## Central Banks Hike Interest Rates in Sync to Tame Inflation Pressures

_IMF Blog, August 10, 2022_

## Source details

**Canonical URL:** [Central Banks Hike Interest Rates in Sync to Tame Inflation Pressures](https://www.imf.org/en/blogs/articles/2022/08/10/central-banks-hike-interest-rates-in-sync-to-tame-inflation-pressures)

## Other formats

- [Markdown version](/en/blogs/articles/2022/08/10/central-banks-hike-interest-rates-in-sync-to-tame-inflation-pressures/index.md)
- [Structured JSON version](/en/blogs/articles/2022/08/10/central-banks-hike-interest-rates-in-sync-to-tame-inflation-pressures/index.json)
- [Bundle manifest](/en/blogs/articles/2022/08/10/central-banks-hike-interest-rates-in-sync-to-tame-inflation-pressures/bundle-manifest.json)

## Bibliographic details
- Authors: Tobias Adrian, Fabio Natalucci
- Published: August 10, 2022

---

### Overview
- Authors: Tobias Adrian, Fabio Natalucci
- Date: August 10, 2022
- Context: During the pandemic, central banks in both advanced and emerging market economies implemented interest-rate cuts and asset purchases to ease financial conditions and support the economic recovery.
- Current situation: With inflation at multi-decade highs in many countries and pressures broadening beyond food and energy prices, policymakers have pivoted toward tighter policy.

### Recent policy moves and synchronization
- Emerging market central banks proactively started to hike rates earlier last year; advanced-economy counterparts followed in the final months of 2021.
- The monetary policy cycle is increasingly synchronized globally.
- The pace of tightening is accelerating in several countries, particularly in advanced economies, in terms of both frequency and magnitude of rate hikes.
- Some central banks have begun to reduce the size of their balance sheets, moving further toward normalization of policy.

### Rationale and constraints for tightening
- Stable prices are described as a crucial prerequisite for sustained economic growth.
- With risks to the inflation outlook tilted to the upside, central banks must continue normalizing to prevent inflationary pressures from becoming entrenched.
- Monetary policy cannot resolve remaining pandemic-related bottlenecks in global supply chains and disruptions in commodities markets due to the war in Ukraine.
- Monetary policy can slow overall demand to address demand-related inflationary pressures; thus, tightening of financial conditions is the goal.

### Policy recommendations and communication
- Central banks need to act resolutely to bring inflation back to their target, avoiding a de-anchoring of inflation expectations that would damage credibility built over the past decades.
- Clear communication by central banks about the need to further tighten policy and steps required to control inflation is crucial to preserve credibility.
- Clear communication is also critical to avoid a sharp, disorderly tightening of financial conditions that could interact with, and amplify, existing financial vulnerabilities.

### Risks and trade-offs
- High uncertainty in the economic and inflation outlook hampers the ability of central banks to provide simple guidance about the future path of policy.
- A sharp, disorderly tightening of financial conditions could put economic growth and financial stability at risk down the road by amplifying existing financial vulnerabilities.

*Source: Tobias Adrian, Fabio Natalucci, August 10, 2022.*

---


## References

- [Chart of the Week](https://www.imf.org/en/News/Chart-of-the-week)
- [https://www.imf.org/wp-content/uploads/2022/08/COTW-MCM-Rate-Hikes.jpg](https://www.imf.org/wp-content/uploads/2022/08/COTW-MCM-Rate-Hikes.jpg)

_Source: https://www.imf.org/en/blogs/articles/2022/08/10/central-banks-hike-interest-rates-in-sync-to-tame-inflation-pressures_