Central Banks Unite Against Inflation with Rate Hikes

Major central banks took action on monetary policy in their September meetings. The US Federal Reserve raised interest rates for the first time in over three years, increasing its benchmark rate by 25 basis points to a range of 3.75-4.00%. The Fed signaled it may raise rates again this year amid persistent inflation and soaring oil prices. It aims to bring inflation back to its 2.0% target more quickly.

The Federal Open Market Committee's forecasts show that most officials believe another interest rate hike is possible this year, but no further rate hikes are expected in 2027 or beyond. The Fed also forecasted the overall personal consumption expenditure price index at 3.7% and core PCE at 3.4%, both higher than its June forecast.

The European Central Bank raised its policy interest rate by 25 basis points, aiming to achieve its long-term inflation target of 2.0%. The ECB stated that the economic outlook remains uncertain due to rising inflation risks and slowing GDP growth. However, it believes the Eurozone economy has been more resilient than expected in recent months.

The Bank of Japan raised its benchmark interest rate from 1.00% to 1.25%, aiming to stabilize inflation around 2.00%. The US dollar weakened significantly against the Japanese yen. The Bank of England decided to keep its policy interest rate unchanged but slowed the pace of its balance sheet reduction.