Terrifying inflation has forced many central banks around the world to take even tougher measures to counter it.
With the emergence of increasing indications that the horror of inflation that has spread recently will not disappear soon amid supply and supply chain crises, high commodity prices, and increased demand, many central banks have begun to withdraw the emergency monetary stimulus packages that they launched to confront the stagnation of the economy due to the spread of the general Corona pandemic. the past.
As the US Federal Reserve prepares to slow the pace of its asset-purchase program, its peers in Norway, Brazil, Mexico, South Korea, and New Zealand have taken real steps in this direction by raising interest rates in an attempt to reduce spending in their countries.
Those steps were backed up by a report issued by the International Monetary Fund last Tuesday in which it advised central banks, such as the Federal Reserve in America, that they should be prepared to tighten policy in the event that inflation gets out of control.
Bank of England on the approach
This atmosphere prompted many decision-makers to warn of the existence of an economic environment characterized by stagflation, and in this context, Hugh Bell, the new chief economist at the Bank of England, said last week, “The balance of risks is currently tending towards growing concern about expected inflation rates, It appears that the current strength of inflation will last longer than we previously expected.”
For his part, the Deputy Governor of the European Central Bank, Luis de Guindos, warned last month that the inflation rate is expected to reach its peak during the month of November at about 3.4% or 3.5%, and stressed the need to be careful in anticipation of a sudden rise in the inflation rate, and pointed out that That wages so far have not shown signs of rising.
With attention turned to what the US Central will do during its meeting next November, Jerome Powell, Federal Reserve Chairman, took a step towards reducing the massive support package that was put in place to confront the pandemic.
During the past month, Powell said that the central bank of the United States may begin to ease its monthly purchases of bonds in November, or what is known as the asset purchase program, and added that this comes at the top of the bank’s priorities, in addition to persuading Americans that it will not lose sight of the inflation rate that exceeds the numbers. expected.
The European Central is getting ready
As for the European Central Bank, it is also preparing for a major update on its policy in December, and monetary policy makers led by Christine Lagarde, President of the European Central Bank, have already decided to slow the purchase of bonds approved in the pandemic response program in the last quarter of the year, which costs 1.85 trillion euros. ($2.2 trillion), and they may allow this program to expire next March.
With UK inflation set to rise more than double the Bank of England’s 2% target by the end of the year, speculation is growing that the Bank of England will be among the first of its peers in the Group of Seven to begin to undo its interest rate cuts during the year. pandemic period.
Canadian Central Bank
While the Central Bank of Canada reduced the pace of government bond purchases three times over the past year, and is expected to reduce asset purchases again this month to one billion Canadian dollars of Canadian government bonds per week, amid anticipation of the results of its next meeting on October 27.
The Bank of China is not far away
The Central Bank of China also began a gradual reduction in the movement of credit expansion in order to control financial risks during the current year, as soon as the economic recovery from the impact of the Corona pandemic progressed at a rapid pace.
However, evidence of the weak performance of the Chinese economy during the second half of the year prompted the authorities to suddenly change direction last July by reducing the amount of money that banks held in reserve balances, in part to help banks meet their liquidity needs, but also to increase lending to small businesses that Affected by soaring commodity prices.