LONDON (Reuters] – Central banks race to keep up with surging inflation. New Zealand, Canada and the ECB have both announced half-point rate rises. On Thursday, however Canada and New Zealand pushed for aggressive rates hikes of 50% each. However on Thursday, they maintained their plans to reduce stimulus.

However, the impact of the conflict in Ukraine must be considered by policymakers. Higher energy prices and disruptions in supply chains could cause a decline in consumer confidence, which may lead to monetary tightening.

This is where the policymakers currently stand regarding how to get out of the crisis-era stimuli. The rankings are based on hawkishness.

Graphic: The rate hiking cycle is off – https://fingfx.thomsonreuters.com/gfx/mkt/akvezjbkwpr/rates1404.PNG

1) NORWAY

Norges Bank raised rates 25 basis points to 0.755% on March 24, and also announced that they would hike faster than originally planned.

The March move means that the bank is now planning eight rate hikes to raise rates to 2.5% by the end of 2023. That’s three more than what was predicted in March, as well as two more than the Reuters poll forecast in March.

2) NEW ZEALAND

On Wednesday, the Reserve Bank of New Zealand reinforced its status as one of most hawkish central bank in the world.

The cash rate was increased by 50 basis points to 1.5%. This is the largest increase in 20 years and fourth in this cycle. It also maintained its prediction that rates would peak at 3.35% by the end of 2023.

Graphic: RBNZ gets aggressive – https://fingfx.thomsonreuters.com/gfx/mkt/byvrjbgrjve/RBNZ.PNG

3) CANADA

The Bank of Canada increased key rates by 50bps to 1.1% on Wednesday, after having started its rate-rise cycle back in March. This was its largest single move in over two decades.

The BoC will allow maturing bonds to roll off its balance sheets starting next week. Tiff Macklem, BoC Governor, believes rates remain below neutral levels. He estimates that they are between 2% and 3%. The market expects rates to reach 2.5% before year’s end.

Graphic: Canada most certainly in the hawkish camp – https://fingfx.thomsonreuters.com/gfx/mkt/znpneqwrqvl/CANADA.PNG

4) BRITAIN

After three increases since December, inflation is at its highest level in 30 years. The Bank of England now faces pressure to tighten their policy.

It is expected that the benchmark will be raised by 25 basis points to 1% on May 5th and then to between 2%-2.255% by 2022.

The BoE is now softer on tightening, despite rising energy costs threatening growth.

Graphic: UK inflation hits 30-year high of 7% – https://fingfx.thomsonreuters.com/gfx/mkt/dwvkrqxakpm/UKINFLATION.PNG

5) UNITED STATES

Federal Reserve raised interest rates by 25% in March to 0.25-0.5%, and flagged a half point move for May 4. The Federal Reserve is currently discussing the possibility of trimming its assets portfolio.

The Fed has a 2% inflation target for at least 2023. However, the 8.5% inflation rate, which was at its highest point in 40 years, is now expected to be at or near peak.

Graphic: Central Bank balance sheets set to shrink – https://fingfx.thomsonreuters.com/gfx/mkt/gdvzyjxqopw/CABNKS1.PNG

6) AUSTRALIA

Marches succeeded in getting the Reserve Bank of Australia pivot hawkish on April 5, when the bank finally gave permission for the 0.1% cash rate rise to be this year.

Later this month, data is expected to show annual inflation at 3.2%. On April 12, a survey showed that there were strong business conditions and the possibility of the unemployment rate falling below 4% for the first-time since 1970.

Futures prices a 25-bps increase in June, which translates into a total 200-bps tightening at year’s end.

EURO ZONE (7)

The European Central Bank ranks among the top-rated central banks. It reaffirmed its plans for gradually reducing extraordinary stimuli. This was in response to concerns about record high inflation and the possibility that the conflict in Ukraine would drive the euro area economy into recession.

Economists continue to expect that the ECB would raise interest rates this year, and market prices are currently at 60 bps.

Graphic: Euro zone inflation at record highs – https://fingfx.thomsonreuters.com/gfx/mkt/zjpqkdreapx/EZinflation.PNG

SWEDEN

The 6.1% increase in inflation to Sweden, which is the highest rate since 1991, could make the Riksbank hawkish.

The bank’s policy will need to be rethought at the next meeting which takes place on April 28th, according to Martin Floden, deputy governor. Similar comments were made by Governor Stefan Ingves recently. His vote in February helped to keep the balance sheet plans unaltered this year.

Riksbank is still predicting a hike in 2024. Markets see rates increasing from zero to 1.1% between November and December.

9) SWITZERLAND

The Swiss National Bank remains in a dovish mood, but 2022 inflation is projected to be above target at 2.1%. This means that it pays closer attention prices.

In response to the Ukraine crisis, the SNB has increased currency intervention and boosted Swiss sight deposits to 8 billion Swiss Francs (or $8.58 billion).

Graphic: SNB deposits – https://fingfx.thomsonreuters.com/gfx/mkt/gkplgqnxkvb/SNB%20deposits.JPG

10)JAPAN

Bank of Japan is the lone soaring dove.

Governor Haruhikokuroda warned that the recent spike in inflation, fueled by rising import prices, may have a negative impact on the economy. He also stressed the BOJ’s determination to maintain a loose monetary policy.

With tightening policy still far off, traders increased their wagers on a weaker Japanese yen. It fell to two decades against the dollar, causing it to drop further. The warning came from Japan’s finance minister.

Graphic: BOJ balance sheet – https://fingfx.thomsonreuters.com/gfx/mkt/jnpwekmwmpw/BOJ%20balance%20sheet.JPG

($1 = 0.9329 Swiss francs)