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The world’s leading central banks are finally pushing their interest rates into restrictive territory, causing fears of overkill in financial markets and stoking chatter that policymakers may need to pivot at some point.

The Federal Reserve, European Central Bank and most of their peers are set to keep raising borrowing costs aggressively in coming weeks. The faster they go, the more questions will be asked about how far they can squeeze economies before unsettling investors or generating recessions.

Already some emerging-market officials are beginning to grumble that the push by developed-economy central banks is causing problems for them by weakening their exchange rates.

The complaints may grow this week as central bankers and finance ministers gather in Washington for the International Monetary Fund’s annual meetings.

For now, after having failed to predict the inflation surge, the priority remains beating back the strongest price pressures in four decades -- even if that comes at the cost of weaker growth and higher unemployment.

Some central banks are already pivoting to more modest hikes, or declaring a peak in rates, in what may be a theme for elsewhere in 2023. Others, such as those of Japan and China, are keeping policy loose.

Bloomberg Economics reckons its global average policy rate just reached 4.7%. That level will rise to 5.2% in the final three months of 2022 before topping out at 5.4% in the third quarter of 2023, its projections show.

What Bloomberg Economics Says:

“Talking like Volcker -- with a commitment to hike rates into tumbling markets and rising unemployment -- is easy. Walking like Volcker -- actually hiking rates when investors are losing money and workers jobs -- is hard. So far in 2022, central banks have talked the talk. In the months ahead, we’ll find out if they can also walk the walk.”.”

--Tom Orlik, chief economist

Here is Bloomberg’s quarterly guide to 23 of the world’s top central banks, covering 90% of the world economy.

Group of Seven

U.S. Federal Reserve

• Current federal funds rate (upper bound): 3.25%
• Bloomberg Economics forecast for end of 2022: 4.5%
• Bloomberg Economics forecast for end of 2023: 5%

Having lifted the target range for its benchmark rate by three percentage points since March to 3% to 3.25%, officials have signaled a fourth 75 basis point hike could be on the table in November.

Chair Jerome Powell and his colleagues are on track to keep raising rates beyond then to beat the hottest inflation in nearly four decades.

The Fed’s forecasts show rates at 4.4% by year end and 4.6% in 2023.

Their tightening campaign -- the most aggressive since Paul Volcker’s Fed in the 1980s -- has sent a spasm through financial markets as the dollar surges and drawn criticism from abroad.

But policymakers are so far shrugging off the risk of contagion, noting financial markets are operating smoothly and stressing that their primary focus is on the US economy.

What Bloomberg Economics Says:

“A Fed that is laser-focused on bringing down inflation has recently signaled another 150-basis points of rate hikes to come. The significant tightening of financial conditions lately, on concerns about global financial stability, raised the odds that the Fed will downshift the pace of hikes from 75 to 50-basis points in November. We still expect rates will need to reach 5% next year before high inflation can be banished from its radar.”

--Andrew Husby

European Central Bank

• Current deposit rate: 0.75%
• Bloomberg Economics forecast for end of 2022: 2%
• Bloomberg Economics forecast for end of 2023: 1.75%

The ECB has raised rates by 125 basis points over the past quarter and President Christine Lagarde has flagged additional hikes at the next “several meetings” to safeguard inflation expectations.

While wage growth has remained moderate despite double-digit price gains in vast parts of the 19-nation euro zone, consumers see inflation far above the ECB’s 2% target in the medium term.

The recession that’s becoming ever more likely amid record energy costs and uncertainty over outages this winter is unlikely to significantly damp prices, and officials have signaled that they’re planning to take the deposit rate to neutral levels -- where it neither stimulates nor restricts the economy -- by the end of the year. 

At that point, Lagarde has argued, policymakers will consider shrinking their balance sheet, which is bloated by nearly 5 trillion euros ($4.9 trillion) of bonds purchased under various programs and more than 2 trillion euros of long-term loans to banks.

