From September 20 to 22, over ten central banks from major economies, including the Federal Reserve, Bank of England, Bank of Japan, Central Bank of Brazil, and South African Reserve Bank, announced their latest monetary policy decisions. These announcements impacted nearly half of the G20 nations and five of the top ten globally traded currencies.

Following the Federal Reserve and Bank of England's decisions to pause rate hikes, and the Bank of Japan's continued refusal to alter its easy monetary policy, along with the European Central Bank's recent rate hike of 25 basis points and its indication to hold off on further hikes, there seems to be a consensus among major developed economies. This suggests that tightening policies might be nearing their peak.

For Western economies like Europe and the U.S., there's a consensus to maintain current restrictive interest rates for an extended period to keep inflation within the 2% target range. This indicates that the decade of monetary easing from the 2010s is unlikely to return soon.

Fed Pauses Rate Hikes, Powell Says "Goal is Near"

On September 20, the Federal Reserve decided to hold off on raising interest rates, keeping the federal funds rate between 5.25% and 5.5%, in line with general expectations.

Since initiating its rate hike cycle last March, the Fed has raised rates 11 times, totaling an increase of 525 basis points. This has brought the current federal funds rate to its highest in 22 years. Data from the U.S. Bureau of Labor Statistics shows that U.S. inflation has dropped from a peak of 9.1% to 3.7% in August. At a previous global central bank meeting in Jackson Hole, Fed Chairman Jerome Powell highlighted the positive impact of tighter monetary policy on controlling inflation.

However, the U.S. inflation rate for August, at 3.7%, marked the second consecutive month of increase, showing a significant rise from the 3.0% in June. This suggests persistent inflation in the U.S., with core inflation in August still high at 4.3%, and the service sector's core inflation at 4.1%, both well above the Fed's 2% medium-term inflation target.

As a result, Powell mentioned during a press conference that the Fed is "prepared to raise rates further under appropriate conditions and maintain a restrictive monetary policy until there's confidence in a sustainable decline in inflation." He also noted that they are "very close to achieving their goal."

This implies that the Fed is nearing the peak of its current rate hike cycle. The Fed's dot plot projections indicate one more rate hike of 25 basis points this year. For 2024, the Fed plans to cut rates twice, maintaining the federal funds rate at 5.1%. The projected median federal funds rates for 2025 and 2026 are 3.9% and 2.9%, respectively.

Compared to the Fed's dot plot projections from June, the number of rate cuts for 2024 has been reduced from four to two, and the projected federal funds rate for 2025 has been raised by 0.5%.

Higher projected rates over the next three years suggest that the Fed's restrictive rate policy will be maintained for a longer period, or "higher for longer."

It's worth noting that Powell's optimistic outlook for U.S. economic growth not only provides the foundation for maintaining higher rates for longer but is also reflected in the official rate decision. The monetary policy committee has revised the U.S. GDP growth forecast from 1% in June to 2.1% now, and the 2024 GDP growth forecast has been revised from 1.1% to 1.5%.

European Nations See Rate Peak Amid Recession Fears

A day after the Fed's decision to pause rate hikes, the Bank of England also announced it would maintain its current benchmark rate of 5.25%.

Unlike the Fed, which has strong economic growth and inflation data under control, the Bank of England's decision to pause rate hikes was unexpected. The U.K.'s inflation rate for August was still high at 6.7%, although it's lower than last year's peak of 11.1%. This rate is noticeably higher compared to other major European countries and the U.S. The Organization for Economic Co-operation and Development (OECD) predicts the U.K.'s annual inflation rate will reach 7.2%, the highest among major industrialized nations.

However, Bank of England Governor Andrew Bailey stated on September 22 that "future rates are unlikely to rise further. Many indicators suggest that despite the upward pressure from high oil prices, inflation continues to decline." The Bank of England had previously raised rates 14 times.

The decision to halt rate hikes amid uncontrolled inflation caused internal disagreements within the Bank of England. Only five out of the nine-member committee supported maintaining the current rate.

On the other hand, the U.K.'s weak economic performance has made it challenging for the Bank of England to raise rates further. The latest data from the U.K.'s Office for National Statistics shows that the country's GDP growth rate for the second quarter of 2023 was only 0.2%, the lowest since the 2008 financial crisis.

The U.K.'s economic downturn has been attributed to various factors, including the impact of Brexit, the global semiconductor shortage, and the decline in North Sea oil production. The U.K. government has also reduced its fiscal stimulus, leading to a decline in public investment.

The European Central Bank (ECB) also announced on September 22 that it would maintain its current benchmark rate of 2.5%. The ECB had previously raised rates by 25 basis points in August, its first rate hike in over a decade.

The ECB's decision to hold off on further rate hikes was in line with expectations. The Eurozone's inflation rate for August was 3.2%, which is within the ECB's target range of 2%. The Eurozone's GDP growth rate for the second quarter of 2023 was 1.2%, showing a steady recovery from the pandemic-induced recession.

However, the Eurozone's economic recovery has been uneven, with southern European countries like Italy and Spain still facing high unemployment rates and slow GDP growth. The ECB's decision to maintain its current rate reflects its cautious approach to monetary policy amid the region's economic challenges.

Asian Economies Maintain Easy Monetary Policies

On September 22, the Bank of Japan announced that it would maintain its current benchmark rate of -0.1%. The Bank of Japan has been implementing a negative interest rate policy since 2016, aiming to stimulate economic growth and combat deflation.

The Bank of Japan's decision to maintain its current rate was in line with expectations. Japan's inflation rate for August was only 0.5%, well below the Bank of Japan's target of 2%. The country's GDP growth rate for the second quarter of 2023 was 0.8%, showing a moderate recovery from the pandemic-induced recession.

Japan's economic challenges include an aging population, a declining workforce, and a high public debt. The Bank of Japan's easy monetary policy aims to address these challenges by encouraging borrowing and investment.

Other Asian economies, such as South Korea and Taiwan, have also maintained their easy monetary policies. South Korea's benchmark rate is currently at 1.5%, while Taiwan's is at 1.25%. Both countries have seen steady economic growth and low inflation rates in recent years.

Emerging Markets Face Unique Challenges

Emerging markets, such as Brazil and South Africa, have faced unique challenges in their monetary policy decisions. High inflation rates, volatile exchange rates, and external debt have made it difficult for these countries to implement effective monetary policies.

On September 22, the Central Bank of Brazil announced that it would raise its benchmark rate by 50 basis points to 10.5%. This is the bank's seventh consecutive rate hike, aiming to combat the country's high inflation rate, which reached 9.8% in August.

South Africa's Reserve Bank also announced on September 22 that it would raise its benchmark rate by 25 basis points to 6.75%. The bank's decision was in response to the country's rising inflation rate, which reached 5.5% in August.

Both Brazil and South Africa have faced challenges in balancing economic growth and inflation. High interest rates can slow down economic growth by making borrowing more expensive. However, they are necessary to combat high inflation rates and stabilize exchange rates.


The recent monetary policy decisions by major central banks reflect the unique challenges faced by different economies. While developed economies like the U.S. and Europe are focused on maintaining restrictive interest rates to combat inflation, emerging markets like Brazil and South Africa are grappling with high inflation rates and external debt.

The global economic landscape is complex, with each country facing its own set of challenges. Central banks play a crucial role in navigating these challenges and ensuring economic stability. As the global economy continues to recover from the pandemic, central banks will need to adapt their monetary policies to address the evolving economic landscape.