# Central banks hike rates again, but a pause is coming
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-02-02
Category: BANKING
Category URL: https://financedigest.com/category/banking
Meta Title: The global central bank interest rate race
Meta Description: Stay updated on central banks' aggressive interest rate hikes. US, Canada, UK, New Zealand, Australia, and more are racing to tighten monetary policies.
URL: https://financedigest.com/central-banks-hike-rates-again-but-a-pause-is-cominghtml

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LONDON (Reuters) – Major central banks are steadily moving closer to a pause in their aggressive interest rate hiking campaigns.

The U.S. Federal Reserve has just implemented its smallest [rise of its tightening cycle](https://www.financedigest.com/european-shares-rise-as-us-inflation-data-signals-end-of-rate-hike-cycle.html "European shares rise as US inflation data signals end of rate-hike cycle") so far. The European Central [Bank and the Bank of England](https://www.financedigest.com/bank-of-england-fines-former-tsb-executive-over-2018-it-failure.html "Bank of England fines former TSB executive over 2018 IT failure") raised rates on Thursday, but markets suspect a peak is nearing.

Overall, 10 big developed economies have [raised rates](https://www.financedigest.com/european-central-bank-to-raise-deposit-rate-to-3-25-by-mid-year-reuters-poll.html "European Central Bank to raise deposit rate to 3.25% by mid-year: Reuters poll") by a combined 2,965 basis points in this cycle to date, with Japan the holdout dove.

Here’s a look at where policymakers stand, from hawkish to dovish.

GRAPHIC: The race to raise rates The race to raise rates (https://www.reuters.com/graphics/CANADA-CENBANK/dwvkdeaqopm/chart.png)

![](https://www.globalbankingandfinance.com/wp-content/uploads/2023/02/a1.jpg)

1) UNITED STATES

The Fed on Wednesday raised its benchmark overnight [interest rate](https://www.financedigest.com/hotel-investors-should-they-be-worried-about-a-potential-economic-pause-delving-into-inflation-interest-rates-recession-etc.html "‘Hotel Investors – should they be worried about a potential economic pause?’ delving into inflation, interest rates, recession etc") by 25 basis points to a range of 4.50% to 4.75%, its smallest hike so far of an 11-month tightening cycle.

[Fed Chair Jerome Powell said it would “not be appropriate” to cut rates](https://www.financedigest.com/oil-up-2-as-dollar-weakens-on-small-us-fed-rate-hike.html "Oil up 2% as dollar weakens on small US Fed rate hike") in 2023 and warned inflation remained too high, pushing back against an exuberant market rally driven by hopes of eventual rate cuts. Powell offered no clues on how many hikes were due this year, saying decisions would be made “meeting by meeting.”

GRAPHIC: [Fed keeps promise of more hikes](https://www.financedigest.com/asian-shares-gain-as-fears-about-rapid-fed-hikes-bank-crisis-fade.html "Asian shares gain as fears about rapid Fed hikes, bank crisis fade") (https://www.reuters.com/graphics/USA-FED/zgpobkryyvd/chart.png)

![](https://www.globalbankingandfinance.com/wp-content/uploads/2023/02/a2.jpg)

2) CANADA

The [Bank of Canada](https://www.financedigest.com/bank-of-canada-seen-on-hold-even-as-economy-accelerates.html "Bank of Canada seen on hold even as economy accelerates") (BoC) on Jan. 18 [lifted its key rate](https://www.financedigest.com/shares-steady-dollar-dips-as-us-holiday-lifts-rates-gloom.html "Shares steady, dollar dips as US holiday lifts rates gloom") by 25 basis points to 4.5%, the highest level in 15 years.

BoC Governor Tiff Macklem told Reuters he was purely focused on whether borrowing costs should be higher, quashing market bets that cuts could come as soon as October.

Canada’s [central bank](https://www.financedigest.com/inflation-trumps-financial-risks-as-central-bank-tightening-set-to-continue.html "Inflation trumps financial risks as central bank tightening set to continue") has raised its policy rate at a record pace of 425 basis points in 10 months. Inflation, which peaked at 8.1% and slowed to 6.3% in December, remains more than triple the BoC’s 2% target.

