The central banks of New Zealand, Denmark and Colombia raised key interest rates last week, strengthening this year’s trend toward higher rates as global monetary policy slowly unwinds from years of ultra-low rates and extraordinary policy measures.
Russia’s central bank also raised its policy rate last week, but this was mainly in response to heightened inflationary pressures from the falling ruble as spooked investors continue to withdraw funds due to a worsening of the conflict with Ukraine and the West.
Last week’s rate hikes raised the number of central bank rate increases so far this year to 17, topping the 15 rate cuts, cementing this year’s trend toward higher rates as the global economy recovers and the U.S. Federal Reserve pulls back on extraordinary stimulus.
The Global Monetary Policy Rate (GMPR), the average nominal rate of the 90 central banks followed by Central Bank News, rose to 5.58 percent at the end of the week, up from 5.53 percent at the end of March and 5.51 percent at the end of January.
In the month of April, five central banks have changed policy rates (Brazil, Ukraine, New Zealand, Russia and Colombia) with every decision leading to higher rates while no central banks have cut rates.
Denmark is not included in this list as it raised its deposit rate and not its benchmark lending rate. Nevertheless, the move by Denmark’s Nationalbank is significant because it concludes the bank’s experiment with negative deposit rates and shows how central banks are unwinding the extraordinary measures they took in the wake of the global financial crises and Europe’s sovereign debt crises.
Denmark introduced the negative deposit rate for banks on July 6, 2012 when it cut the rate for the third time that year to minus 0.20 percent.
The move came at the height of the euro zone’s crises in an attempt to reduce the inflow of capital and the resulting upward pressure on its crown currency from investors that were seeking a safe haven at a time when serious questions were being raised about the survival of the single currency.
