Global Central Banks Increases Their Efforts to Combat Inflation

As rapid inflation persists and seeps into a wide range of goods and services, central bankers around the world are aggressively raising interest rates, setting the global economy up for a lurch toward more expensive credit, lower stock and bond values, and - potentially - a sharp slowdown in economic activity. It is a moment, unlike anything the international community has seen in decades, as countries around the world try to control rapid price increases before they become a more permanent part of the economy.

Since early 2021, inflation has risen in many advanced and developing economies as high demand for goods collided with shortages caused by the pandemic. Central banks hoped for months that economies would reopen, shipping routes would clear, easing supply constraints, and consumer spending would resume normalcy. That has not occurred, and the conflict in Ukraine has only exacerbated the situation by disrupting oil and food supplies, driving up prices even further.

This year, global economic policymakers began to respond seriously, with at least 75 central banks raising interest rates, many from historically low levels. While policymakers cannot do much to control high energy prices, higher borrowing costs may help slow consumer and business demand, allowing supply to catch up across a range of goods and services and preventing inflation from continuing indefinitely.