What Bloomberg Economics Says:

“The fear of rising inflation expectations has trumped recession worries -- the hawks on the Governing Council are winning the debate. We expect another 75-basis point hike in October, a 50 basis point increase in December and a 25-basis point rise in February, with the deposit rate ending the cycle at 2.25%. That would leave policy in restrictive territory -- our estimate of neutral for the euro area is 1.5%.”

--David Powell

Bank of Japan

• Current policy-rate balance: -0.1%
• Bloomberg Economics forecast for end of 2022: -0.1%
• Bloomberg Economics forecast for end of 2023: -0.1%

Bank of Japan Governor Haruhiko Kuroda stands out among major central banks as the last holdout on rock-bottom rates and the view that the current wave of inflation is unsustainable. 

He appears determined to keep his decade-long stimulus in place during his final six months at the helm of the bank, even if it means further falls in the yen or massive bond buying to defend a cap on 10-year yields.

For now, Kuroda has the backing of Prime Minister Fumio Kishida. The government has already intervened to prop up the yen and will unveil more stimulus this quarter to mitigate the impact of higher prices inflated by the weak currency. But the focus is shifting to Kishida’s choice for Kuroda’s replacement. The nomination could come before the end of the year and will shape the direction of BOJ policy next year if the bank isn’t forced to change before then. 

What Bloomberg Economics Says:

“Three conditions would have to be met for the BOJ to shift policy -- and it’s a very high hurdle. We’d need to see the output gap turn positive, a person less dovish than Kuroda would have to succeed the governor in April, and then the core consumer price index would have to stay at 2% or higher once the new person comes on board.” 

--Yuki Masujima

Bank of England

• Current bank rate: 2.25%
• Bloomberg Economics forecast for end of 2022: 3.75%
• Bloomberg Economics forecast for end of 2023: 4.25%

The Bank of England was forced to take its first emergency action since the pandemic last month as Prime Minister Liz Truss’ program of unfunded tax cuts spooked markets and prompted the central bank to step in to buy gilts in an effort to avoid a full blown financial crisis. On Monday, the central stepped up its measures to support market functioning.

The government’s package is also at risk at fanning inflation that’s already lingering near a 40-year high, leaving the BOE under increasing pressure to deliver its biggest rate hike since 1989 at its next decision on Nov. 3.

Investors now anticipate the central bank, led by Governor Andrew Bailey, will deliver at least a full percentage point increase in the key rate in in November and follow with more in the coming months, offsetting the impact of tax cuts and aid to cushion households from spiraling energy prices. The rate is currently 2.25%, from just 0.1% 12 months ago.

What Bloomberg Economics Says:

“The large fiscal stimulus announced by the government means rates still have some way to rise before the BOE can be confident that inflation will fall back to its 2% target. A jumbo move is likely in November before the pace of tightening slows through the turn of the year as concerns about the economy and housing market move to the forefront of the central bank’s thinking.”

--Dan Hanson

Bank of Canada

• Current overnight lending rate: 3.25%
• Bloomberg Economics forecast for end of 2022: 4%
• Bloomberg Economics forecast for end of 2023: 3.25%

After hiking its benchmark rate by a full three percentages since March, Bank of Canada Governor Tiff Macklem is expected to move ahead with at least another 75 basis points in coming months, if not more, before putting an end to one of the central bank’s most aggressive tightening cycles ever.

That’s still likely to be short of where the Fed is expected to go, a rare divergence between the two countries.

Short-term money markets are betting the Bank of Canada will stop at 4% or 4.25% and remain below US short-term rates for at least another three years.

That’s even as the Canadian economy is projected to expand at a faster pace than the US.

Historically, when Bank of Canada rates have fallen below those at the Fed, it’s typically not coincided with a relatively stronger Canadian growth picture. That may suggest markets are underestimating how high Macklem will have to go, or overestimating Canada’s capacity to grow.

