Amid the Middle East crisis, benchmark interest rates in major countries are moving in different directions. Australia is raising, Brazil is cutting, and the United States and Japan are holding, splitting broadly into three tracks. Variables are also growing for the Bank of Korea (BOK), which is set to announce its benchmark rate next month.
◇ Australia raises 0.25 percentage point vs. Brazil cuts 0.25 percentage point
The Reserve Bank of Australia (RBA) on the 17th (local time) raised the benchmark cash rate by 0.25 percentage point to 4.1% from 3.85% annually. Even with the jobless rate holding at a record-low 4.1% range and economic conditions strong, it hiked the benchmark rate for a second straight meeting after last month. Analysts said the recent rise in global oil prices due to the Middle East crisis influenced the decision on the view that inflation risks had grown.
By contrast, the Central Bank of Brazil on the 18th lowered its benchmark rate to 14.75% from 15%. Earlier, from late 2024 to mid last year, Brazil raised the benchmark rate from 12.25% to 15%. With inflation exceeding 4%, it had little choice but to tighten the money supply. This cut came as inflation eased into the low 3% range.
◇ United States, Japan hold… "EU, U.K. expected to hike 1–2 times in the second half"
The United States and Japan chose to hold their benchmark rates. The Federal Reserve (Fed) on the 18th kept the target range for the federal funds rate at 3.5%–3.75% annually. With the worsening situation in the Middle East raising the risk of an economic slowdown and higher inflation, the stance is to watch conditions for the time being. In the same vein, the Bank of Japan kept its benchmark rate at 0.75% at the monetary policy meeting held on the 19th.
There is increasing talk that the European Central Bank (ECB) and the Bank of England (BOE) may raise their benchmark rates. With inflation pressures mounting due to the Middle East crisis, some expect the ECB and BOE are likely to begin hikes in the second half, with two and one increases, respectively.
◇ Bank of Korea (BOK) to set benchmark rate on April 10… Experts see a "hold"
The Bank of Korea (BOK) will convene the the Bank of Korea's monetary policy committee on the 10th of next month to decide the benchmark rate. While the BOK has kept the benchmark rate at 2.5% annually, it had left the door open to a cut in light of weak domestic demand. But as major countries' benchmark rates have split into three tracks due to the Middle East crisis, that has become a variable for the BOK's rate decision.
Park Sang-hyun of iM Securities said, "The overall mood among major countries now is skewed toward holding or raising benchmark rates," adding, "If we raise rates, it could heavily burden the economy, so a prolonged hold is likely."