The world’s central banks have begun the new year with policy adjustments as the global battle against inflation continues and as they adjust to the new policies from the US.
Global economies are modifying policies to adapt to evolving conditions, while the risk of recession persists. Former US President Donald Trump’s protectionist trade policies and tariff threats have led major central banks to adopt a more cautious approach.
The Federal Reserve maintained its interest rate at 4.25% to 4.50%, in line with expectations, citing relatively stable unemployment, continued strong economic activity, and robust labour market conditions.
Chair of the Federal Reserve of the United States stated that there is no urgency to adjust the bank’s policy, and although inflation remains somewhat elevated, it is approaching the long-term 2% target.
The European Central Bank (ECB) reduced its deposit interest rate to 2.75%, the refinancing rate to 2.90%, and the marginal borrowing rate to 3.15%, lowering its three key policy rates by 25 basis points each.
The refinancing and marginal funding rates were reduced for the fifth time since March 2016, while the deposit rate was lowered for the fifth time since September 2019.
The ECB’s decision followed slowing economic growth across the eurozone, with inflation reaching 2.4% in December last year, close to the bank’s 2% target. ECB President Christine Lagarde stated that the eurozone economy remains weak and was stagnant in the fourth quarter of last year.
Türkiye’s Central Bank reduced its policy rate by 250 basis points to 45% at its January meeting, noting that inflation declined in the previous month. Leading indicators from last month showed growth within expectations, primarily driven by services.
The bank noted that core goods inflation remained low, and indicators from the final quarter suggested that domestic demand supported disinflation.
Türkiye’s Central Bank is scheduled to announce a total of eight rate decisions this year.
Meanwhile, the Bank of Canada (BoC) lowered its policy rate by 25 basis points to 3%, easing its stance for the sixth consecutive meeting. The bank announced plans to gradually resume asset purchases in early March, with the balance sheet stabilising in line with economic growth.
