The World’s Central Banks Have Never Been Quite So Unanimous

The World’s Central Banks Have Never Been Quite So Unanimous
Stéphane Renevier, CFA

over 1 year ago1 min

The world’s central banks have never acted together to hike interest rates quite as much as they have lately. You can see above that we’re in the midst of the broadest tightening cycle in history, with more than 80% of the world’s central banks announcing rate increases this year. It’s also been one of the most aggressive, with more than 50 central banks raising interest rates by at least half a percentage point in one go.

These central banks are all trying to achieve the same thing: bring down inflation before it does too much damage to their economies. Thankfully, there are now reasons to believe it’s working: Covid-related supply disruptions are easing, food and energy prices seem to be stabilizing, and spending seems to be slowing down. That suggests central banks might soon be able to take a breather.

But before you start hoarding stocks again, you might want to wait and see how all those rate hikes – which impact the economy with a lag – will pan out. Because while some sectors already are showing signs of cooling off, others might not fully respond for some time. And with that dynamic playing out on a global scale, you’d be smart not to underestimate the impact this unprecedented global tightening may have on economic growth.

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