Cairo - Mubasher: The British Financial Times reported in its Sunday morning issue that the series of large interest rate increases approved by the Federal Reserve in the United States has exacerbated pressure on central banks around the world and prompted them to follow suit to face high inflation and a rise in value. dollar .
And the newspaper revealed, in an analysis it conducted and published on its official website, that central banks are now looking, more than at any other time over the current century, to approve large interest rate hikes of 50 basis points or more, which highlights the challenges of addressing price pressures and high US interest rates. According to Asha .
She stated that the Fed's hikes, including its first 75 basis point increase since 1994, and concerns about the health of the global economy, supported the US dollar against almost all currencies. Since many commodities are priced in dollars in international markets, a strong dollar adds to inflationary pressures by increasing the cost of imports, creating what analysts describe as a "reverse currency war" among monetary policymakers .
“We are seeing crazy hikes in interest rates, which is the opposite of what we have seen in the last decade,” said James Athey, a bond portfolio manager at Aberdeen, an investment firm. “Right now, the last thing anyone wants is a weak currency.”
The newspaper highlighted: that monetary policy makers in Canada became the last to surprise the markets with a larger-than-expected rise in interest rates, and chose to increase 100 basis points last Wednesday, the largest ever by the Group of Seven economies since 1998, while the Philippines raised interest rates by an amount 75 basis points the next day .
In the three months to the end of last June, 62 interest rate increases of at least 50 basis points were made by 55 central banks as the Financial Times monitored, and another 17 large increases of 50 basis points or more have been made in July so far. It represents the largest number of large movements in interest rates at any time since the turn of the millennium and exceeds the most recent cycle of global monetary tightening during the global financial crisis .
Central banks in countries highly exposed to foreign exchange market pressures have increased interest rates by particularly large amounts, Hungary has stood out, with its key rate rising by 385 basis points in just two months, as the country faces double-digit inflation and currency depreciation against the dollar .
"The exchange rate component is important in making monetary policy decisions for many emerging markets," Jennifer McKeown, head of global economics service at Capital Economics, said in exclusive statements to the Financial Times. For the Ukrainian crisis in addition to the general environment of lack of confidence among investors .
However, this trend affected the central banks of richer countries as well, the central bank of South Korea decided the first increase of 50 basis points this July, and in this regard, McKeown added, that central banks need to move quickly to get rates out of the region “stimulus,” “particularly in an environment where wage growth and inflation expectations are rising and the risk is that no action will allow wage price spirals to develop negatively .