LONDON, Reuters – The last major central bank meeting of 2021 is over. It’s clear that the dividing lines have been drawn: policymakers who are too worried by inflation to reverse pandemic-era stimuli now; and policymakers who insist on an ultra-loose approach.

Thursday’s announcement by the Bank of England was the first time that a major central bank raised interest rates in the years since the COVID-19 pandemic. While the U.S Federal Reserve made a significant step towards ending bond-buying, and is preparing for rate increases, the European Central Bank continues to be in the slow lane.

Below is a snapshot of where policymakers are at the moment on how to get out of stimulus that was created during the pandemic.

1 NORWAY

Norway’s central bank cemented its position as the most aggressive rate-setter in the developed world, raising rates https://www.reuters.com/markets/europe/norway-hikes-interest-rates-with-more-come-2021-12-16 for the second time this year on Dec. 16 despite an expansion of COVID curbs that could hurt economic prospects.

After announcing policy tightening, the bank raised rates by 25 basis point to 0.5% in September. The bank also flagged additional next year. They could potentially raise the key rate up to 1.25% by the end of 2020.

2/ NEW ZEALAND

New Zealand’s central banking raised interest rates for the second consecutive month to 0.75%. It also forecasted that they would rise to 2.5% by 2023.

The inflation rate has increased and the red-hot housing market is fueling fears about economic overheating.

Data this week showing the economy shrank a record 3.7% https://www.reuters.com/world/asia-pacific/new-zealand-gdp-shrinks-37-q3-due-delta-lockdowns-2021-12-15 in Q3 was not as bad as expected and with COVID-19 restrictions expected to ease, the numbers have not dampened rate hike expectations.

3/ BRITAIN

The Bank of England shocked markets https://www.msn.com/en-ca/money/topstories/boe-becomes-first-major-central-bank-to-raise-rates-since-pandemic/ar-AARRc2R on Thursday with a 8-1 vote to hike rates, deciding to stamp on inflation now, rather than wait to see how the fast-spreading Omicron variant of COVID-19 impacts the economy.

Explanating its 15% bps increase to 0.255%, the BoE stated that inflation is likely to reach 6% by April. This was triple its goal and more rate hikes will probably be required.

The money markets had already priced in a February hike and now they expect 25bps of additional tightening in March, as well as two more rate increases before the end 2022.

4/ UNITED STATES

The Federal Reserve this week took a significant hawkish turn https://www.reuters.com/markets/us/fed-prepares-stiffen-inflation-response-post-transitory-world-2021-12-15.

It committed Wednesday to ending its pandemic bond buying by March, and set out a accelerated timeline for rate increases.

Fed Chair Jerome Powell expects high growth and full employment by 2022. He believes that inflation is a more urgent risk than anticipated and should be treated accordingly.

Markets are priced accordingly to the strong possibility of rate increases in May with an eventual hike in June.

5/ CANADA

Comments by Bank of Canada governor https://www.reuters.com/markets/us/bank-canada-says-likely-cut-rates-effective-lower-bound-more-often-2021-12-15 Tiff Macklem this week suggest rates will start rising soon, given inflation at 18-year highs and fast-diminishing economic slack.

Markets now price in the possibility of a 25-bps rate hike in March. Canada’s central banks announced in October that it will end the bond-buying program and presented its rates rise projections.

6/ AUSTRALIA

The dovish camp is Australia’s central banking, but it only partially.

The Reserve Bank of Australia made a significant step in unwinding the pandemic stimulus by abandoning an ultra-low yield target for bonds and opening the doors to a rate increase in 2023. This is earlier than the previous forecast of 2024.

The Governor Philip Lowe stated this week that he is open to end bond buying in February, but that he still believes it unlikely that rates will need to go up in 2022. This puts the RBA at the back of tightening.

7/ SWEDON

Sweden ended its pandemic-era loans facilities, but said rates would rise only if inflation pressures increase. A rate increase is planned by the bank for late 2024.

But data this week showed headline inflation at a 25-year high https://www.reuters.com/markets/europe/headline-inflation-sweden-hits-fastest-pace-since-1993-2021-12-14, which one rate-setter said supported the case to further taper stimulus. Riksbank governor Stefan Ingves https://www.reuters.com/markets/europe/swedish-cbank-chief-says-inflation-surge-due-energy-prices-2021-12-14 attributed the surge to power prices.

8. EURO ZONE

The European Central Bank has a different track than most of its counterparts.

The government announced on Thursday that its emergency asset-buying plan for 1.85 trillion euros of pandemic assets would be ended next March.

However, it promised plenty of support via its lengthy-running Asset Purchase Programme. It indicated that any withdrawal from the years-long ultra-easy policy would not be quick. According to the ECB, a rate increase next year is not likely and that inflation will retreat from record highs of 4.9% in 2019, it expects.

JAPAN 9

Friday saw tentative measures taken by Bank of Japan in order to reverse the effects of pandemic-era stimuli. They stated it would slow down commercial paper and corporate bonds purchases to levels that were pre-pandemic from April.

However, the bank did not change its short-term interest rate target to -0.1%. It maintained its 10-year yield target of 0%. The BOJ is likely to continue its ultra-easy policy, despite inflation being well below the 2% target.

SWITZERLAND – 10

This week, the Swiss National Bank stayed true to its guns, declaring that its monetary policy, which combines low interest rates and frequent market intervention, was appropriate.

The recent 6-1/2-year rise in the Swiss Franc has helped to offset import inflation. However, the SNB intervenes occasionally to limit the gains. The SNB recently made its largest weekly intervention since May.