HISTORIC YEAR FOR CENTRAL BANK ACTIVITY

The Federal Reserve (Fed) wrapped up its last Federal Open Market Committee (FOMC) meeting of the year last week, where it hiked short-term interest rates for the seventh time in as many meetings, taking the fed funds rate to 4.5% (upper bound). A day later, both the European Central Bank (ECB) and the Bank of England (BoE) also hiked interest rates, taking their respective policy rates to the highest levels since 2008. Over 90% of central banks have hiked interest rates this year, making the (mostly) global coordinated effort unprecedented. The good news? We think we’re close to the end of these rate hiking cycles, which could lessen the headwind we’ve seen on global financial markets this year.

(MOSTLY) GLOBAL COORDINATED EFFORT

With the Fed’s 0.50% rate hike last week, it capped a year in which the FOMC raised shortterm interest rates at the fastest clip in four decades. Moreover, the magnitude of rate hikes brought the fed funds rate to its highest levels in over a decade. But it wasn’t just the Fed playing catch-up—central banks globally are following suit and raising policy rates in an attempt to arrest the highest consumer price increases since the 1980s. These are “mostly” coordinated because some central banks, such as the ECB, did not start raising rates until four months after the Fed started hiking.