GRAPHIC: Bank of Canada keeps on [hiking](https://www.financedigest.com/big-ecb-hike-adds-fuel-to-the-banking-sector-fire.html "Big ECB hike adds fuel to the banking sector fire") Bank of Canada keeps on hiking (https://www.reuters.com/graphics/CANADA-CENBANK/egpbymdakvq/chart.png)

![](https://www.globalbankingandfinance.com/wp-content/uploads/2023/02/a3.jpg)

3) NEW ZEALAND

The Reserve Bank of New Zealand (RBNZ) upped its pace of tightening in November, delivering a record 75-basis-point rate [rise](https://www.financedigest.com/oil-falls-as-earthquake-impact-on-crude-eases-rate-hike-fears-rise.html "Oil falls as earthquake impact on crude eases, rate hike fears rise") after five consecutive 50-basis-point rate increases.

Minutes from the meeting showed the RBNZ also considered a larger 100-basis-point hike but opted for a smaller increase. The central bank [raised its forecast for its peak interest rate](https://www.financedigest.com/dollar-falls-after-fed-raises-rates-forecasts-future-hike.html "Dollar falls after Fed raises rates, forecasts future hike") to 5.5%, up from a previous forecast of 4.1%.

GRAPHIC: New Zealand’s record [rate hike](https://www.financedigest.com/wall-street-slips-dollar-gains-as-fed-seen-hiking-rates-in-may.html "Wall Street slips, dollar gains as Fed seen hiking rates in May") (https://www.reuters.com/graphics/NEWZEALAND-ECONOMY/lgpdknnlqvo/chart.png)

![](https://www.globalbankingandfinance.com/wp-content/uploads/2023/02/a4.jpg)

4) BRITAIN

The BoE, the first major central [bank to turn hawkish back](https://www.financedigest.com/banking-turmoil-means-recession-fears-are-creeping-back.html "Banking turmoil means recession fears are creeping back") in December 2021, on Thursday lifted its Bank Rate for the tenth time running to 4%, the highest since 2008. The [BoE dropped a former pledge to keep increasing rates](https://www.financedigest.com/fed-rates-up-boe-up-ecb-up-stocks-up.html "Fed rates up, BoE up, ECB up, stocks up") “forcefully” and said UK inflation had probably peaked.

GRAPHIC: BoE’s fight against inflation (https://www.reuters.com/graphics/BRITAIN-BOE/dwpkdeezmvm/chart.png)

![](https://www.globalbankingandfinance.com/wp-content/uploads/2023/02/a5.jpg)

5) AUSTRALIA

The Reserve [Bank of Australia pushed ahead with a third straight 25-basis-point hike](https://www.financedigest.com/ecbs-villeroy-rate-hike-signals-strong-confidence-in-european-banks.html "ECB’s Villeroy: rate hike signals strong confidence in European banks") in December, taking its key rate to 3.1%, its highest level in a decade.

Markets have priced in at least two more 25-basis-point [rate hikes](https://www.financedigest.com/stocks-falter-as-economic-worries-nag-nz-delivers-big-rate-hike.html "Stocks falter as economic worries nag, NZ delivers big rate hike") during this tightening cycle after inflation surged to a 33-year high in the fourth quarter.

GRAPHIC: Taming inflation (https://www.reuters.com/graphics/GLOBAL-MARKETS/THEMES/egpbyaaaevq/chart.png)

![](https://www.globalbankingandfinance.com/wp-content/uploads/2023/02/a6.jpg)

6) NORWAY

Norway, which raised the curtain on the hawkish global trend by first raising rates in September 2021, kept its policy [rate unchanged at 2.75% on Jan](https://www.financedigest.com/italy-jan-jobless-rate-edges-up-to-7-9-with-35000-jobs-created.html "Italy Jan jobless rate edges up to 7.9%, with 35,000 jobs created"). 19.

In potentially another sign of the future of global rate moves, the Norges [Bank also noted inflationary pressures were easing](https://www.financedigest.com/bank-shares-rise-after-credit-suisse-rescue-eases-crisis.html "Bank shares rise after Credit Suisse rescue eases crisis") and previous hikes were slowing the economy.

GRAPHIC: Hikes stalled (https://www.reuters.com/graphics/GLOBAL-CENTRALBANKS/jnvwyxxxxvw/chart.png)

![](https://www.globalbankingandfinance.com/wp-content/uploads/2023/02/a7.jpg)

7) [EURO ZONE](https://www.financedigest.com/euro-zone-economic-sentiment-rises-in-january-to-seven-month-high.html "Euro zone economic sentiment rises in January to seven-month high")

The [ECB raised its key rate](https://www.financedigest.com/morgan-stanley-others-now-forecast-4-peak-for-key-ecb-rate.html "Morgan Stanley, others now forecast 4% peak for key ECB rate") by 50 basis points to 2.5% on Thursday, its fifth successive hike and the highest level since November 2008.

