Central banks around the world raced to raise interest rates, following the US Federal Reserve’s decision to raise rates Wednesday by 0.75 points.
In a series of meetings of central bank leaders in many countries, interest rate increases were approved by margins greater than expected, prompting analysts to describe this day as “Big Thursday”, according to a report published by the newspaperThe Wall Street Journal“.
The Central Bank of Britain increased interest rates, Thursday, for the seventh time in a row, which caused the pound to drop once morest the dollar to its lowest level in 37 years.
Despite the pressures caused by inflation, countries such as Japan did not raise interest rates, and they took other measures to reduce inflationary pressures, by intervening in the currency markets by selling the dollar and buying the yen, in the first such measure in 24 years.
The report pointed out that many leaders of monetary agencies suffer from a “public confidence crisis” following arguing that the inflationary rises will be temporary, but they are now finding that they must speed up the increase in interest rates to keep pace with the rise in prices.
For its part, the Swiss Central Bank raised interest rates by a percentage point, which will increase interest rates for the first time since 2014, according to the newspaper.
In Turkey, where inflation exceeded 80 percent in August, its central bank cut interest rates to 12 percent instead of 13 percent, which caused a new devaluation of its currency.
Economic data indicate that there are preliminary indications of a slowdown in inflation in Britain, while the figures reveal an “economic slowdown” in the United States, but there is low unemployment and activity in the labor market.
Federal Reserve Chairman Jerome Powell warned Wednesday that the process of stamping out inflation will involve some pain.
The price hike is putting pressure on American families and companies, and it has become a political burden on US President Joe Biden, who faces the midterm congressional elections in early November, according to an AFP report.
But a contraction of the world’s largest economy would be an even more damaging blow to Biden, to the credibility of the Federal Reserve and to the world at large.
Powell made clear that officials will continue to act aggressively to calm the economy and avoid a repeat of the 1970s and early 1980s, the last time inflation got out of control in the United States.
It required strict measures in the midst of a recession to bring down prices, and the Federal Reserve is not ready to give up the credibility it has gained in fighting and overcoming inflation.
Inflation is a global phenomenon, exacerbated by the Russian war in Ukraine and the disruption of global supply chains following the Covid shutdowns in China.
