The Pace of Rate Hikes by Central Banks Typically Slows in October

Four of the ten most frequently traded currencies’ central banks upped their benchmark interest rates. Over the last month, the currencies increased by a combined total of 200 basis points. While this was happening, the central banks in charge of the other six currencies kept their exchange rates unchanged.

The Bank of Canada, Reserve Bank of Australia, Reserve Bank of New Zealand, and European Central Bank increased lenders’ interest rates.

Rate Hikes Were at Their Highest in September

The benchmark interest rates of eight of the same ten central banks, however, were increased. This happened in September, with a raise of 550 basis points. The total rate increases that the G10 central banks conducted in 2022 are now 2,050 basis points. This was the highest ever recorded compared to the previous 20 years.

JPMorgan economist Marko Kolanovic offered his thoughts on the subject. In a letter to clients, he said that it is likely that the pace of central bank tightening has peaked. Recent clues have recently given the financial markets solace. The signs led to the Federal Reserve in the United States and other major central banks pausing their rate increases.

Jean Boivin, head of the BlackRock Investment Institute, offered his thoughts on the subject. Any optimism on that front, he suggested, could be premature.

Boivin, from the most significant asset management company in the world, made some remarks on Monday in a weekly outlook report. They see central banks as heading toward too strict policies, he said. Boivin made the statement in light of the present monetary situation.

Boivin thinks that the Federal Reserve will stop raising interest rates for a specific reason alone. That will be the sole justification when it becomes clear that these hikes would harm the economy. Rates have already risen to what we believe are levels that might lead to recessions.

The Momentum Slowed Down in October

Five of the Eighteen central banks raised interest rates in October by a total of 325 basis points. Less than half of September’s total was represented by this. Additionally, it is much less than the monthly statistics of 800 bps or more for both June and July.

Even though there are significant differences in short-term trends, the effective interest rates of Chile, Colombia, Israel, South Korea, Colombia, and Indonesia have all recently climbed. Israel’s central bank has predicted that rates would rise to levels higher than the current ones.

Although, Chilean policymakers have said that there won’t be any additional rate increases in the near term. Turkey was an anomaly, surprising the markets in the interim. More than 150 bps lowered the benchmark rate in Turkey.

Even though there was over 80% inflation, this still occurred. Tayyip Erdogan, the president of Turkey, is widely recognized for supporting lower interest rates.

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