What Bloomberg Economics Says:

“The Bank of Canada is entering the endgame of its tightening cycle as economic growth slows and inflation starts to head lower. The policy rate may peak at 4% in December, after another 75 bps worth of hikes at the next two meetings. Provided inflation cooperates, cuts to less-restrictive rate settings may be appropriate late in 2023.”

--Andrew Husby

BRICS CENTRAL BANKS

People’s Bank of China

• Current 1-year medium-term lending rate: 2.75%
• Bloomberg Economics forecast for end of 2022: 2.75%
• Bloomberg Economics forecast for end of 2023: 2.65%

The People’s Bank of China has kept monetary policy relatively loose this year to bolster an economy hit by Covid lockdowns and a worsening property slump.

It cut its main rate in a surprise move in August, with economists predicting there could be more easing to come toward the end of this year.

Officials have signaled they have enough monetary policy room to act, especially since inflation remains fairly subdued.

A major hurdle for the PBOC is the currency’s depreciation, triggered by capital outflows as the Fed hikes rates aggressively. 

The central bank has been ramping up measures to stabilize the yuan after it fell to its weakest levels since 2008. That suggests any policy easing in the remaining months of the year is likely to be modest and targeted toward specific industries, such as housing and small businesses. The bank has continued to expand structural lending tools, which offer banks cheaper liquidity for lending to favored sectors.

What Bloomberg Economics Says:

“The PBOC is reluctant to cut rates further, given the beating the yuan is taking from a widening yield disadvantage against the dollar. Reducing borrowing costs is also not the best way to deal with the main challenges to growth right now -- the property rout and the damage to activity from the Covid Zero policy. This is why the central bank is likely to focus increasingly on targeted measures, especially for stabilizing the property market.”

--Chang Shu

PBOC Policy Stance Dashboard

Reserve Bank of India

• Current RBI repurchase rate: 5.9%
• Bloomberg Economics forecast for end of 2022: 6.25%
• Bloomberg Economics forecast for end of 2023: 6.5%

The Reserve Bank of India may start to taper its rate hikes after four straight increases as it balances price stability with the need to shield growth in Asia’s third-largest economy. 

Governor Shaktikanta Das vowed to stay “alert and nimble” after delivering a half-percentage-point move last month to rein in stubborn inflation that’s remained above the central bank’s target this year. 

He said that after the pandemic and the war in Ukraine, the world is in the middle of a third major shock, which is the aggressive tightening by central banks in advanced economies that’s roiled markets including the rupee. India’s foreign-currency reserves, he said, remains robust even after a $100 billion deterioration caused mainly by revaluation.

What Bloomberg Economics Says:

“The RBI’s third straight 50-basis point hike suggests it is now prioritizing supporting the rupee, while ignoring the risks to growth. Even though inflation is likely to ease below the 6% target ceiling by March, we see concerns on the currency now guiding the RBI to hike the repo rate to a terminal level of 6.5% by February.”

--Abhishek Gupta

Central Bank of Brazil

• Current Selic target rate: 13.75%
• Bloomberg Economics forecast for end of 2022: 13.75%
• Bloomberg Economics forecast for end of 2023: 11.25%

Brazil’s key rate is forecast to remain at 13.75% until policy makers make sure inflation expectations return to target. 

The central bank led by Roberto Campos Neto halted last month an aggressive monetary tightening campaign that took borrowing costs to their highest level in more than five years, warning it could act again if price pressures don’t dissipate.

Inflation slowed to less than 8% by mid-September on the back of gasoline tax cuts and cheaper commodities, but services prices remain a concern. Central bankers signaled their easing cycle wouldn’t start before June, though most traders bet it could begin as early as March.

What Bloomberg Economics Says:

“The Brazilian policy rate is nearly 8 percentage points higher than inflation expected over the next 12 months, deep in tight territory. The central bank expects that holding the rate at this level for long will suffice to tame the resilient underlying inflation and unanchored expectations. A rate cut may not happen until either, or both, show a sustained improvement. We expect moderate cuts from March on, with risks that the rate cuts start later rather than sooner if the new presidential mandate fails in addressing fiscal risks early on. In either case, policy should remain tight throughout 2023, at least.”

