LONDON, Reuters – U.S. Federal Reserve launched 2022 with a simple message: Rates will increase to limit inflation.

The rates riseoff has been initiated by other central banks, as well as dovish ones. They are also beginning to withdraw the stimulus they have used to defend their economies from the COVID-19 epidemic.

Here’s a look at where policymakers stand on the path out of pandemic-era stimulus, in order of how hawkish they appear: (Graphic: Central bank balance sheets, https://fingfx.thomsonreuters.com/gfx/mkt/klvyknowjvg/theme1612.PNG)

1) NORWAY

Norway’s central banking confirmed its status as the most aggressive rate-setter of the advanced world. They raised rates in December following a September tightening policy.

It raised its rates last month to 0.5%, and it announced a rate rise at its January meeting. (Graphic: New Zealand, Norway lead way with rate hikes among developed economies, https://fingfx.thomsonreuters.com/gfx/mkt/mopanqrdzva/CBANKS1712.PNG)

2) NEW ZEALAND

New Zealand raised rates by 0.75% in November, and predicted that they would rise to 2.5% by 2023.

Inflation in consumers reached a record high of 33% during the fourth quarter. This confirms that central banks will tighten policy at their February 23rd meeting.

3) BRITAIN

Following surprise markets by raising rates in December, the Bank of England expects to raise rates next week.

Explanating its 15% hike to 0.255%, the BoE stated that inflation is likely to reach 6% by April. This was triple its goal. Further rate increases would be required.

Markets expect four increases of 25 basis points by the end of 2022, with a 90% probability for a rate hike in February. (Graphic: UK inflation, https://fingfx.thomsonreuters.com/gfx/mkt/zdvxoaooopx/uk%20inflation%20chart.PNG)

4) UNITED STATES

On Wednesday, the Federal Reserve signaled its intention to increase interest rates for March. It also reaffirmed its plans to stop bond purchases in that month. This was in line with what Jerome Powell, chief of U.S. central banks pledged would be a long-term battle to control inflation.

Wall Street is unnerved by the possibility that the Fed might move more aggressively, which has put the Fed on the verge of its largest monthly decline since March 2020.

Deutsche Bank (DE) Expect the Fed to raise rates at each meeting in March-June, and then to resume a quarterly tightening from September. That would mean five rate hikes for this year. Nomura predicts that the Fed will move 50 bps in March. (Graphic: UST yield spread, https://fingfx.thomsonreuters.com/gfx/mkt/gkplgjmrrvb/UST%20yield%20spread.JPG)

CANADA (5)

On Wednesday, the Bank of Canada surprised many by not raising the interest rate of 0.25%. Governor Tiff Macklem however stated that the bank is on a “rising path”. https://www.reuters.com/business/finance/hike-or-not-its-toss-up-ahead-bank-canada-rate-decision-2022-01-26

The December inflation rate of 4.8% was at its highest level since 1991. It is also well beyond the bank’s control zone of 1% to 3%. The market is pricing in a 95% chance that March 2 will see a hike of 0.50%, and possibly five more increases.

6) AUSTRALIA

The Reserve Bank of Australia is under immense pressure to change itsdovish stance next week, given the highest consumer inflation in 2014 and the strongest labor market since 2008.

The Fed has made progress in removing pandemic stimuli by reducing the ultra-low yield target on bonds and opened up possibilities for an increase of rates to 2023, as opposed to a prior forecast of 2024.

Reuters analysts polled by the Reuters Group predicted that Governor Philip Lowe would not raise rates for 2022. However, he did say it was unlikely.

SWEDEN

Sweden ended its pandemic-era loans facilities, but it has planned for a rate increase in the late 2024.

In December, headline inflation was 4.1%. This is lower than the target of 2%. Stefan Ingves from the central bank stated earlier in December that the December rise was mostly due to higher electricity prices. However, overall inflation remains moderate.

EURO ZONE 8)

The European Central Bank follows a completely different route than many of its counterparts.

The government announced last month that it will end the 1.85 trillion Euro pandemic asset-buying scheme at March 31st.

While inflation stands at a record high 5% the ECB anticipates that inflation will retreat. It also says it is not likely to see a rate increase this year. It has offered generous support through its Asset Purchase Programme, signalling a gradual withdrawal from decades of extremely easy policy. (Graphic: Life after PEPP looms in the euro area, https://fingfx.thomsonreuters.com/gfx/mkt/byprjqabjpe/ECB1712.PNG)

JAPAN

Bank of Japan pledged to slow down purchases of corporate bonds, commercial paper and bank notes to pre-pandemic levels starting in April.

It raised inflation expectations this month but denied speculation that it would soon announce a change in the decade-old stimulus experiment. Instead, it said it wasn’t in hurry to alter its ultra-loose money policy.

10 SWITZERLAND

Despite higher inflation, the Swiss National Bank is still at the conservative end of central banks’ spectrum. It maintains that its open-minded stance was right.

It was confronted by a boom in property and asked lenders to increase capital to 2.5% for risk-weighted position that is backed residential real estate.