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CENTRAL BANKS STRUGGLE TO CONTROL INFLATION

Business 15 Sep, 2022 Follow News

CENTRAL BANKS STRUGGLE TO CONTROL INFLATION

By Staff Writer

With many economic factors currently nudging leading nations towards recession, central banks have been tightening the money supply as sky-rocketing inflation continues to be a headache for governments.

Most eyes are on the UK Federal Reserve which is set to announce its latest interest rates decision next week.

The Federal Reserve is expected to raise interest raise again, with further rises expected as consumer prices in August continued an upward trend and widened across several sectors with rent being a growing concern.

Chairman of the US Federal Reserve, Jerome Powell, has spoken of a commitment to reduce inflation ‘before the public gets too used to higher prices and comes to expect them as the norm’.

“I can assure you that my colleagues and I are strongly committed to this project and we will keep at it until the job is done.”

US headline inflation was pegged at 8.3 per cent, down from 8.5 per cent in July, the highest rate in four years, with economists expecting the latest reading to 8.1 per cent with the Fed adding a third consecutive 0.75 percentage point increase in interest rates at its September 20th-21st meeting.

Meanwhile, in the UK, the Bank of England postponed its latest decision on interest rates as the country mourns the death of Her Majesty Queen Elizabeth II.

The bank’s Monetary Policy Committee (MPC) was due to meet on September 15th, but that has been delayed until next Thursday September 22nd.

A further hike in interest rates is also expected, continuing a pattern over the past six meetings as the bank grapples with rising inflation in the UK.

The country’s Office for National Statistics (ONS) reported last month that inflation was pegged at 10.1% in the 12 months to July, up from 9.4% in June.

The main factors driving inflation are energy and petrol costs with the downstream impact on the cost of living being felt particularly hard in the price of food and non-alcoholic drinks and utility bills.

 Canada recently hiked its interest rates to their highest level in 14 years, on the expectation that inflation there may have peaked.

The country’s annual inflation rate was at 7.6% in July down from a 39-year high of 8.1 per cent recorded in June.

In a statement, the Bank of Canada said: “While overall inflation may have peaked, most of the drop was due to gasoline prices. Inflation has continued to rise and broaden across goods and services. And globally, we’re still seeing supply chain bottlenecks and high commodity prices, both of which contribute to inflation here in Canada.”

Supply chain challenges, high energy prices from the war in Ukraine and labour shortages have been blamed.


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