Pause, hike and cut: Central banks diverge over regional challenges

Pause, hike and cut: Central banks diverge over regional challenges

WASHINGTON: In Washington they paused; in Frankfurt they hiked; and in Beijing they cut. Central bankers in three of the world’s key economic regions have unveiled divergent monetary policies this week as they each contend with their own challenges. The moves reflect the different economic headwinds faced by the Euro-zone, the United States and China, and also where they are in their cycle of monetary policy. The US Federal Reserve began rapidly and aggressively raising rates in March last year, while the European Central Bank (ECB) adopted a more gradual approach to monetary tightening.

“I don’t know who has more to do, but certainly the Fed has done more than the ECB,” Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics (PIIE), told AFP. China’s situation is markedly different than the United States and the Euro-zone, with rate cuts on the menu as policymakers move to tackle lackluster economic growth and soaring youth unemployment. Skip, hike and cut On Wednesday, the Fed paused interest rate hikes after 10 straight increases, bringing its benchmark lending rate from close to zero to a range between 5.0 and 5.25 percent.

“It allows the economy a little more time to adapt as we