Hike rates

Central banks to hike rates in ‘show of force’ against runaway inflation

The world’s major central banks appear poised for an aggressive series of ‘show of force’ interest rate hikes as they step up the fight against inflation

The world’s major central banks appear poised for an aggressive series of interest rate hikes in a “show of force” as they step up the fight against inflation.

In the latest sign that the pandemic era of cheap money is over, the Bank of England and the Federal Reserve are expected to raise borrowing costs again this week.

After raising rates for the first time in three years in March by 0.25 percentage points, the Fed could raise them another 0.5 percentage points on Wednesday.

Under pressure: With a cost of living crisis rocking households, UK inflation hits 30-year high of 7%

And some believe the Bank of England could follow suit with an equally large rate hike on Thursday – although a smaller hike of 0.75% to 1% is seen as more likely.

This would still be the highest interest rate level in the UK since the start of 2009. They were just 0.1% last December. While rate hikes of 0.5 percentage points are rare, they are not unprecedented.

The Reserve Bank of New Zealand and the Bank of Canada implemented such hikes last month and are expected to do so again in the coming weeks.

Analysts said central bankers may wish to portray these coordinated aggressive moves as a “show of force” as they step up their fight against inflation.

With a cost of living crisis rocking households, inflation in the UK hit a 30-year high of 7% compared to a 40-year high of 8.5% in the US.

Simon French, an economist at Panmure Gordon, said: “A number of central banks have moved away from a phased approach.”