--Adriana Dupita

Bank of Russia

• Current key rate: 7.5%
• Bloomberg Economics forecast for end of 2022: 7.5%
• Bloomberg Economics forecast for end of 2023: 7.5%

The Bank of Russia lowered its benchmark rate by half a percentage point to 7.5% on Sept. 16, and signaled a pause in easing, which had more than reversed the emergency tightening following the imposition of sanctions in the wake of the Kremlin’s Feb. 24 invasion of Ukraine.

Even before Russia’s call-up of reservists added more uncertainty to the outlook, Governor Elvira Nabiullina was pointing to renewed inflation risks and even warned the next move might be a hike. 

Although consumer-price growth decelerated to 14.3% in August from its 20-year high in April, inflation expectations have risen for two months in a row and the weekly price index turned positive for the first time since May. 

What Bloomberg Economics Says:

“We expect the Bank of Russia to keep the policy rate unchanged for the rest of this year before raising it to 8% by the end of 2023. Rising inflation expectations, an expansionary fiscal policy and a hot labor market suggest the September rate cut is the final move in the easing cycle. The decision to mobilize additional troops will add to the inflationary pressure.”

--Alexander Isakov

South African Reserve Bank

• Current repo average rate: 6.25%
• Median economist forecast for end of 2022: 6.75%
• Median economist forecast for end of 2023: 6.9%

The central bank responded quicker to the global inflation shock than many of its peers, raising borrowing costs by a cumulative 275 basis points since November. 

The benchmark is now close to 6.36% -- the implied year-end 2023 rate, according to the bank’s quarterly projection model. While Governor Lesetja Kganyago has repeatedly stressed that the model is simply a broad policy guide, it does signal the committee is front-loading its fight against inflation and suggests there may be room to cool the hiking cycle.

Economists predict inflation peaked at 7.8% in July, though the Reserve Bank remains prepared to act with urgency to curb price growth and more firmly anchor expectations close to the 4.5% midpoint of its target range. While slowing the tightening cycle will support South Africa’s moribund economy, policy makers may take direction from developed market central banks. That’s because sharp rate increases elsewhere risk eroding the differential that makes local assets attractive to foreign investors, further weakening the rand and fueling imported inflation. 

MINT CENTRAL BANKS

Banco de Mexico

• Current overnight rate: 9.25%
• Bloomberg Economics forecast for end of 2022: 10%
• Bloomberg Economics forecast for end of 2023: 9.5%

Mexico’s central bank raised its key rate by 75 basis points last month, in line with the US Fed. 

But board members are increasingly debating whether they should keep following their northern counterparts. It’s a tough decision as they grapple with potential capital outflows and the fastest inflation in two decades, at the same time that the economy loses steam.

The bank’s next decision is coming up on Nov. 10 and the board members said their decision would be based on “prevailing conditions.” Inflation remains near 8.8%, far above the bank’s target of 3%, and growth is expected to slow to a little more than 1% next year.

What Bloomberg Economics Says:

“Banxico has little choice but to hike rates to bring down inflation and inflation expectations, which are above target and still under upward pressure. Safeguarding financial stability and limiting the market impact from higher US rates also argue for more tightening. We see the policy rate at 10% by the close of 2022 and 10.5% at the end of the cycle early next year.”

--Felipe Hernandez

Bank Indonesia

• Current 7-day reverse repo rate: 4.25%
• Bloomberg Economics forecast for end of 2022: 4.75%
• Bloomberg Economics forecast for end of 2023: 4.75

Among the last to join the rate hike frenzy, it will probably slow the pace of tightening after delivering 75 basis points of increases amid signs that the impact of a fuel price increase was more subdued than anticipated. 

Governor Perry Warjiyo said that more aggressive rate moves aren’t necessary in resource-rich Indonesia where the currency has remained resilient compared to peers, aided by a current account benefiting from the commodity price spike. 

