Central Bank Interest Rates: Still More Increases Than Declines

September 12, 2008

Although global growth has slowed with several economies in recession, the scorecard of central bank rate changes so far this month shows many more increases than declines, and no rate reductions are likely next week.  Central bank rates have been raised by 75 basis points to 13.75% in Brazil, 50 basis points to 8.25% in Chile, 25 basis points to 9.25% in Indonesia, 25 basis points to 6.5% in Peru and 25 basis points to 4.75% to 4.75% in Sweden.  The only cuts this month have occurred in neighboring New Zealand (-50 basis points to 7.5%) and Australia (-25 basis points to 7.0%), while central bank meetings in Euroland, Britain, Canada, and South Korea ended with decisions to keep rates steady.  The last changes in Euroland and South Korea were increases, and the Banks of Canada and England have not sliced rates further since April because of mounting inflation.  Policy meetings next week at the Fed, Bank of Japan, and Swiss National Bank will leave rates unchanged.  There are also policy meetings scheduled in Mexico, Turkey, Hong Kong and Colombia, and no decreases are probable in those instances, either.  If commodity prices do not turn back up, overall global inflation will be settling back, paving the way for greater downward movement in central bank interest rates.  But that time is not yet here, and such will depend on the right conditions being met.


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