Central Banks Unleash Rate Hikes as Inflation Fears Intensify

Central banks around the world have raised interest rates to combat inflation, sending global stocks and bonds plummeting. The Bank of Japan hiked rates to a 31-year high of 1.25%, while the Federal Reserve raised rates for the first time in three years and adopted a more aggressive stance on inflation.

The Japanese yen weakened sharply against the dollar, down 2.6% this week, despite expectations that the Bank of Japan would raise rates faster. BOJ Governor Kazuo Ueda said the bank's policy focus has shifted to underlying inflation approaching 2%, with most board members believing policy is still accommodative.

Chris Scicluna, head of research at Daiwa Capital Markets Europe, warned that the yen could weaken sharply again, further exacerbating inflation. He predicted another rate hike to 1.50% before the end of the year 'should seem a decent bet'.