Brussels (Brussels Morning) A number of central banks are moving away from crisis policies and lifting interest rates to beat back inflation.
The South Korean central bank upped its benchmark interest rate by 0.25 percentage points on Thursday in response to a surge in household debt, making it the first large central bank in Asia to increase the interest rate since the start of the coronavirus pandemic, according to Reuters reporting on Friday.
Central banks in Eastern and Central Europe and Latin America started lifting interest rates before their Korean counterpart to address inflationary pressures.
Central banks of large economies are changing their policies as well – the Bank of Canada has cut bond purchases and is thinking about upping interest rates next year, while the Reserve Bank of New Zealand will likely increase rates by the end of the year.
The US Federal Reserve System is not expected to start increasing interest rates for at least another year and its monthly asset purchases stand at approximately US$ 120 billion.
Most economies growing
In contrast with last year, most economies are recovering from the coronavirus crisis, but recovery is uneven.
Recovery picked up pace in Central Europe in the second quarter, as authorities eased lockdowns in the region. The Czech National Bank upped interest rates two times this summer and its Hungarian counterpart implemented its third increase earlier this week.
Both banks are expected to continue on this path in the coming period, with Czech officials discussing whether to go with higher than the standard hike of 0.25 percentage points.
The Norwegian central bank announced plans to increase interest rates next month, which would make Norway the first G10 country to up borrowing costs. Governor Øystein Olsen noted last week that “in the committee’s current assessment of the outlook and balance of risks, the policy rate will most likely be raised in September.”
Commenting on the situation in the EU, European Central Bank Chief Economist Philip Lane noted that it is in line with expectations and concluded “it’s a reasonably well-balanced picture.”
