Many Central Banks Raised Their Key Interest Rate During May — Here’s a Tally
May 30, 2022
Accelerating inflation has been a global problem, and a result has been a scramble by central banks around the world to undo stimulus related to the Covid-19 pandemic. In a number of cases, rate now exceed their pre-pandemic levels. This update looks only at central banks whose interest rates were raised this month and compares the increased levels to those in the onset of the pandemic in February 2020.
Among the Group of Seven bloc of industrialized countries, both the Fed and Bank of England raised rates, and the Bank of Canada is likely to bump its rate up 50 basis points tomorrow. The 1.0% federal funds rate target is still 75 basis points below the pre-pandemic level, and the Bank of England key rate of 1.0% exceeds its early-2020 level by 25 basis points. The likely half percentage point central bank hike in Canada to 1.5% would leave the rate level still 25 basis points south of its pre-pandemic level.
Other countries where central bank rates were raised during May include
- Ghana, announced just today. At 19%, the rate now exceeds the pre-pandemic level of 16% by 300 basis points.
- Nigeria, where an increase of 150 basis points to 13.0% was the first hike in nearly six years and leaves the rate level still a half percentage point lower than just prior to the pandemic.
- Kenya, where a 50-bp hike to 7.5% was also an initial increase and to 75 basis points below the pre-pandemic level.
- South Africa: A 50-bp increase there this month was the third rise this year. The current 4.25% level is still 1.5 percentage points below the pre-pandemic level.
- South Korea: A 25-bp increase was also the third of 2022, and the resultant 1.75% level exceeds the pre-pandemic level of 1.5%.
- Brazil‘s Selic rate was hiked 100 basis points in may to 12.75%. A tightening cycle in Brazil had covered much ground by the start of 2022. The pre-pandemic level was 4.25%.
- Czech Republic: The 75-bp size of the CNB’s rate hike in May was larger than the prior increase, and the 5.75% new rate level is 350 bps above its pre-pandemic level.
- Poland: After a 75-bp rate hike in May to 5.25%, such was 375 bps higher than just prior to the pandemic.
- Iceland: A full percentage point rate hike in May to 3.75% catapulted the rate 75 bps above its pre-pandemic level.
- Mexico: There have now been two 50-bp increase in 2022, putting the level at 7.0% and 25 basis points shy of its pre-pandemic level.
- Serbia: May’s rate hike of 50 basis points to 2.0%, 25 bps below its pre-pandemic level.
- Israel: A hike of 40 bps in May to 0.75% has more than made up cuts early in the pandemic.
- Romania: The central bank was raised 75 basis points in May to 3.75%, which is above the 2.5% pre-pandemic level.
- Pakistan‘s central bank rate was raised 150 bps to 13.75% and is now 50 bps above its pre-pandemic level.
- Australia: The RBA implemented its first rate hike since late 2010 this month. At 0.35%, the rate is still 40 basis points south of its pre-pandemic level.
- New Zealand‘s official cash rate was increased 50 basis points during May and at 2.0% is twice as high as its 1.0% pre-pandemic level.
- Argentina: When it’s raining inflation around the world, Argentina gets hail. The CPI inflation rate in April was at a 30-year high of 58%, and the 7-day Leliq interest rate was increased by 200 basis points this month to 49%. That’s up from 38% at the start of this year but below 60% around the end of 2019.
- Saudi Arabia: A 25-bp hike to 1.75% this month left such 50 basis points below its pre-pandemic level.
- India: A tightening cycle began this month. The 4.40% rate level remains 70 bps below its pre-pandemic level.
- The Philippines: May also saw an initial central bank rate hike in this country’s instance. The increase was only 25 basis points in size and put the new level at 2.25% versus a 4.0% pre-pandemic level.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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