Reporter of the Economic Business: Cai Ding Reporter of the Economic Business Business: Lan Suying
On Thursday, September 22, Beijing time, the Federal Reserve announced the third consecutive hike of 375 basis points this year, setting off a climax of the global "super central bank week". In less than 24 hours afterwards, many central banks in Asia, Europe and Africa also announced interest rate hikes in , highlighting the pressure on the decline of the local currency under a strong US dollar environment.
Except for the Bank of Japan maintaining a loose monetary policy beyond as expected, many central banks including the Bank of England, the Swiss National Bank, the Norwegian Central Bank and the Bank of South Africa have announced interest rate hikes. However, some central banks have announced interest rate cuts. For example, even though lira hit a record low, the Turkish central bank unexpectedly cut interest rates by 100 basis points.
The Swiss National Bank raised interest rates by 75 basis points, and the era of " negative interest rate " in Europe ended
On Thursday afternoon, Beijing time, the Swiss National Bank raised interest rates by 75 basis points as expected, raising interest rates from -0.25% to 0.5%, a new high since December 2008. The Swiss National Bank's interest rate hike this time means that all central banks in Europe are separated from negative interest rates, and an era will end.
Swiss National Bank interest rate (Photo source: Yingwei Financial Information)
" Daily Economic News " reporter noticed that this is the second interest rate hike of the Swiss National Bank in nearly 15 years. The bank's last rate hike was in June this year.
In 2014, the European Central Bank lowered the overnight deposit rate to -0.1%, becoming the first major central bank in the world to implement a negative interest rate policy. After that, the euro fell sharply against the Swiss franc. In order to maintain exports to Europe, Switzerland significantly lowered the central bank interest rate and entered the negative interest rate range. The Swiss National Bank has maintained interest rates at -0.75% since 2015.
In the latest economic forecast released on Thursday, the Swiss National Bank lowered its economic growth forecast for this year to around 2% from around 2.5% in June. Currently, the average inflation rate is expected to be 3% in 2022, and the indicator will slow to 2.4% and 1.7% in 2023 and 2024. The latest data released by
shows that Switzerland's annual inflation rate reached 3.5% in August, which is far below the level of euro zone , but it also reaches the country's new high in the past 30 years. Swiss National Bank Governor Jordan expects Swiss inflation to remain at a high level for some time, and also said that Swiss National Bank is willing to interfere in the market to curb the excessive appreciation or depreciation of Swiss francs . The strong Swiss francs will help alleviate the pressure on inflation .
South Africa's central bank raised interest rates by 75 basis points, the largest rate hike in the past 20 years
also raised interest rates by 75 basis points. The Monetary Policy Committee of the South African Central Bank (MPC) announced on Thursday that it would raise the policy interest rate by 75 basis points to 6.25% from the 23rd, is the bank's largest rate hike in the past 20 years. This means that the current 5.5% repurchase rate will rise to 6.25%, and the preferential loan rate will rise to 9.75%. So far, the policy interest rate of the South African central bank has rebounded to the level before the outbreak of the new crown epidemic in January 2020.
It should be noted that the rate hike of on Thursday was the sixth consecutive time that the Central Bank of South Africa has raised its repurchase rate since November last year.
South African Central Bank Governor Kan Yagu said that three members in the MPC support a 75 basis point rate hike, and two members support a 100 basis point rate hike. He said the purpose of the policy is to "anchor" inflation expectations more firmly in the middle of the target range and to strengthen confidence that inflation targets will be achieved by 2024. He said South Africa should aim to improve the effectiveness of monetary policy by “prudent” government debt and stable energy supply. In this uncertain environment, monetary policy decisions will continue to rely on data and respond to future risk balances.
According to Xinhua Finance , the inflation rate target of the South African central bank is 3% to 6%. Inflation has risen rapidly since the beginning of the year, mainly due to rising costs of food, gasoline and other living. This rate hike means consumers need to repay more loans and mortgages, which will erode consumers' disposable income.
The Bank of England raised interest rates for the second time 50 basis points in a row
On Thursday evening, Beijing time, the Bank of England announced a 50 basis points rate hike, pushing the benchmark interest rate from 1.75% to 2.25%. This is the second time the bank raised interest rates for 50 basis points in a row, and it is also the seventh consecutive rate hike since December last year, and the longest rate hike cycle in the country since the late 1990s.
However, among the nine members of the Monetary Policy Committee, three officials supported a 75 basis point hike. The Bank of England also announced on the same day that it would actively sell British Treasury bonds from October 3 to actively quantify the tightening (QT).
