The Bank of England joined Norway and Switzerland in hiking interest rates on Thursday (23) as inflation remains elevated, though banking-sector turmoil could soon lead to a pause in US tightening as hinted by the Federal Reserve.
A day after the Fed lifted US borrowing costs by 25 basis points, the BoE did the same as its key rate reached 4.25 per cent -- the highest level since the 2008 global financial crisis.
The central banks pressed on with monetary tightening even though the troubles in the banking sector have been linked to their rate-hike campaigns.
The Bank of England (BoE) acknowledged that "uncertainties around the financial and economic outlook have risen".
It added it was "unclear how credit conditions and economic activity might be affected by recent banking sector stress in a number of advanced economies".
Also Thursday, the Swiss National Bank (SNB), which helped oversee the buyout of troubled Credit Suisse by national rival UBS last weekend, lifted its rate by a hefty 50 basis points to 1.5 per cent.
Norway's central bank hiked its rate by a more modest 25 basis points to 3.0 per cent and noted there was "considerable uncertainty about future economic developments".
Policymakers remain laser-focused on fighting inflation, with the European Central Bank last week announcing a 50-basis-point increase in eurozone borrowing costs.
The main outlier among major central banks is the Bank of Japan, which steadfastly resists tightening owing to what it deems are temporary boosts to consumer prices in the wake of Russia's invasion of Ukraine.
Over the past year, energy and food bills have rocketed around the world on supply constraints triggered by the ongoing war.
Following their monetary policy gatherings, the SNB said it was "countering the renewed increase in inflationary pressure", while Norway's central bank stated that higher rates were "needed to curb inflation".
While the Fed hiked its lending rate to 4.75-5.0 per cent, analysts said its accompanying statement signalled it may soon pause monetary tightening.
The Fed statement replaced a previous warning that "ongoing increases... will be appropriate" to tame inflation with a conditional one saying "some additional policy firming may be appropriate".
Recent banking sector developments "are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring and inflation", the Fed added.
(AFP)
Cental banks hike rates despite turmoil in banking sector
Bank of England joined Norway and Switzerland in hiking interest rates on Thursday (23) as inflation remains elevated