Also, an excessive monetary tightening could derail the recovery of Southeast Asia’s largest economy, Finance Minister Sri Mulyani Indrawati had warned.

What Bloomberg Economics Says:

“Bank Indonesia started its rate hikes much later than other central banks and would likely have waited longer if not for the accumulated downward pressure on the rupiah. With price pressures now much more apparent, its use of yield curve control to damp monetary transmission sends a mixed message that is likely to loosen its inflation anchor. In the end, this will mean more tightening than would have otherwise been necessary, or more inflation -- either way, growth will be slower.” 

--Tamara Henderson

Central Bank of Turkey

• Current 1-week repo rate: 12%
• Bloomberg Economics forecast for end of 2022: 9%
• Bloomberg Economics forecast for end of 2023: 21.25%

Turkey’s central bank, led by Governor Sahap Kavcioglu, is almost certain to continue to buck the global tightening trend -- and defy conventional economic orthodoxy -- by delivering more rate cuts. 

President Recep Tayyip Erdogan has called for the benchmark rate to be in the single digits by year-end, from 12% in October. The monetary authority already slashed rates twice, in August and September, citing a slowing economy.

Erdogan is counting on growth via low borrowing costs to help him secure another term at elections next June. He’s called interest rates his “biggest enemy,” and claims that lowering rates will rein in inflation. Inflation in September exceeded 83% and the lira lost over 50% of its value against the dollar in the past year. The currency is likely to face new stress tests in the coming months if the central bank carries out Erdogan’s wishes.

What Bloomberg Economics Says:

“We expect the CBRT to cut its main policy rate by another 300-basis points this year after President Recep Tayyip Erdogan’s call to bring it to single digits by the end of 2022. That would come despite a multi-decade inflation peak above 80%, and weaken the currency -- already at historic lows -- even further.”

--Selva Bahar Baziki

Central Bank of Nigeria

• Current central bank rate: 15.5%
• Median economist forecast for end of 2022: 14.5%
• Median economist forecast for end of 2023: 14%

Nigeria’s central bank is likely to keep hiking its benchmark as long as inflation, which hit a 17-year high in August, continues to surge in Africa’s biggest economy. 

Oil production in the country, until recently the continent’s biggest producer, has plummeted, putting pressure on the naira, which has hit record lows against the dollar.

Choked supply chains caused and rampant insecurity in the country’s food-producing regions could also put pressure on the naira. Governor Godwin Emefiele signaled last month that the central bank could tighten further: “as long as inflation is trending upwards, we cannot assure anybody that we will not raise rates.”

OTHER G-20 CENTRAL BANKS

Bank of Korea

• Current base rate: 2.5%
• Median economic forecast for end of 2022: 3%
• Median economic forecast for end of 2023: 3%

Bank of Korea Governor Rhee Chang-yong faces a dilemma complicated by a cratering currency. Having already scaled back to regular-sized rate hikes, he is under growing pressure to re-accelerate the pace of policy tightening this quarter. That’s largely because the Fed’s reaffirmed commitment to higher rates has sent the won tumbling to its lowest levels since the aftermath of the global financial crisis.

If Rhee opts for outsized rate moves to help support the currency as well as cool inflation further, the pain for highly indebted households will intensify at a quicker pace and the risk of a slide in the property market will increase. If he doesn’t try to catch up with the Fed, he risks speculators jumping on a reason to bet against the won. The BOK has gained independence from the government, but not from the Fed, one board member has said, according to Rhee.

Reserve Bank of Australia

• Current cash rate target: 2.6%
• Bloomberg Economics forecast for end of 2022: 3%
• Bloomberg Economics forecast for end of 2023: 2.75%

The Reserve Bank of Australia has staked out a global outlier position as the first major central bank to downshift on policy, surprising markets Oct. 4 with a quarter percentage-point hike. 

Now that the RBA has reached its estimated neutral rate, it will be increasingly data dependent on further tightening, with third-quarter inflation shaping up as a pivotal report.

