Posted: 21:50, 1 May 2022 | Updated: 21:50, 1 May 2022
The world’s top central banks appear ready for an aggressive round of interest rate hikes in a “show of strength” as they step up the fight against inflation. At the last sign that the pandemic era of cheap money is over, the Bank of England and the Federal Reserve are widely expected to raise borrowing costs once again this week. Having raised interest rates for the first time in three years in March by 0.25 percentage points, the Fed could raise them by 0.5 percentage points on Wednesday. Under pressure: With the cost of living affecting households, inflation in the UK is at a high of 30 per cent at 7 per cent And some believe the Bank of England could follow suit with a similarly large rate hike on Thursday – although a smaller rise from 0.75 per cent to 1 per cent is more likely. This would still be the highest interest rate in the UK since early 2009. It was just 0.1 per cent last December. Although interest rate hikes of 0.5 percentage points are rare, they are not unprecedented. The Reserve Bank of New Zealand and the Bank of Canada made similar increases last month and look set to do so again in the coming weeks. Analysts say central bankers may want to portray such coordinated aggression as a “show of strength” as they step up their fight against inflation. With the cost of living affecting households, inflation in the UK is at a 30-year high of 7%, while it is at a 40-year high of 8.5% in the US. Simon French, an economist at Panmure Gordon, said: “Some central banks have abandoned a gradual approach.
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