Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Bank of Canada Governor Mark Carney (Adrian Wyld)
Bank of Canada Governor Mark Carney (Adrian Wyld)

Economy Lab

Inflation and the response by central banks Add to ...











U.S. Federal Reserve

Inflation rate: 1.6 per cent

Central bank rate: 0.25 per cent

Anecdotal evidence suggests American companies are starting to pass on higher input prices to consumers, but inflation remains a distant threat. The Fed's preferred gauge of inflation, which excludes food and fuel, rose 0.8 per cent in January from a year earlier, the same as December and is the lowest in five decades of record keeping. Unemployment remains the biggest problem for U.S. policy makers. "The economy's recovery is not firmly established, and we think monetary policy needs to be supportive," Fed chairman Ben Bernanke said in testimony at the House Financial Services Committee Wednesday.

Bank of Canada

Inflation rate: 2.3 per cent

Central bank rate: 1 per cent

Canada's central bankers stared into the face of the global inflation threat this week and gave a dismissive sniff. The country's economy grew at an annual rate of 3.3 per cent in the fourth quarter - a full percentage point more than the Bank of Canada's forecast. Yet Governor Mark Carney left the key overnight target unchanged. The stronger dollar is damping inflationary pressures by making imports cheaper. It's also damping Canada's economic growth prospects by making exports more expensive on international markets.

Reserve Bank of Australia

Inflation rate: 2.7 per cent

Central bank rate: 4.75 per cent

On Tuesday, Australia's central bank left its "mildly restrictive" benchmark lending rate alone for a fourth month and signalled confidence that inflation pressures are contained. The Reserve Bank of Australia, led by Glenn Stevens, was the first to raise borrowing costs after the financial crisis. That decision has allowed Mr. Stevens to stay ahead of inflation pressures. The RBA has raised its key rate 1.75 percentage points since late 2009, more than any advanced economy.

National Bank of Poland

Inflation rate: 3.8 per cent

Central bank rate: 3.75 per cent

The Polish central bank opted to leave interest rates unchanged - but with reservations - on Wednesday, citing concern over unemployment. But Marek Belka, the bank's governor, indicated the decision was taken with some reservation. The central bank raised borrowing costs in January and continues to worry about "a gradual rise in wage and inflationary pressure" over the medium term. "Some members of the Monetary Policy Council saw the January hike as the start of a cycle and I am one of them," Mr. Belka said.

Bank of England

Inflation rate: 4 per cent

Central bank rate: 0.5 per cent

The annual inflation rate is about 4 per cent - double the Bank of England's target. Three of nine members of the central bank's policy committee voted for raising the benchmark rate, breaking with Governor Mervyn King, who favoured leaving policy unchanged. Mr. King appears nonplussed. He told parliamentarians this week that he detects no "pickup in medium-term inflation expectations" and said he was confident that price increases would slow by the middle of this year.

European Central Bank

Inflation rate: 2.3 per cent

Central bank rate: 1 per cent

The clouds hanging over Europe's economy are many: wobbly banks, indebted states, elevated unemployment. But there is perhaps no institution that takes price stability more seriously than The European Central Bank, which sets policy for the 17 countries that use the euro. The euro zone consumer price index is at 2.3 per cent, higher than the ECB's target of "close to but below" 2 per cent. The ECB left its benchmark rate at 1 per cent on Thursday, but president Jean-Claude Trichet said that "an increase at the next meeting is possible."

Riksbank

Inflation rate: 2.5 per cent

Central bank rate: 1.5 per cent

Sweden's central bank has boosted interest rates five times since the summer and is planning more. The country's economy is one of the strongest in the world, advancing at an annual rate of 7 per cent in the fourth quarter. Minutes of the Riksbank's Feb. 14 meeting, released on Monday, showed that Governor Stefan Ingves supports raising the benchmark interest rate at each of the five remaining policy meetings this year. The worry is that the economy's strength will put upward pressure on wages, stoking inflation. If that happened, Mr. Ingves said he "would not be unsympathetic to raising the repo rate by more than 0.25 percentage point in one meeting."

Central Bank of Brazil (Banco Central do Brasil)

Inflation rate: 5.99 per cent

Central bank rate: 11.75 per cent

Brazil's economy grew 7.5 per cent in 2010, the most in 24 years, and inflation is running at an annual rate of about 6 per cent, compared with the central bank's target of about 4.5 per cent. Policy makers on Wednesday raised their benchmark rate to 11.75 per cent from 11.25 per cent and signalled more increases are coming in the months ahead.

Bank Rossii

Inflation rate: 9.6 per cent

Central bank rate: 8 per cent

Russia's central bank on Tuesday widened the range within which it allows the ruble to trade so a stronger currency can help it tame prices. "We think this measure … will ensure more effective transmission of interest rate policy and … better control price stability," first deputy chairman Alexei Ulyukayev said, according to Reuters. Russia's consumer price index increased to 9.6 per cent in January from a year earlier, testing the central bank's goal of keeping inflation below 10 per cent.

Bank of Korea

Inflation rate: 4.5 per cent

Central bank rate: 2.75 per cent

South Korea's central bank chief, Kim Choong Soo, raised borrowing costs in July, November and January. He may do so again at next week's policy meeting. Consumer prices climbed 4.5 per cent in February from a year earlier, faster than January's 4.1 per cent. The Asian country's economy still has momentum after expanding 6.1 per cent in 2010, the most since 2002.

Follow on Twitter: @CarmichaelKevin

 

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories