Charting the Global Economy: Interest-Rate Hikes May Be Coming

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(Bloomberg) — Monetary policymakers from the US to Europe to Japan all held the line on interest rates this week as they assess the economic fallout from a war-driven spike in energy costs.

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But that could soon change. Money markets are betting on rate hikes by the European Central Bank this year, with the first as soon as next month. The Bank of England shifted to a more hawkish stance and a rate hike is still on the table for the Bank of Japan.

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Meanwhile in North America, Federal Reserve officials signaled one rate cut this year, while Bank of Canada policymakers held rates steady and noted they would look beyond the war’s immediate inflation impact as officials focus on downside growth risks.

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Central bankers around the world are in a tough spot. While rapidly soaring energy costs risk fueling higher inflation, they could also suppress business activity and household consumption.

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Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy, markets and geopolitics:

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World

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Aside from the aforementioned monetary policy decisions, central banks in Taiwan, Sweden, Switzerland, Indonesia, Armenia, Ukraine, the Czech Republic, Uzbekistan, Morocco and Paraguay kept interest rates unchanged. Brazil, Russia and Ghana lowered borrowing costs. Australia raised rates for a second straight meeting, while Iceland also tightened policy.

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An Iranian missile strike on the Ras Laffan complex in Qatar inflicted extensive damage to the world’s largest liquefied natural gas plant. Oil loadings on Saudi Arabia’s west coast, a vital export route for the country amid the closure of the Strait of Hormuz, were briefly halted by an attack. European gas futures surged to more than double their pre-war level, and Brent crude topped $119 a barrel at one point on Thursday.

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Each week the world’s largest liquefied natural gas plant remains shut, the world loses the equivalent of enough energy to power Sydney’s homes for an entire year. Buyers are now bracing for an outage that could ripple through markets for years.

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Europe

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ECB policymakers would be ready to raise interest rates as soon as their next meeting should fallout from the war in Iran push inflation too far above target, according to people familiar with the situation. April’s decision won’t feature updated forecasts, which may deter some officials from committing to policy action. Some of the people therefore suggested June as a more likely juncture to increase borrowing costs.

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The BOE said it “stands ready to act” against a surge in inflation triggered by war in the Middle East, prompting traders to ramp up bets on an interest-rate hike as soon as next month. Officials voted unanimously to leave rates unchanged at 3.75% in their first decision without any dissent in four and a half years. Minutes from the meeting pointed to a major hawkish shift by the panel, while the Iran conflict disrupts production in the world’s most important oil-producing region.