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Central banks hiked rates – what are they doing?

The main three events of this week were the central bank monetary policy decision, causing sharp movements in the markets.

Central banks made some important decisions this week. These were as follows: 

  • Firstly, the Fed on Wednesday caused some movements in the markets. The Federal Reserve raised interest rates by 0.25% (25 basis points). Furthermore, Fed Chair Jerome Powell’s comments that “the disinflationary process has begun” cause hopes that the Fed will end its tightening cycle in March.
  • Secondly, the Bank of England also hiked rates on Thursday, with a 7 – 2 split for that decision. However, the BoE suggested that inflation may have reached a peak, softening the language in the following statement from “we would act aggressively if necessary” to “if there were signs of more persistent pressures.” 
  • Lastly, the ECB cemented the rate hike week with a 50 bps increase, but also lowered in its outlook the number of additional rate hikes from two to one. Instead, the Governing Council declared a move towards meeting-by-meeting decision-making, dropping the crucial forward guidance (again).

We have discussed these critical macro factors in our video analysis, which you can watch below:

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