A summary of the world's major central banks' interest rate hikes and interest rate trends this year

The central banks of the Eurozone and South Korea have raised interest rates twice this year. The U.S. Federal Reserve and the Bank of Japan will hold decision-making meetings next week. The market is paying attention to interest rate trends. The following is a summary of the interest rate hikes by major central banks around the world this year.

● United States

The 12 voting members of the Federal Open Market Committee (FOMC) of the Federal Reserve Board of Governors (Fed) will announce their decision at 2 pm on the 16th (2 am on the 17th, Taiwan time) after the two-day meeting. This will be the 6th regular meeting of the Federal Reserve this year.

In July this year, the Federal Reserve, as widely expected by the market, kept its benchmark interest rate unchanged at a range of 3.50% to 3.75%, marking the fifth consecutive time on hold. However, 3 of the 12 FOMC members voted against, arguing that interest rates should be raised by 1 point (0.25 percentage points) at that meeting.

The August Consumer Price Index (CPI) released on the 11th of this month showed that the annual growth rate was flat at 3.4%, but it was still well above the long-term target of 2% set by the Federal Reserve. Driven by August CPI data, market expectations for the Federal Reserve to raise interest rates by 1% on the 16th have risen sharply.

Since the beginning of his second term in office, U.S. President Donald Trump has launched an unprecedented attack on the independence of the central bank, demanding interest rate cuts to stimulate economic activity.

Kevin Warsh, who was nominated by Trump, took over as Fed chairman in May and has chaired two FOMC meetings. Whether the Fed will raise interest rates next week to combat inflation or maintain the status quo, as the White House prefers, analysts believe this is the first real test since Washer took office.

● Europe

On the 10th of this month, the European Central Bank (ECB), the central bank of the Eurozone, raised its benchmark interest rate by 1% to 2.5% in response to renewed conflicts in the Middle East pushing up energy costs and increasing inflationary pressure.

This is the second time the European Central Bank has raised interest rates this year. In response to the energy shock caused by the U.S.-Iran War, the European Central Bank announced its first interest rate increase since 2023 in June.

The European Central Bank kept its inflation forecast for this year unchanged at 3%, but slightly raised its forecast for next year to 2.5%.

● Japan

The Bank of Japan (BoJ) will hold a monetary policy decision-making meeting from the 17th to the 18th. Japanese media reported that the Bank of Japan is expected to raise the policy interest rate again at the meeting, from the current 1.0% to 1.25%.

If the decision is made, it will be the first interest rate hike in three months after June this year, and the fastest since the interest rate hike cycle started in March 2024.

In the past, the Bank of Japan generally maintained a pace of raising interest rates about once every six months. This time it raised interest rates again only after two meetings and three months, indicating that the pace of normalization of monetary policy is accelerating amid rising inflationary pressure.

A major factor prompting the Bank of Japan to accelerate interest rate hikes is the risk of price increases brought about by crude oil prices and the depreciation of the yen. At a press conference at the end of July, Bank of Japan President Kazuo Ueda named the rise in crude oil caused by tensions in the Middle East, the expansion of artificial intelligence (AI)-related demand, and the depreciation of the yen as three major risks that may further accelerate Japan's inflation.

● South Korea

On the 27th of last month, the Bank of Korea's (BOK) Banking, Financial and Monetary Committee decided to raise the benchmark interest rate from 2.75% to 3.00%, an increase of 0.25 percentage points.

This is the second consecutive month that the Bank of Korea has raised its benchmark interest rate since July 16. July was the first interest rate increase in South Korea since January 2023.

It is quite rare for South Korea to raise interest rates continuously. Previously, it only raised interest rates twice in a row from July to August 2007, twice in a row from November 2021 to January 2022, and seven times in a row from April 2022 to January 2023. This is the fourth time in history.

Yonhap News Agency reported that since the political uncertainty following the emergency martial law, the sluggish domestic construction boom, and the impact of reciprocal tariffs by the United States and other negative factors, it was imperative to implement monetary easing policies at that time. However, last month, the economy rebounded rapidly due to booming semiconductor exports, and the situation in the Middle East made prices unstable. The Bank of Korea restarted raising interest rates after a lapse of three years and six months.

● UK

The Bank of England has kept its benchmark interest rate unchanged at 3.75% so far this year, but warned that the war between the United States and Iran has pushed up energy prices and inflation may rise in the future.

Bank of England Governor Andrew Bailey said at the end of July: "The global environment looks more uncertain and more likely to push up inflation, while the domestic situation is generally more benign in terms of inflation prospects, so it is appropriate to keep interest rates unchanged."

He also pointed out: "Inflation is declining faster than we expected, but the conflict in the Middle East continues to cause high and volatile energy prices, which will cause inflation to rise again later this year."

● Australia

Due to soaring energy prices, Australia's central bank, the Reserve Bank of Australia, has changed its easing policy and has raised interest rates three times this year. The current interest rate is 4.35%.

The Reserve Bank of Australia last raised interest rates in May, announcing that it would raise the Australian dollar cash rate by 25 basis points to 4.35%, and said that economic pressure mainly stems from turmoil in the Middle East.

The Reserve Bank of Australia said in a statement at the time: "As expected, developments in the Middle East are having an impact on inflation...Rising fuel prices are adding to the burden of inflation, and there are signs that this may lead to subsequent increases in prices for a variety of goods and services."

● Indonesia

The Bank of Indonesia has raised interest rates by a total of 100 basis points this year, raising the benchmark interest rate to 5.75%.

The Bank of Indonesia held a monetary decision-making meeting in May and announced that it would raise the benchmark interest rate by 50 basis points to 5.25%. In June, it raised interest rates twice, by 25 basis points each, ultimately pushing the interest rate to 5.75%.

The Bank of Indonesia explained that the interest rate increase was "to strengthen the stability of the Indonesian rupiah exchange rate in response to the impact of violent global fluctuations caused by the war in the Middle East."

● Brazil

The Monetary Policy Committee of the Central Bank of Brazil (Copom) decided in August to cut the benchmark interest rate by 25 basis points to 14% in response to cooling inflation and a gradual slowdown in economic activity. This is the fourth consecutive interest rate cut in Brazil, Latin America's largest economy.

In addition, Brazil's annual inflation rate in August was lower than expected, and consumer prices recorded the largest monthly decline in four years, further strengthening expectations that the central bank will cut interest rates again next week.

Liam Peach, senior emerging markets economist at Capital Economics, said: "Despite the sharp rise in oil prices in recent weeks, the latest inflation figures are still weak, coupled with the weakening economic momentum, these factors support the Brazilian central bank to cut interest rates again at next week's meeting, possibly from 14% to 13.75%."