggressive in controlling inflation.
๐ช๐บ Euro Area - Inflation in the Eurozone is at itโs highest since 1997, the time the number started getting recorded. Rising energy costs are the key culprit in the region. Europeโs dependence on Russia for gas, and parallel efforts to cut that dependency have been sending prices off the roof. There is pressure on the central bank to increase rates, which it hasnโt done so far.
๐ฌ๐ง UK - Rates were lifted by a quarter point in February and another quarter point in March. The markets are now factoring in a 50bp rate hike next month.
๐ฎ๐ณ India - The RBI maintained rates, and had been pro-growth so far. But it has recently changed its stance, and has priortitised inflation control over growth. A rate hike now doesnโt seem unlikely.
๐ฟ๐ฆ South Africa - Rates were increased by 25bp for 3 consecutive meetings. The central bank also indicated it would be aggressively increasing borrowing costs through 2024. These actions kicked in as South Africa is close to breaching its 6% inflation target.
๐จ๐ณ China - Chinaโs economy has been slowing down as it goes aggressive on its zero-COVID tolerance policy. Latest figures show growth at 4%, which in fact prompted China to cut rates. Given weak growth and relatively lower inflation, China could in fact further ease policy. It has been warning the West on rapid rate hikes, which might put global economic recovery at a halt.
๐ฏ๐ต Japan - Japan has always been a different story. Prices have been roughly flat here for decades now, but inflation is finally taking off. However, the Bank of Japan has resolved to keep interest rates low, and also resumed another round of bond buying. Consumer demand is still weak in Japan and rising rates could choke the economy.