The RBA expects the economy will slow sharply in 2023 as its 2.5 percentage points of hikes flow through to mortgage holders, the majority of whom are on variable rates. This policy potency, together with Australian households being among the world’s most indebted, helps explain Governor Philip Lowe’s decision to err on the side of caution. Australia is likely to dodge recession as the labor market remains tight, wages are well-behaved and the economy is a rare beneficiary of geopolitical disruptions that have sent commodity prices soaring.

What Bloomberg Economics Says: 

“The RBA’s tightening cycle is close to completion. Higher borrowing costs are already weighing on the housing market and will likely hit spending as homeowners, most of whom have variable rate mortgages, pull back. Meanwhile we see inflation easing rapidly after a 4Q peak. Energy prices should cool and the opening of borders post-Covid is bringing in more workers, reducing pressure on wage growth that has been slow to begin with. We expect a rate reversal in late 2023, but a lowering of loan serviceability thresholds could come sooner if housing market stress rises.”

--James McIntyre

Central Bank of Argentina

• Current rate floor: 75%
• Bloomberg Economics forecast for end of 2022: 78%
• Bloomberg Economics forecast for end of 2023: 58%

Argentina’s central bank has raised rates nine times this year, to as high as 75% in August. That’s still below inflation, which is running at 79% a year, its fastest pace in three decades. The central bank typically raises rates the same week that inflation data is released.

Rates are likely to keep going up, as Argentina’s $44 billion program with the IMF includes a pledge to keep them above the rate of inflation, which is estimated to end the year around 100%.

What Bloomberg Economics Says:

“The Argentine central bank has taken steps towards the policy adjustments recommended by the IMF. But so far the rate hikes and the currency depreciation have barely kept up with inflation. Real rates are positive, but probably not sufficiently high to tame inflation or boost reserves -- uncertainty on inflation and the persistent risk that the peso may slide should continue to ward of investors, even with the effective rate above 100% per year. Premature rate cuts are a risk as the country nears the October 2023 presidential vote.”

--Adriana Dupita

G-10 CURRENCIES AND EAST EUROPE ECONOMIES

Swiss National Bank

• Current policy rate: 0.5%
• Median economist forecast for end of 2022: 0.75%
• Median economist forecast for end of 2023: 1%

The Swiss National Bank’s rate moves this year have been in tandem with the 1.25 percentage point in hikes in the euro area, and officials have signaled an intention to keep raising.

Decisions are likely to keep reflecting both domestic consumer-price concerns and the extent of tightening in the surrounding euro zone. 

At 3.3%, inflation in Switzerland is still much lower than in the neighboring currency area, but policy makers worry that wages may pick up in response.

The next decision is only in December, and will take place just hours before the ECB is likely to be about to raise again.

The question for the SNB is whether it will wait until then or act sooner. President Thomas Jordan has set a high bar for an unscheduled hike, saying officials would only do so “if our inflation outlook would completely change.”

Sveriges Riksbank

• Current repo rate: 1.75%
• Bloomberg Economics forecast for end of 2022: 2.5%
• Bloomberg Economics forecast for end of 2023: 2.5%

Sweden’s policy makers are likely to slow the pace of rate hikes after they surprised most economists last month with a full percentage point increase, the biggest in nearly three decades. 

The Riksbank’s new rate path indicates borrowing costs will peak at about 2.5% in a year’s time, projecting 75 basis points of increases until then.

Still, the minutes of the latest meeting signaled a growing split between the Executive Board members against the backdrop of a rapidly cooling housing market and signs of weaker spending. While Governor Stefan Ingves highlighted the growing importance of more aggressive tightening by other central banks, some of his deputies were worried about the uncertain outlook and a high sensitivity of the economy to rate hikes.

November’s rate meeting is set to be the last for Ingves, whose term expires after 17 years overseeing Swedish monetary policy. Analysts have differed on whether his successor Erik Thedeen, who now heads Sweden’s financial watchdog, will be more dovish or hawkish than Ingves.

