Central banks raise rates again as Fed pushes fight against global inflation

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A string of central banks around the world raised interest rates again on Thursday, following the U.S. Federal Reserve in a global fight against inflation that is rattling financial markets and the economy.

Japan, the exception among major developed economies, kept rates on Thursday but was punished when traders pushed the yen to a record low against the dollar, prompting the first intervention by Japanese authorities in support of the currency since 1998. .

On the eve, the Fed set the pace with a 0.75% rate hike, its fifth increase since March, and half a dozen central banks, from Indonesia to Norway, followed suit with hikes of similar or identical size in question. of hours, often issuing guidance pointing to more action to come.

Institutions are struggling with inflation rates ranging from 3.5% in Switzerland to almost 10% in the United Kingdom, the result of a rebound in demand since the pandemic subsided, accompanied by a scarce supply, especially from China. , and the increase in the prices of fuel and other raw materials after Russia’s invasion of Ukraine.

Central bankers insist their main task now is to curb runaway price growth, but they are preparing for their actions to take a toll on the economy as rising borrowing costs tend to dampen investment, hiring and consumption.

“We have to put inflation behind us,” Fed Chairman Jerome Powell told reporters after Fed policymakers unanimously agreed to raise its overnight benchmark rate to a range of 3.00. %-3.25%. “I wish there was a painless way to do it. There isn’t.”

The Fed said it expects the economy to slow and unemployment to rise to a degree historically associated with a recession, a prospect that is also looming ever stronger in the euro zone and seen as highly likely in Britain.

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The Bank of England raised rates and said it will continue to “respond forcefully, as necessary” to inflation, despite the economy slipping into recession.

“For borrowers, this will mean a significant increase in costs once again, and there is still no real check on the rising cost of living,” said Emma-Lou Montgomery, associate director of Fidelity International.

Global stocks hovered at two-year lows and emerging-market currencies tumbled as investors braced for a world in which growth is scarce and credit harder to come by.

Market participants have also raised their rate expectations from the European Central Bank, which is almost certain to raise them again on October 23. It is now seen as taking its rates to nearly 3% next year, from the current 0.75%.

For its part, Turkey’s central bank continued its unorthodox policy on Thursday, delivering another surprise rate cut despite inflation surging above 80%, sending the lira to a record low against the dollar.

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