# ECB goes big with 50 basis-point hike, ending negative rates era
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-07-21
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Central banks worldwide race to contain inflation
Meta Description: Get the latest on global interest rate hikes by major central banks and where policymakers stand in the race to control surging inflation.
URL: https://financedigest.com/ecb-goes-big-with-50-basis-point-hike-ending-negative-rates-erahtml

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(Reuters) – The European Central Bank on Thursday delivered its first interest rate hike in over a decade, joining other major central banks in the race to get on top of surging inflation.

The United States, Canada, New Zealand and Switzerland among others have lined up in recent weeks with aggressive rate rises. Japan, which is yet to lift rates in this cycle, is left as the holdout dove among the 10 big developed economies.

In total, those central [banks have so far raised rates](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 this cycle by a combined 1,140 basis points.

Graphic: G10 interest rates- https://graphics.reuters.com/EUROZONE-MARKETS/ECB/lbpgnemjqvq/chart.png

![](https://www.globalbankingandfinance.com/wp-content/uploads/2022/07/286.jpg)

Here’s a look at where policymakers stand in the race to contain inflation.

1) CANADA

The [Bank of Canada is the chief hawk after last week delivering the first 100-basis-point rate](https://www.financedigest.com/central-banks-hike-rates-again-but-a-pause-is-coming.html "Central banks hike rates again, but a pause is coming") increase — lifting its key policy rate to 1.5% — among the world’s advanced economies in the current policy-tightening cycle.

With [data on Wednesday showing annual inflation](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") at 8.1% in June, the highest in 39 years, analysts reckon another big rate hike is likely.

Graphic: Canada in the hawkish camp- https://fingfx.thomsonreuters.com/gfx/mkt/zdpxobjywvx/CA2107.PNG

![](https://www.globalbankingandfinance.com/wp-content/uploads/2022/07/287.jpg)

2) UNITED STATES

The Federal Reserve is not far behind. It’s widely expected to deliver its second 75 bps [rate rise](https://www.financedigest.com/uk-inflation-rate-unexpectedly-rises-to-10-4-in-february.html "UK inflation rate unexpectedly rises to 10.4% in February") next week.

Data last week showed U.S. consumer prices accelerated 9.1% in June, the largest annual increase in [inflation in more than 40 years](https://www.financedigest.com/spains-inflation-to-be-lower-this-year-than-in-2022-minister.html "Spain’s inflation to be lower this year than in 2022 -minister"). That sparked some excitement in markets over a 100 bps July rate move, but Fed officials doused that talk.

Graphic: U.S. inflation still at lofty levels–https://fingfx.thomsonreuters.com/gfx/mkt/jnpwedkgnpw/US2107PNG.PNG

![](https://www.globalbankingandfinance.com/wp-content/uploads/2022/07/288.jpg)

3) NEW ZEALAND

The Reserve [Bank of New Zealand delivered its sixth straight rate](https://www.financedigest.com/bank-of-england-officials-split-over-future-path-for-rates.html "Bank of England officials split over future path for rates") rise last week, lifting the official cash rate by 50 bps to 2.5%, a level not seen since March 2016.

It remains comfortable with its planned aggressive tightening [path to restrain runaway inflation](https://www.financedigest.com/analysis-central-europes-path-to-lower-inflation-strewn-with-hazards.html "Analysis-Central Europe’s path to lower inflation strewn with hazards").

Graphic: Reserve Bank of New Zealand gets aggressive- https://fingfx.thomsonreuters.com/gfx/mkt/lgvdwzlddpo/Pasted%20image%201657727974842.png

![](https://www.globalbankingandfinance.com/wp-content/uploads/2022/07/289-666x500.jpg)

4) BRITAIN

The Bank of England will almost certainly [hike 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") for a sixth time in August following data showing inflation in June surged to a 40-year-high of 9.4%.

Investors are pricing in an almost 100% chance of the [BoE raising the Bank Rate](https://www.financedigest.com/fed-rates-up-boe-up-ecb-up-stocks-up.html "Fed rates up, BoE up, ECB up, stocks up") to 1.75% from 1.25%. The BoE said in June that it was ready to act “forcefully” if needed.

Graphic: UK inflation running above 9%- https://fingfx.thomsonreuters.com/gfx/mkt/lbpgnemnnvq/GB2107.PNG

![](https://www.globalbankingandfinance.com/wp-content/uploads/2022/07/290.jpg)

5) NORWAY

Norway, the first big developed economy to kick off a rate-hiking cycle last year, [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 50 bps on June 23 to 1.25%, its largest single hike since 2002.

