The BOJ left its interest rates and asset purchases unchanged and downgraded its assessment of the economy, citing the impact of COVID-19. Image Credit: AP

New York: Federal Reserve officials this week embarked on a campaign of tighter monetary policy with the first increase in the US benchmark interest rate since 2018 as inflationary pressures build.

The Bank of Japan is choosing a different course. Japanese central bankers opted to keep policy stimulative in order to support an economy still contending with the coronavirus.

Meantime, global inflationary pressures persist as Russia’s attack on Ukraine drives up commodities costs.

United States

The Fed kicked off a campaign of interest rate hikes that’s set to be the most aggressive since the mid-2000s. After raising rates by a quarter point and signaling six more increases this year, Fed Chair Jerome Powell told reporters that inflation is too high, the labor market is over-heated and price stability is a ‘pre-condition’ for the central bank as it tackles the hottest price pressures in 40 years.

Prices paid to US producers rose strongly in February on higher costs of goods. The producer price index for final demand increased 10 per cent from February of last year and 0.8 per cent from the prior month.

US importers, straining under a tapped-out supply chain, are increasingly offering top dollar for long-term shipping contracts that may not even be honored as they try whatever it takes to guarantee the arrival of their products. The pandemic-driven boom in demand for goods pushed both contract and spot rates for shipping to records - getting merchandise from place to place costs about 11 times more than it did before the COVID-19 outbreak.


Russia is a commodities powerhouse, producing and exporting huge amounts of materials the world uses to build cars, transport people and goods, make bread and keep the lights on. Its attack on Ukraine is constraining those crucial supplies - or threatening to - as it becomes increasingly isolated from the global economy, driving up prices in the process.

Russia’s oil output may slump by about a quarter next month, inflicting the biggest supply shock in decades as buyers shun the nation’s exports following its attack on Ukraine, the International Energy Agency said. Russian oil production could plunge by 3 million barrels a day, further squeezing a world market already strained by the post-pandemic rebound in demand.


France’s central bank said the war in Ukraine is already affecting the economy and creating high uncertainty that makes it tricky to forecast how much inflation will accelerate, or the extent to which the recovery from the pandemic will slow.


China’s surprisingly robust economic data for the first two months of this year sparked heated discussions among analysts struggling to reconcile the figures with underlying indicators showing a much weaker picture. Some of the strong headline numbers in the release by the National Bureau of Statistics are not supported by a detailed breakdown of the data, several economists have highlighted.

Bank of Japan Governor Haruhiko Kuroda doubled down on his commitment to continue with stimulus even if inflation continues to accelerate, in a rebuttal of the need to join a global wave of central banks normalizing policy. The BOJ left its interest rates and asset purchases unchanged and downgraded its assessment of the economy, citing the impact of COVID-19.

Emerging markets

Central banks in five African nations will likely raise interest rates in the coming weeks to tame inflation pressures that threaten to become entrenched. Those in another seven are expected to keep borrowing costs on hold as they assess the impact of supply shocks caused by Russia’s war on Ukraine.

Argentina’s inflation accelerated in February at its fastest pace in nearly a year, surpassing forecasts and challenging the government’s targets for this year in its preliminary agreement with the International Monetary Fund.