LONDON, (Reuters) – New Zealand’s central banks raised interest rates Wednesday for the first-time in seven years. It became the second largest developed country to do so and the one to reduce the hefty stimulus that was unleashed after the coronavirus epidemic.

Some central banks believe that the right time is now to tighten as an economy recovers and inflationary pressures rise. Some remain cautious due to the uncertain outlook. This is exacerbated further by COVID-19 variants.

This is a snapshot of where the major central banks are on the road to removing pandemic-era stimuli.

Graphic: Central bank balance sheets, https://fingfx.thomsonreuters.com/gfx/mkt/gdvzyqxgwpw/cbank0610.PNG

1 NORWAY

Norway’s Norges Bank raised its key rate by 25 basis points last month to 0.255%. It forecasts four additional increases before the end of 2022.

This makes Norges Bank one of the largest developed economies to normalize ultra-loose policies – a view that will help Norway strengthen its crown.

Graphic: Norway’s crown rallies on rate-hike outlook, https://fingfx.thomsonreuters.com/gfx/mkt/jnvweymoxvw/NOK0610.png

2/ NEW ZEALAND

New Zealand’s Reserve Bank just raised its cash rates by 25 basis point to 0.5%. It also signalled that further tightening would be done to counter inflationary pressures, and help cool an already hot housing market.

A Reuters poll shows that economists anticipate the benchmark rate reaching 1.50% by next year, and 1.75% by 2023.

Graphic: RBNZ hikes rates, https://fingfx.thomsonreuters.com/gfx/mkt/klvykgaoovg/NZ0610.PNG

3/ CANADA

Tiff Macklem, Governor of the Bank of Canada believes that the economy is getting closer to the point when the central bank won’t need to keep adding quantitative easing stimulus to stimulate the economy.

In April, the central bank slowed asset purchases and cut its weekly net purchase of government bonds by C$2 billion (1.6 billion). This was an increase of C$3 billion. At its October 27 meeting, it is anticipated to reduce this figure to C$1billion.

4/ UNITED STATES

Federal Reserve’s message is simple: It will probably reduce $120 billion in monthly bonds purchases by November, and that rates may rise sooner than expected.

If the Fed moves sooner or later, the job market will still be the key. Friday’s nonfarm payrolls report is being closely watched. While many economists believe the Fed will not raise its rates before 2023 as some predict, others think it might.

“The expectation of a November tapering announcement in November was low. This is our main case. Luigi Speranza is the chief global economist of BNP Paribas Markets (OTC:). We expect the first rate increase in Q4 2022.”

Graphic: Fed, https://fingfx.thomsonreuters.com/gfx/mkt/egpbkyqakvq/Fed.JPG

5/ BRITAIN

Markets are now alerted by a hawkish move last month from the Bank of England, which suggests that interest rates could increase in the fifth largest economy on the planet sooner than expected.

Due to rising gas prices, investors have been selling off British government bonds in large numbers. They are concerned that inflation will increase and accelerate the rate-setting debate.

British economic growth slows unexpectedly in July, and consumers’ price inflation surged to record levels. It surpassed its target of 2% by a wide margin.

According to policymakers, inflation may temporarily exceed 4% this year. The market sees a high chance for a rate increase by February 2022.

Graphic: Britain’s two-year gilt yield, https://fingfx.thomsonreuters.com/gfx/mkt/byvrjlgaxve/gilt0610.png

6/ AUSTRALIA

Australia’s central banking is in the opposite camp to the RBNZ.

The Reserve Bank of Australia (RBA), which held rates at 0.1% for the 11th consecutive month, sounded prepared to maintain them that low for several years.

Although it did reduce its bond-buying program by A$1billion ($727m) to A$4billion per week, bond purchases will continue at the same level at least until February.

7/ SWEDEN

Sweden is also in the dovish group, and has no plans to increase its 0% rate beyond Q3 2024. It did, however, decide last month to stop pandemic-era loans facilities and restore normal collateral provisions by the year’s end. Also, end asset purchases before then.

Riksbank might tighten their policy quicker if inflation persists above the 2% target. This is because inflation could reach 3% or more in the future. However, Governor Stefan Ingves is calm about the prospect. He stated that it’s much easier to deal with an overshoot of inflation than an undershoot.

8. EURO ZONE

European Central Bank made a modest first step in removing emergency stimulus. The bank will cut emergency bond buying over the next quarter.

However, the ECB emphasizes that there is no tapering. Asset purchases in any form will be in place to support long-term inflation for a time.

Last time it raised rates was 2011 but rates are not likely to rise in the future.

Graphic: ECB weekly bond purchases , https://fingfx.thomsonreuters.com/gfx/mkt/egpbkyrgevq/ECB0610.PNG

JAPAN

The Bank of Japan’s cautious approach to exports and output due to supply shortages indicates that it will be slower than its counterparts in reducing pandemic-era stimulative policies.

Japan’s economy is in trouble due to disruptions in supply chains. Weak consumption has made it difficult for Japan to recover. So it’s no surprise that BOJ kept its 10-year yield target around 0% and its short-term rate target at 0.1% at its most recent meeting.

SWITZERLAND – 10

At -0.75% the Swiss National Bank holds the lowest global interest rate and it is not likely to change its expansive monetary policy any time soon.

It has reiterated its determination to use currency intervention as necessary to reduce the appreciation in the safe-haven Swissfranc. This was despite continuing to call it “highly appreciated”.

Graphic: SNB, https://fingfx.thomsonreuters.com/gfx/mkt/dwvkrdleapm/SNB.JPG