Charting the Global Economy: Interest-Rate Hikes May Be Coming

Monetary policymakers from the US to Europe to Japan all held the line on interest rates this week as they assess the economic fallout from a war-driven spike in energy costs.Author of the article:You can save this article by registering for free here. Or sign-in if you have an account.(Bloomberg) — Monetary policymakers from the US to Europe to Japan all held the line on interest rates this week as they assess the economic fallout from a war-driven spike in energy costs.Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.But that could soon change. Money markets are betting on rate hikes by the European Central Bank this year, with the first as soon as next month. The Bank of England shifted to a more hawkish stance and a rate hike is still on the table for the Bank of Japan.Meanwhile in North America, Federal Reserve officials signaled one rate cut this year, while Bank of Canada policymakers held rates steady and noted they would look beyond the war’s immediate inflation impact as officials focus on downside growth risks.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Central bankers around the world are in a tough spot. While rapidly soaring energy costs risk fueling higher inflation, they could also suppress business activity and household consumption.Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy, markets and geopolitics:WorldAside from the aforementioned monetary policy decisions, central banks in Taiwan, Sweden, Switzerland, Indonesia, Armenia, Ukraine, the Czech Republic, Uzbekistan, Morocco and Paraguay kept interest rates unchanged. Brazil, Russia and Ghana lowered borrowing costs. Australia raised rates for a second straight meeting, while Iceland also tightened policy.An Iranian missile strike on the Ras Laffan complex in Qatar inflicted extensive damage to the world’s largest liquefied natural gas plant. Oil loadings on Saudi Arabia’s west coast, a vital export route for the country amid the closure of the Strait of Hormuz, were briefly halted by an attack. European gas futures surged to more than double their pre-war level, and Brent crude topped $119 a barrel at one point on Thursday.Each week the world’s largest liquefied natural gas plant remains shut, the world loses the equivalent of enough energy to power Sydney’s homes for an entire year. Buyers are now bracing for an outage that could ripple through markets for years.EuropeECB policymakers would be ready to raise interest rates as soon as their next meeting should fallout from the war in Iran push inflation too far above target, according to people familiar with the situation. April’s decision won’t feature updated forecasts, which may deter some officials from committing to policy action. Some of the people therefore suggested June as a more likely juncture to increase borrowing costs.The BOE said it “stands ready to act” against a surge in inflation triggered by war in the Middle East, prompting traders to ramp up bets on an interest-rate hike as soon as next month. Officials voted unanimously to leave rates unchanged at 3.75% in their first decision without any dissent in four and a half years. Minutes from the meeting pointed to a major hawkish shift by the panel, while the Iran conflict disrupts production in the world’s most important oil-producing region.Moscow rushed to load crude onto tankers to take advantage of soaring oil prices triggered by Iran’s effective closure of the Strait of Hormuz, and a US tariff waiver that permits buyers to purchase those barrels without fear of sanctions.USThe Federal Open Market Committee voted 11-1 to hold the benchmark federal funds rate in a range of 3.5% to 3.75%. In economic forecasts released with their decision to hold rates steady, officials raised their inflation outlook for 2026 to 2.7% from 2.4%.

Chair Jerome Powell emphasized that to resume lowering rates, officials would have to see progress in reducing inflation, especially goods inflation that has been boosted by tariffs.US wholesale inflation unexpectedly accelerated in February from a month earlier, reflecting higher costs for goods and services prior to the war in Iran. More than half of the increase in the PPI last month was due to a 0.5% advance in services costs. That includes rising costs for traveler accommodation, food wholesaling and investment services.The idea that spending by rich Americans is driving an ever greater share of economic growth, while people on the low end pull back, has become a staple of economic research and corporate planning. Some analysts push back — arguing that the trend has been exaggerated, or even made up completely.AsiaBOJ Governor Kazuo Ueda kept the possibility of an April interest rate hike on the table after the central bank left policy unchanged Thursday amid uncertainty over the impact of the Middle East conflict on the economic outlook. Surging global oil prices stemming from the war with Iran have put China on the cusp of exiting a record streak of deflation well ahead of schedule. But it’s not clear if the economy is better off. An official exit from economy-wide deflation would be a big moment for China. Since the country’s Covid reopening in late 2022, a manufacturing glut and sluggish consumer demand have led to intense price wars that eroded company profits and slowed wage growth.Emerging MarketsChile’s economy expanded more than expected in the fourth quarter, as expectations for market-friendly policies under President José Antonio Kast boosted sentiment before the Iran war stoked global uncertainty.A scorching rally by Ghana’s main stock index since the start of the Iran war tops a small cohort of equity markets that have gained amid a wider global selloff. The gains reflect a shift in foreign investor sentiment toward the oil-rich country, which as recently as 2022 defaulted on its sovereign debt. —With assistance from Alice Atkins, Priscila Azevedo Rocha, Anthony Di Paola, Toru Fujioka, Sumio Ito, Julian Lee, Ruth Liao, Yujing Liu, Fiona MacDonald, Matthew Malinowski, Jonnelle Marte, Alessandra Migliaccio, Ray Ndlovu, Emele Onu, Jana Randow, Tom Rees, Catarina Saraiva, Zoe Schneeweiss, Mark Schroers, Stephen Stapczynski, Ott Tammik and Charlie Zhu.Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.