Global Central Banks Continue To Combat Inflation In March

The interest rate hike pace by major emerging as well as developed market central banks continued to be at a healthy rate in March; however, the scale of the rise has lessened a bit as the chaos in the banking vertical has clouded the outlook when it comes to overall growth.

The month of March has already seen six interest rate surges in eight meetings by the central banks that oversee ten of the most heavily traded currencies. Policymakers across Norway, Australia, and Britain joined forces with the US Federal Reserve as well as the European Central Bank when it came to raising the key lending rates by 200 basis points in total.

When it comes to policymakers from Japan and Canada, they have kept their benchmarks unchanged. All this follows six rate hikes in interest rates that, in total, delivered a 250-bps rise across six meetings by G-10 central banks in the month of February.

March happened to be a roller coaster ride for policymakers as well as markets, with expectations that the US Federal Reserve rate peaked at 6% right before the collapse of a number of US banks and also before the Credit Suisse issue thwarted the global markets, raising concerns as far as financial stability is concerned.

According to Wei Li, the global chief investment strategist at BlackRock Investment Institute, in a note written to their clientele said that the Fed as well as other central banks made it very clear that the banking challenges will not stop them from further tightening the screws.

By clearly separating the financial as well as price stability goals and tools, the majority of central banks carried on with the hike in rates all through the turmoil. That said, the top central banks of the world are contemplating an early end point when it comes to the rate hikes, but not due to the financial turmoil.

On the contrary, the oil prices elevating on April 3 against the backdrop of a surprise OPEC cut in production can very well go on to add new pressures on inflation, as per analysts.

When it comes to the emerging markets, the slowdown in the hike in the rate was very evident. 14 out of 18 central banks, as per a Reuters survey met to take a decision on rate moves, but only five hiked the interest rate by 150 basis points in total. When it came to the other nine, the interest rates were left unchanged.

When we compare these figures to a month earlier in February, 13 emerging central banks had met, of which only 4 implemented a hike totaling 175 basis points. As per the senior economist of the Amundi Institute, Alessia Berardi, one can expect an almost complete end to the hiking cycle.