Central banks continue to respond to rising inflation with hawkish policies.

📌 As widely anticipated, the Federal Reserve carried out another interest rate increase of 25bps on Wednesday, marking its 11th rate hike in the last 12 meetings. The move brought the benchmark overnight interest rate to a range between 5.25% and 5.50%, with the decision being attributed to persistent inflation levels.

📌 Moreover, the European Central Bank (ECB) has announced another hike for the ninth consecutive time, implementing a 25-bp increase to 3.75%. This decision comes as the bank faces the challenge of fighting off a historic surge in prices due to stubborn inflation and a growing risk of recession. The ECB is concerned that the surge in inflation could be perpetuated by wage increases in a tight job market.

📌 Since July 2022, the ECB has raised borrowing costs by 425bps, with interest rates reaching their peak since 2000. Despite the series of rate hikes, the central bank is not ruling out the possibility of further tightening in the future.

Source: Investing