What Bloomberg Economics Says:

“We expect the Riksbank to continue with rate hikes in an effort to prevent multi-decade high inflation rates from becoming entrenched in price and wage gains. We see the central bank raising its policy rate by 75 basis points in the last meeting of the year in November, closing the year off at 2.5%, and forecast a 25 basis point hike in early 2023.”

--Selva Bahar Baziki

Norges Bank

• Current deposit rate: 2.25%
• Median economist forecast for end of 2022: 2.75%
• Median economist forecast for end of 2023: 3%

Norway’s central bank is set to slow the pace of its policy-rate hikes to a 25 basis-point increase in November amid signs that its tightening push is beginning to cool the overheated economy. 

The Nordic nation has been more insulated than most peers from Europe’s energy crisis and the end of natural gas shipments by Russia because of correspondingly higher demand for its fossil-fuel exports.

Norges Bank projects its key rate to peak at about 3% “in the course of winter,” after last month delivering its third half-point key hike since June, lifting borrowing costs to 2.25%. The central bank is facing a “more challenging” trade-off in monetary policy between accelerating inflation and cooling economy, according to Governor Ida Wolden Bache. At the same time, wage growth is expected to accelerate next year, and inflation is seen remaining clearly above the central bank’s 2%-target through its forecast period ending in 2025.

Reserve Bank of New Zealand

• Current cash rate: 3.5%
• Bloomberg Economics forecast for end of 2022: 3.75%
• Bloomberg Economics forecast for end of 2023: 3.75%

New Zealand’s central bank is maintaining its aggressive tightening approach as core inflation pressures persist and labor shortages stoke wages. The Reserve Bank raised its benchmark rate by a half-percentage point for a fifth consecutive meeting in October and signaled further tightening to come.

That’s despite the biggest quarterly drop in house prices since 2008 and concerns that the economies of some of the nation’s key trading partners are set to slow.

What Bloomberg Economics Says:

“Further hikes from the RBNZ are likely over the rest of 2022, but the pace of tightening should slow as the end of the cycle approaches. The housing market has responded to the a sharp lift in borrowing rates, with prices and turnover declining rapidly. As the housing downturn spills across the economy, the RBNZ risks over-tightening. With fuel cost and other energy price pressures easing, inflation expectations are likely to cool. The reopening of borders after Covid should ease labor shortages, and help cap wage pressures. After peaking at 4% in 1Q 2023, we expect policy to ease starting in late 2023.”

--James McIntyre

National Bank of Poland

• Current cash rate: 6.75%
• Median economist forecast for end of 2022: 6.75%

The Polish central bank paused its yearlong campaign of rate increases in October despite inflation accelerating to 17.2%, its highest level in more than a quarter century. The economy has begun to slow since the borrowing costs began to rise from almost zero, although Governor Adam Glapinski dismissed the risk of a recession. 

A potential resumption of hikes will depend on how successful the government is going to be in getting a grip on the runaway energy costs. It’s planning to cap power prices, on top of the already announced tax cuts on everything from food to fuels. Glapinski said rate cuts may start in the second half of next year, coincidentally around the time of the next general elections.

Czech National Bank

• Current cash rate: 7%
• Median economist forecast for end of 2022: 7%
• Median economist forecast for end of 2023: 5.5%

The Czech central bank halted its aggressive tightening cycle -- which brought rates to the highest since 1999 -- in August after a revamp of the board. Governor Ales Michl, who voted against all nine rate hikes under the previous leadership, says borrowing costs are already high enough to tame home-grown price pressures.

Most of the board members opposing further hikes say slowing growth in money supply and credit, combined with declining real household income will help return inflation to the 2% target by around mid-2024, from 17.2% in August. The central bank’s forecast sees lower rates next year, although Michl has left the door open for more hikes in case of excessive wage demands and an overly loose fiscal policy.

(Updates with BOE action. An earlier story corrected the current rate for Brazil)

©2022 Bloomberg L.P.