Is the phase of coordinated central bank action against world inflation to end?

Federal Reserve Governor Jerome Powell testified at a Senate Banking Committee hearing on Capitol Hill in June.

- Dr. T K Jayaraman

Now Tow each central bank seems to act on its own. They do not seem to consider inflation as a common enemy anymore, unlike what they did when inflation rose to ravage the global economy from second half of 2021, but now seen receding. The United States Federal Reserve (the Fed), whose inflation target is 2% finally decided to pause its interest change on June 14, 2023. That marked the snapping up of a string of 10 consecutive rate hikes since July last year for 2022 for fighting "the country's worst outbreak of inflation in 40 years". The inflation rate was at its highest in US in April 2022 at 9.1%. Anti-inflationary measures thereafter eventually produced results. Inflation in US was cooling off with a clear downward trend from 6.4% in January 2023, 6.0% in Feb, 5.0% in March, 4.90% in April and 4.0% in May. June inflation data would be available around July.

The United Kingdom (UK), and the Eurozone, comprising 22 countries with a common currency have been facing persistent inflation, exceeding their target rate at 2%. Inflation in UK has been 8.70% for the past two months in 2023 (April and May). In the euro zone it was still above 6%, though showing somewhat a declining trend of 6.96% in April and 6.10% in May. While the Bank of England (BOE) raised the interest rate by 50 basis points to 5%, European Central Bank (ECB) effected a more moderate increase in its interest rate on June 15, to 4% in June, a 22-year high, from the May rate of 3.75%.

India, an emerging economy has been experiencing a downward trend in its inflation beginning from the first month of 2023 (6.52% in Jan, 6.44% in Feb, 5.66% in March and 4.70% in April). The Reserve Bank of India (RBI) paused the interest rate change in April and continued its policy interest rate at 6.50%. As inflation came down to 4.25% in May, RBI again paused the interest rate change on June 8, for the second time, maintaining the rate at 6.50%.