TOKYO (Reuters) -While the U.S. Federal Reserve is publicly committed to keeping interest rates near zero for some time, there are growing expectations that accelerating inflation could pressure the central bank to begin seriously debating the withdrawal of monetary stimulus.
At the same time, central banks in other parts of the world are already adjusting monetary settings or preparing to dial back pandemic crisis-mode stimulus measures.
The Bank of Japan has maintained ultra-easy monetary policy for years in a long battle to revive stagnant consumer prices.
A Fed tapering is unlikely to change that outlook. The key concern among BOJ policymakers is the risk of market turbulence that could boost investors’ demand for the safe-haven yen.
The Bank of Canada became the first among Group of Seven nations to withdraw its pandemic era stimulus and signalled rates could begin to rise in 2022.
China’s central bank is trying to cool credit growth to help contain debt risks, but is treading warily to avoid hurting the economic recovery that remains uneven as consumption lags.
A Chinese central bank official said signals from the Fed on future policy shifts will have limited impact on China’s financial markets.
The Norwegian central bank plans to raise rates in the third or fourth quarter of 2021, likely making it the first among its G10 peers to increase the cost of borrowing since the pandemic began.
Sweden’s central bank has said it intends to complete its 700-billion Swedish crown asset purchase programme as planned by the end of 2021.
But the pace of asset purchases will decrease throughout the year. After that, the Riksbank has said it will keep its balance sheet roughly unchanged, at least during 2021, replacing bonds that mature.
The Reserve Bank of New Zealand has held rates at record lows but hinted at a hike as early as September next year as the country rapidly emerges from its pandemic slump.
The Bank of Korea signaled an eventual tilt towards tightening to end its run of record-low rates, and upgraded its growth and inflation projections.
Double-digit inflation, persistent currency weakness and badly depleted reserves prompted Turkey’s central bank to begin aggressively tightening policy in September last year, well before emerging market peers. Its key rate is now one of the highest globally at 19%.
The World Bank and others say premature Fed tightening is the biggest risk for Turkey. The central bank is not expected to tighten any more in part due to public pressure from President Tayyip Erdogan to maintain monetary stimulus.
Brazil’s central bank raised its benchmark rate at its past two policy meetings and has indicated it will do so again with inflation expected to surge.
South Africa’s central bank has kept rates low to support its economic recovery, but said upside inflation risks were beginning to emerge.
Its governor said the recent spike in consumer prices was temporary, but that the bank would not hesitate to tighten policy if it became permanent.
Indonesia’s central bank governor said in May it must be prepared for a potential Fed tightening next year, warning that such a move could have an impact on local financial markets.
Bank Indonesia has cut rates by a total of 150 basis points and injected more than $50 billion in liquidity since the pandemic began.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno has said the central bank is prepared for any change in Fed policy but does not think the U.S. bank will “rock the boat” ahead of U.S. mid-term elections next year.
The BSP kept rates at record lows and pledged to maintain loose policy until it was sure the economy was on a path to recovery.
The Reserve Bank of India (RBI) has kept rates at record lows as its economy struggles with a devastating new wave of COVID-19 infections.
RBI Governor Shaktikanta Das said its growing foreign exchange reserves, which now exceed $600 billion, will help deal with “challenges arising out of global spillovers.”
(Reporting by Swati Bhat in Mumbai, Neil Jerome Morales in Manila, Gayatri Suroyo in Jakarta, Jamie McGeever in Brasilia, Praveen Menon in Wellington, Leika Kihara in Tokyo, Cynthia Kim in Seoul, Jonathan Spicer in Istanbul, Mfuneko Toyana in Johannesburg; Editing by Kim Coghill)