Global: Higher for Longer
2023-09-28
■ Central banks around the world have started to diverge in their monetary policy direction, with more suggesting that they will stop raising interest rates in September
■ However, there are currently no signs of discussing interest rate cuts, and it is considered premature to shift from tight policies to losing ones
Since September, there have been differences in the direction of monetary policy among countries. The United States has indicated that it will continue to raise interest rates or maintain a high-interest rate policy, but the eurozone has decided to continue raising interest rates but is also considering stopping raising interest rates in the future. In terms of policy decisions, the United States is seen as adopting a ("Hawkish pause") policy, while the eurozone is seen as adopting a ("Dovish hike") policy. Among other major countries, Sweden and Norway have decided to continue raising interest rates, while the UK and Switzerland have shifted from a policy of continuous rate hikes to maintaining policy interest rates unchanged. In June of this year, Australia and Canada announced further rate hikes ahead of the United States and Europe, but now they also maintain policy interest rates unchanged. However, almost all central banks, including the UK and Chinese central bank, have retained the option of further interest rate hikes. It is worth mentioning that Japan has previously made policy revisions, including rumours of lifting negative interest rate policies, but has now reconfirmed its policy of continuing to adopt a loose monetary policy.
The divergence in financial policy is a typical feature of the tightening monetary policy cycle, which transitions from significant or continuous interest rate hikes to gradual interest rate hikes in the context of clear inflation peaks. However, there is currently almost no indication that countries are discussing future interest rate reduction policies.
Looking back, in August last year, Federal Reserve Chairman Powell clarified the "Higher for Longer" policy principle of raising policy interest rates to higher levels and continuing to tighten monetary policy for a longer period of time at the Jackson Hole seminar. Since then, the global tightening of monetary policy has accelerated until September last year. However, at the Jackson Hole seminar in August this year, in stark contrast to last year, although there were no clear guidelines on current monetary policy, the basic principles of the "Higher for Longer" policy were not withdrawn from view of the policy actions of central banks in September, but should be seen as adjusting its operations. Countries are more inclined to extend the tightening cycle of policies rather than accelerate further interest rate hikes, reflecting that as policy interest rates approach neutral levels, central banks are adjusting to maximize the gradual tightening effect that is compatible with their respective domestic economic and inflation conditions. I believe that the time is ripe now, and it is still too early to shift from a tight policy to a loose one.
■ However, there are currently no signs of discussing interest rate cuts, and it is considered premature to shift from tight policies to losing ones
Since September, there have been differences in the direction of monetary policy among countries. The United States has indicated that it will continue to raise interest rates or maintain a high-interest rate policy, but the eurozone has decided to continue raising interest rates but is also considering stopping raising interest rates in the future. In terms of policy decisions, the United States is seen as adopting a ("Hawkish pause") policy, while the eurozone is seen as adopting a ("Dovish hike") policy. Among other major countries, Sweden and Norway have decided to continue raising interest rates, while the UK and Switzerland have shifted from a policy of continuous rate hikes to maintaining policy interest rates unchanged. In June of this year, Australia and Canada announced further rate hikes ahead of the United States and Europe, but now they also maintain policy interest rates unchanged. However, almost all central banks, including the UK and Chinese central bank, have retained the option of further interest rate hikes. It is worth mentioning that Japan has previously made policy revisions, including rumours of lifting negative interest rate policies, but has now reconfirmed its policy of continuing to adopt a loose monetary policy.
The divergence in financial policy is a typical feature of the tightening monetary policy cycle, which transitions from significant or continuous interest rate hikes to gradual interest rate hikes in the context of clear inflation peaks. However, there is currently almost no indication that countries are discussing future interest rate reduction policies.
Looking back, in August last year, Federal Reserve Chairman Powell clarified the "Higher for Longer" policy principle of raising policy interest rates to higher levels and continuing to tighten monetary policy for a longer period of time at the Jackson Hole seminar. Since then, the global tightening of monetary policy has accelerated until September last year. However, at the Jackson Hole seminar in August this year, in stark contrast to last year, although there were no clear guidelines on current monetary policy, the basic principles of the "Higher for Longer" policy were not withdrawn from view of the policy actions of central banks in September, but should be seen as adjusting its operations. Countries are more inclined to extend the tightening cycle of policies rather than accelerate further interest rate hikes, reflecting that as policy interest rates approach neutral levels, central banks are adjusting to maximize the gradual tightening effect that is compatible with their respective domestic economic and inflation conditions. I believe that the time is ripe now, and it is still too early to shift from a tight policy to a loose one.