While the financial world waits for the Federal Reserve to start reversing its ultra-loose policy stance, recent moves by a clutch of other central banks signal the days of pandemic-era accommodation are already numbered even as COVID-19 continues to impede smooth economic recoveries around the world.
South Korea’s central bank on Thursday raised its benchmark interest rate by a quarter of a percentage point to blunt rising financial stability risks posed by a surge in household debt, becoming the first major monetary authority in Asia to do so since the coronavirus broadsided the global economy 18 months ago.
Even before the rate hike in South Korea, though, central banks in Latin America and eastern and central Europe had begun lifting interest rates this year to beat back inflation that is building on the back of currency fluctuations, global supply chain bottlenecks and regional labor shortages.
And larger-economy central banks also are getting into the swing. The Bank of Canada has already cut back on its bond purchases and could proceed to raise borrowing costs in 2022, and the Reserve Bank of New Zealand (RBNZ) is expected to lift rates by the end of this year despite balking at an expected hike last week in the face of a snap COVID-19 lockdown.