It said it intends to [hike the rate](https://www.financedigest.com/dollar-hits-one-month-high-against-yen-as-traders-bet-on-fed-rate-hike.html "Dollar hits one-month high against yen as traders bet on Fed rate hike") by another 50 basis points in March to bring inflation down to its 2% medium-term target.

While euro zone headline [inflation eased for the third straight month in January](https://www.financedigest.com/uk-shop-price-inflation-hits-record-8-in-january-brc-2.html "UK shop price inflation hits record 8% in January: BRC"), falling to 8.5% from 9.2% in December, core inflation held steady at 5.2%.

GRAPHIC: [ECB hikes](https://www.financedigest.com/analysis-investors-stick-to-bets-on-early-end-to-ecb-hikes-as-uncertainty-grows.html "Analysis-Investors stick to bets on early end to ECB hikes as uncertainty grows") again and signals more to come (https://www.reuters.com/graphics/GLOBAL-CENTRALBANKS/dwpkdeejmvm/chart.png)

![](https://www.globalbankingandfinance.com/wp-content/uploads/2023/02/a8.jpg)

8) SWEDEN

Swedish inflation hit a 30-year high of 10.2% on a year-on-year basis in December, raising the pressure on the Riksbank to keep lifting borrowing costs.

Sweden’s [central bank hiked its key rate](https://www.financedigest.com/central-banks-keep-hiking-rates-amid-banking-turmoil.html "Central banks keep hiking rates amid banking turmoil") by 75 basis points to 2.5% in November and next meets on Feb. 8

GRAPHIC: Further hikes expected (https://www.reuters.com/graphics/GLOBAL-CENTRALBANKS/lgvdknnkepo/chart.png)

![](https://www.globalbankingandfinance.com/wp-content/uploads/2023/02/a9.jpg)

9) SWITZERLAND

The [Swiss National Bank](https://www.financedigest.com/swiss-regulator-monitoring-banks-and-insurers-after-svb-collapse.html "Swiss regulator monitoring banks and insurers after SVB collapse") (SNB) raised its policy rate by 50 basis points to 1% in December, in its third hike of 2022. Senior officials have signaled further increases could come this year.

SNB Chairman Thomas Jordan said last month that it’s too early to sound the all-clear on inflation, although [inflation eased](https://www.financedigest.com/german-inflation-rate-to-ease-over-course-of-2023-econ-minister.html "German inflation rate to ease over course of 2023 – econ minister") to 2.8% in December from a year earlier.

GRAPHIC: Exit from negative rates (https://www.reuters.com/graphics/CEN-WRAP/znvnbkkjbvl/chart.png)

![](https://www.globalbankingandfinance.com/wp-content/uploads/2023/02/a10.jpg)

10) JAPAN

The Bank of Japan, the most dovish major [global central bank](https://www.financedigest.com/global-shares-jump-but-bank-whack-a-mole-not-over.html "Global shares jump but bank ‘whack-a-mole’ not over"), inched closer to ending its ultra-easy monetary policy in December with a hawkish tweak to its yield-curve control scheme that it uses to pin down borrowing rates.

The BOJ resisted further policy changes in January. But as inflation rises, the International Monetary Fund has recommended the [BOJ let government bond yields move more freely and consider raising short-term interest rates](https://www.financedigest.com/sp-warns-of-possible-economic-blow-hit-to-japan-inc-from-boj-rate-hike.html "S&P warns of possible economic blow, hit to Japan Inc from BOJ rate hike"). Any such move may rock markets as Japanese investors sell [overseas assets to invest](https://www.financedigest.com/brexit-no-obstacle-as-chinese-overseas-property-investment-doubles.html "Brexit no obstacle as Chinese overseas property investment doubles") back home.

GRAPHIC: BOJ under fire BOJ under fire (https://www.reuters.com/graphics/JAPAN-ECONOMY/BOJ/zjpqjeoojvx/chart.png)

![](https://www.globalbankingandfinance.com/wp-content/uploads/2023/02/a11.jpg)

(Reporting by Yoruk Bahceli, Samuel Indyk, Nell Mackenzie, Dhara Ranasinghe, Alun John, Naomi Rovnick, Harry Robertson and Chiara Elisei; Graphics by Vincent Flasseur, Sumanta Sen and Pasit Kongkunakornkul and Riddhima Talwani; Editing by Paul Simao)


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