Title: Nordic central banks join the 50 bps rate hike club

Jul 04, 2022 03:11AM ET

By: AnalysisWatch

Norway and Sweden joined the ranks of central banks that opted to raise interest rates by 50 basis points, marking the strongest monetary tightening measures in two decades.

The U.S. Federal Reserve raised rates by 75 basis points, and the Swiss National Bank surprised with a half-point hike. That makes the Bank of Japan the only major central bank in the developed world still chanting the "inflation is a passthrough" mantra.

Here's a look at where policymakers stand in the race to curb inflation.

The Federal Reserve took the lead on June 15, raising the federal funds rate by three-quarters of a percentage point to a range of 1.5% to 1.75%.

This came just days after annual inflation in the U.S. hit 8.6%, sending markets into a tizzy over the possibility of an even more aggressive response in the months ahead.

The Fed is also winding down the $9 trillion in assets it accumulated during the pandemic.

The Reserve Bank of New Zealand raised its benchmark interest rate by 50 basis points to 2% on May 25, a level not seen since 2016. This was the fifth consecutive rate hike.

It expects the rate to double to 4% next year and remain at that level until 2024. New Zealand's inflation hit a three-decade high of 6.9% in the first quarter, while the target was 1–3%.

The Bank of Canada raised its policy rate for a second consecutive quarter on June 1, by 50 basis points to 1.5%, and announced it would "act more forcefully" if needed.

With inflation at 6.8% in April, Governor Tiff Macklem did not rule out a hike of 75 basis points or more and said rates could go beyond the neutral 2% to 3% range for some time.

Norway, the first major industrialized nation to embark on a rate hike cycle last year, raised rates by 50 basis points to 1.25% on June 23, completing the largest single hike since 2002.