With the level of inflation, interest rates and growth varying across the world, there remain nuances in the approach of central banks, reflecting local constraints. As inflation falls, the inflation-adjusted interest rate naturally rises, meaning that central banks need to cut rates to keep policy the same. Rapid rate cuts, though, would likely raise questions about whether central banks overdid it in responding to high inflation over the past 18 months. Still, after being wrong-footed by inflation last year, central bankers also worry about a rebound in inflation rates if they lift their foot off the brake too soon. Underlining its caution, three of the BOE’s nine policy makers voted to raise the key interest rate to 5.5% from 5.25%.

Source: Wall Street Journal December 15, 2023 00:22 UTC