Global Central Banks Adjust Interest Rates in Response to Easing Inflation, While Key Economies Continue to Implement Tight Monetary Policies
In July, central banks across the globe navigated a dynamic economic landscape, marked by shifting inflationary pressures and cautious optimism about the future. While inflation fears continued to wane, several major central banks made significant adjustments to their interest rates. As the prolonged battle against inflation, now stretching over nearly three years, appears to be nearing its end, some economies are showing signs of monetary policy relaxation, even as others maintain a firm stance.
Despite the mixed approaches, key players like the U.S. Federal Reserve (Fed), the European Central Bank (ECB), and the Central Bank of the Republic of Turkiye (CBRT) opted to keep interest rates steady, signaling their commitment to a tight monetary policy. On the other hand, central banks in Canada, Hungary, Japan, and Russia took divergent paths, either cutting or increasing rates in response to their unique economic challenges.
Canada’s Central Bank (BoC) took a notable step by reducing its policy rate by 25 basis points to 4.5%, marking the second consecutive rate cut. The BoC cited easing inflationary pressures as the driving factor behind this decision, aligning with its broader goal of bringing inflation closer to the 2% target.
Similarly, the Central Bank of Hungary (MNB) also cut its policy rate by 25 basis points to 6.75%, marking its 10th rate cut since the beginning of its monetary easing cycle last October.
Conversely, the Bank of Japan (BoJ) surprised markets by raising its policy rate to 0.25%, a move aimed at countering the yen’s weakness and mitigating the impact of deflation. The BoJ’s decision comes after its first rate hike in over 17 years earlier this year.
Meanwhile, the Central Bank of Russia (CBR) implemented a substantial 200 basis point increase, raising its policy rate to 18%. This move was driven by persistent inflationary pressures within the Russian economy, underscoring the CBR’s aggressive stance to curb rising prices.
Source: Trthaber / Prepared by Irem Yildiz