G10 Central Banks and Their Latest Interest Rate Hikes in 2024
By Alun John
Overview of G10 Central Bank Interest Rate Decisions
LONDON, June 18 (Reuters) - The agreement between the United States and Iran to end their war, and the subsequent fall in oil prices, are good news for central bankers worried that high energy costs will spill over into broader price pressures.
Still, four developed market central banks are in hiking mode already, and several others, including the U.S. Federal Reserve, said this week they stood ready to act if inflation built.
Here's where central banks in the Group of 10 developed economies stand, ranked from the highest policy rate to the lowest.
1/ Australia
Reserve Bank of Australia Policy Actions
The Reserve Bank of Australia has raised interest rates three times this year to 4.35%, the highest in the G10, to head off a global energy shock, fully reversing the amount of cuts it made last year.
It paused this week, saying tighter financial conditions were slowing the economy, though warned it could hike again. Markets see around a 50% chance of a further increase later this year.
2/ Norway
Norges Bank's Stance on Inflation
Norway's central bank held rates steady at 4.25% on Thursday but said inflation was too high and that borrowing costs would likely be raised again later this year.
The Norges Bank raised its policy rate in May, and annual core inflation rose unexpectedly that month to 3.4%.
3/ Britain
Bank of England's Response to Inflation
The Bank of England kept interest rates on hold at 3.75% in June, as it has since the start of the U.S.-Iran war, given the unclear strength of increased inflation pressures.
The BoE said it was too soon to declare the inflation threat over, but just two of its nine rate-setters voted to hike at Thursday's meeting.
Inflation Projections and Market Expectations
It expects inflation to rise above 3.25% in the final quarter of this year, up from 2.8% in May, though this is a smaller increase than it projected in April under two of its three main scenarios. Markets see at least one hike this year.
4/ United States
Federal Reserve's Latest Moves
Kevin Warsh's era as Federal Reserve chair began with a jolt on Wednesday. While the Fed held rates steady as expected, new projections and comments from Warsh blindsided traders and led markets to price in a possible hike within months.
The Fed produced a stripped down monetary policy statement, but quarterly projections showed nine Fed officials now anticipate a hike in rates by end-2026.
Market Reactions and Future Outlook
Markets see a good chance of a rate increase in September, and see a second hike before the year is out as more likely than not. That caused a sharp jump in short-term bond yields and the dollar.
5/ New Zealand
Reserve Bank of New Zealand's Position
The Reserve Bank of New Zealand does not meet until early July, when markets see an increase in the current 2.25% rate as likely, with more later in the year.
It is in a tough spot. Inflation is expected to push well above its 1% to 3% target band, while the jobless rate is at a decade high.
6/ Canada
Bank of Canada's Interest Rate Policy
The Bank of Canada held its policy rate at 2.25% last week saying there were few signs that higher energy costs were spilling over into broader inflation.
It is expected to stay on hold in the coming months. Recent figures showed inflation remained within the central bank’s 1% to 3% target band.
7/ Euro Zone
European Central Bank's Rate Hike
The European Central Bank raised rates for the first time in nearly three years last week in the hope of curbing inflation before a surge in energy costs triggered by the Iran war spreads more broadly across the euro zone economy.
The well-telegraphed move took the benchmark deposit rate to 2.25%. Traders price in one more 25 bps hike by year-end.
8/ Sweden
Riksbank's Policy and Inflation Assessment
Sweden's central bank kept its policy rate unchanged at 1.75% as expected on Wednesday.
While the Riksbank said the likelihood that rates will be raised later this year had increased as the war in the Middle East had increased inflationary pressure, it said underlying inflation was low.
9/ Japan
Bank of Japan's Landmark Rate Increase
The Bank of Japan raised rates to 1%, a 31-year high, on Tuesday in a landmark step in its policy normalisation and signalled readiness to tighten further to tame price pressures.
Further rate hikes could help support the weak yen, though Japanese rates remain low compared to most peers.
10/ Switzerland
Swiss National Bank's Approach to Policy Rates
At 0%, the Swiss National Bank has the lowest policy rate in the G10, and it left rates unchanged on Thursday saying price pressures over the medium term had barely changed despite a recent uptick in inflation stoked by higher fuel costs.
Swiss policymakers have been grappling with the strength of their currency, but they are wary of returning to negative rates, and say they are ready to intervene in markets to soften the Swiss franc if needed.
(Reporting by Alun John; editing by Dhara Ranasinghe and Alex Richardson)
