Central banks in Japan, the US and Europe all raise interest rates for the first time in about 20 years due to inflation concerns
Against the backdrop of the turmoil in the Middle East and the supply shock, the Bank of Japan, the Federal Reserve, and the ECB have all decided to raise interest rates in unison.
Quick Look
- Central banks in Japan, the United States, and Europe have all decided to raise interest rates for the first time in about 20 years, out of concern for accelerating inflation amid the Middle East crisis.
- A new era in which supply shocks become permanent is becoming a reality.
AI-generated summary
Why It Matters
Central banks in Japan, the United States, and Europe raised interest rates almost simultaneously for the first time in about 20 years. In the background, there are inflationary pressures and supply shocks originating from the Middle East.
Central banks in Japan, the United States, and Europe all moved to raise interest rates. This is due to concerns about accelerating inflation caused by the Strait of Hormuz crisis in the Middle East. This is the first time in about 20 years that the world's three major central banks have raised interest rates at the same time. Due to the reverse flow of globalization, an era in which constant supply shocks will permanently bring inflationary pressure and interest rates will remain high is becoming a reality.
Press conference after the monetary policy meeting on the 18th, which decided to raise interest rates to 1.25%. Bank of Japan Governor Kazuo Ueda pointed out that the interest rate hikes in Japan, the US, and Europe overlapped, saying, ``In some ways, they are responding to a common factor.'' He cited inflationary pressures originating from the Middle East and the strength of movements related to artificial intelligence (AI).
In the mid-2000s, before the Lehman Shock, when interest rates were raised one after another, global demand was rising due to the rise of emerging countries such as China that joined the World Trade Organization (WTO), and a housing bubble was expanding in the United States.
The US Federal Reserve (FRB) started raising interest rates in 2004, and the European Central Bank (ECB) started raising interest rates in 2005. The Bank of Japan moved to lift interest rates from zero in 2006, spurred by global economic growth, but after the bursting of the US housing bubble, developed countries fell into long-term stagnation.
This is the first "simultaneous three-pole interest rate hike" since then. What the world is facing is not so much the rise in demand as in the past, but rather a series of shocks that disrupt the supply of energy, raw materials, and goods, and the resulting persistent inflation.
Supply shocks are no longer temporary “noise”
ECB President Lagarde raises interest rates...
What to Watch
AI outlook — possibilities, not facts
Interest rates remain high
Likely · Within months
Open Questions
- How long will the supply shock last?
- What impact will monetary tightening in Japan, the US, and Europe have on the economy?