Bank of England benchmark interest rate trends (Image source: Bloomberg)
Bank of England warned that energy price security may reduce the risks of persistent domestic price and wage pressures, but the risks remain high, with inflation expected to exceed 10% in the coming months and said the central bank will respond strongly to longer lasting inflation pressures when necessary.
The Bank of England also lowered its inflation forecast peak and economic growth prospects, reducing the expected inflation peak from more than 13% to less than 11%. expects the UK GDP growth rate to drop from 0.4% in the third quarter of this year to a decrease of 0.1%. This means that the economy will shrink for the second consecutive quarter, in line with the definition of a technical recession.
pound hit a decades-long low against the dollar this week, falling below 1.13 in early Thursday, the last time it reached this level was in 1985. After the Bank of England announced its interest rate decision, the pound rose slightly against the dollar, indicating that the expectation of a 50 basis point rate hike has been fully digested by the market.
Mitsubishi UFF Financial Group Direk Halpenny, head of global market research at global market research, pointed out in an email to a reporter from the Daily Economic News that the pound remained generally stable after the Bank of England's policy statement was released. Although market expectations were closer to the 75 basis points price hike, the Bank of England's interest rate curve moved up more than 10 basis points. The factors supporting its further rate hikes after the Bank of England announced a rate hike are clearly the details of its policy statement evaluating the UK government's "Growth Plan" which will also be part of an update to its economic forecast at its next policy meeting on November 3.
"This is a clear signal that based on these details, the Bank of England's Monetary Policy Committee (MPC) may raise interest rates faster if necessary," Halpenny said.
Norway's central bank raised interest rates by 50 basis points, implying that the tightening is coming to an end
0 Norway's central bank also announced a rate hike of 50 basis points to 2.25%, in line with market expectations, and the interest rate level hit a new high since 2011. Norway's central bank said it may raise interest rates again in November this year.
In the policy statement, Norwegian central bank officials hinted that the monetary tightening may be nearing the end , saying that "monetary policy has begun to have a tightening effect on the Norway economy, which may mean that in the future, setting policy interest rates should be adopted in a more gradual manner."
"Daily Economic News" reporter noticed that the Norwegian central bank had started a interest rate hike cycle as early as September last year, which also made Norway one of the first countries to start interest rate hikes.
Norwegian Central Bank currently expects policy rates to reach 3% in the coming months and then stay close to that level, reaching a peak of 3.11% by the third quarter next year, down from the previously expected peak of 3.5% next year.
Some analysis pointed out that Norway, which is rich in resources such as oil, has better resisted economic downturn than most countries. Due to the corresponding increase in market demand for its fossil fuel exports, Norway is relatively less affected by the European energy crisis and the disruption of Russian natural gas exports compared with other European countries.
Three Southeast Asian central banks also "take action": Vietnam unexpectedly raised interest rates by 100 basis points
In addition to the three European countries and South Africa mentioned above, the three Southeast Asian central banks also announced interest rates hikes on Thursday. Among them, the central banks of Indonesian and Philippines each raised policy interest rates by 50 basis points, while the Vietnamese central bank raised the two major policy interest rates by 100 basis points, the first rate hike since the outbreak of the new crown epidemic in September 2020.
Indonesian Central Bank Governor Perry said on the same day that the decision to raise interest rates is a "pre-employment forward-looking step" to reduce inflation expectations and ensure that the core inflation rate remains within the target range.
According to data previously released by the Indonesian National Bureau of Statistics, the country's inflation rate in July this year was 4.94%, of which the national food inflation rate reached 11.47%. The country's economic coordination minister Ellanga has said that inflation is expected to be between 4% and 4.8% for the whole year.
Perry said that the interest rate hike is also to strengthen the stability of the Indonesian rupiah exchange rate and make it in line with its basic value. On that day, the Indonesian rupiah exchange rate against the US dollar fell below 15,000 rupiah and exchanged for 1 US dollar, setting a new low in two years. Perry said that the Indonesian central bank will strengthen the combination effect of monetary policy and maintain the momentum of economic recovery and the Indonesian rupiah exchange rate in various ways.
. For Vietnam, which unexpectedly raises interest rates by 100 basis points, although the country's inflation rate is only 2.89% so far, the lowest among major economies in Southeast Asia, the exchange rate of Vietnamese Dong against the US dollar has fallen to its low since 1993.
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