The Norges [Bank plans to raise rates](https://www.financedigest.com/bank-of-england-set-to-hike-to-4-as-rate-peak-looms.html "Bank of England set to hike to 4% as rate peak looms") by 25 bps at each of its four remaining policy meetings in 2022, although larger increments are also possible, Governor Ida Wolden Bache said.

6) AUSTRALIA

The Reserve Bank of Australia has raised its key [rate three months in a row to 1.35% and markets are betting the rate will hit](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") 3.5% by the end of 2022.

RBA Governor Philip Lowe on Wednesday indicated a steady drum [beat of rate](https://www.financedigest.com/beat-the-exchange-rate-and-buy-that-dream-holiday-home-by-paying-in-pounds.html "Beat the exchange rate and buy that dream holiday home – by paying in pounds! ") rises to stop a damaging inflationary cycle developing, and suggested rates could at least double from their current low levels.

7) SWEDEN

Another late-comer to the inflation battle, Sweden’s Riksbank [delivered a half percentage-point interest rate hike](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") on June 30 to 0.75%, its biggest hike in more than 20 years.

As recently as February, the Riksbank had forecast unchanged policy until 2024, but governor Stefan Ingves now [expects rates to hit](https://www.financedigest.com/uks-dominos-expects-tech-investments-to-hit-2023-profit.html "UK’s Domino’s expects tech investments to hit 2023 profit") 2% in early 2023 and said 75 bps moves are possible.

8) [EURO ZONE](https://www.financedigest.com/euro-zone-inflation-seen-just-above-ecbs-target-in-2025-poll-shows.html "Euro zone inflation seen just above ECB’s target in 2025, poll shows")

The European [Central Bank on Thursday hiked its deposit rate](https://www.financedigest.com/central-banks-keep-hiking-rates-amid-banking-turmoil.html "Central banks keep hiking rates amid banking turmoil") by 50 bps — more than expected — in its first rate rise since 2011 as it fights soaring inflation. The move to raise rates to 0% brought an end to eight [years of experimenting](https://www.financedigest.com/2021-the-year-of-buyer-experience.html "2021: The year of buyer experience") with negative rates.

The [bank also promised further rate hikes](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") possibly as soon as its next meeting on Sept. 8.

Graphic: ECB monetary policy- https://graphics.reuters.com/EUROZONE-MARKETS/ECB/zdpxobnwrvx/chart.png

![](https://www.globalbankingandfinance.com/wp-content/uploads/2022/07/291.jpg)

9) SWITZERLAND

On June 16, 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) unexpectedly raised its -0.75% interest rate, the world’s lowest, by 50 bps, sending the franc soaring.

Recent franc weakness has contributed to driving [Swiss](https://www.financedigest.com/swiss-franc-grapples-with-safe-haven-identity-crisis-after-credit-suisse.html "Swiss franc grapples with safe-haven identity crisis after Credit Suisse") inflation towards 14-year highs and SNB governor Thomas Jordan said he no longer saw the franc as highly valued. That has [opened the door](https://www.financedigest.com/lack-of-electric-vans-opens-door-for-chinese-other-ev-makers.html "Lack of electric vans opens door for Chinese, other EV makers") to more rate hikes.

10) JAPAN

Japan is the holdout dove. On Thursday the Bank of Japan maintained ultra-low interest rates of -0.1% and signalled its resolve to keep them that way even as it projected [inflation would exceed its target](https://www.financedigest.com/the-mouse-that-roared-new-zealand-and-the-worlds-2-inflation-target.html "The mouse that roared: New Zealand and the world’s 2% inflation target") this year.

BOJ Governor Haruhiko Kuroda said he had no plan to [raise rates or hike](https://www.financedigest.com/dollar-falls-after-fed-raises-rates-forecasts-future-hike.html "Dollar falls after Fed raises rates, forecasts future hike") an implicit 0.25% cap set for the bank’s 10-year bond yield target, because Japan was still recovering from the pandemic and its terms of trade had worsened.

Graphic: BOJ is the last dove standing- https://fingfx.thomsonreuters.com/gfx/mkt/klvykrzggvg/Pasted%20image%201655441669556.png

![](https://www.globalbankingandfinance.com/wp-content/uploads/2022/07/292-666x500.jpg)

(Reporting by Sujata Rao, Dhara Ranasinghe and Yoruk Bahceli, Tommy Reggiori Wilkes and Saikat Chatterjee and Vincent Flasseur; Editing by Toby Chopra and Hugh Lawson)


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