LONDON (Reuters) - The European Central Bank on Thursday stuck with plans for a big interest rate increase, keeping up the pace of its monetary tightening to contain inflation even as markets wobble.
The collapse last week of Silicon Valley Bank in the U.S. has highlighted banks' vulnerabilities to sharply higher rates, while a rout in Credit Suisse shares added to market turmoil.
The turbulence could strengthen the case for major central banks to slow the pace or pause of rate increases ahead.
Overall, 10 big developed economies have raised rates by a combined 3,165 basis points (bps) in this cycle to date.
Graphic: The race to raise rates - https://www.reuters.com/graphics/GLOBAL-MARKETS/jnpwyjemkpw/chart.png
Japan is the holdout dove.
Here's a look at where policymakers stand, from hawkish to dovish.
1) UNITED STATES
The Federal Reserve, meeting on March 22, is caught between focusing on stubborn core inflation and stresses in the banking system sparked by the failure of California's Silicon Valley Bank.
A lending programme designed to stem deposit outflows may give the Fed scope to continue raising its funds rate from the current 4.5%-4.75% range, although the next increase is not expected to be aggressive.
Traders mostly expect a 25 bps rise to 4.75-5.00%.
Graphic: Fed's next decision: to hike or to pause? - https://www.reuters.com/graphics/USA-FED/znvnblbdxvl/chart.png
2) NEW ZEALAND
The Reserve Bank of New Zealand (RBNZ) has slowed its pace of tightening, raising rates by 50 bps to a 14-year high of 4.75% in February.
Meeting minutes showed officials had considered a 75-bps hike. The RBNZ also held its peak rate forecast at 5.5%, saying that it was too early to assess policy implications from January's severe flooding in the country's North Island.
Graphic: New Zealand's rate hikes - https://www.reuters.com/graphics/NEWZEALAND-ECONOMY/dwvkdkdggpm/chart.png
3) CANADA
The Bank of Canada on March 8 became the first major central bank to halt monetary tightening during this cycle.
It held its key overnight interest rate at 4.50% with the aim to hold there as long as inflation dropped to 3% at about mid-year. Deputy governor Carolyn Rogers (NYSE:ROG) has said that "if evidence accumulates suggesting inflation may not decline in line with our forecast, we're prepared to do more."
Graphic: Bank of Canada holds its key rate - https://www.reuters.com/graphics/CANADA-CENBANK/akveqeqzjvr/chart.png
4) BRITAIN
Futures market predictions have been shifting over whether the Bank of England, the first major central bank to turn hawkish back in December 2021, will lift interest rates for an eleventh time on March 23.
BoE governor Andrew Bailey said it was possible the bank was near the end of its rate rise cycle. Traders now see a 46% chance of a pause at the current rate of 4%.
Graphic: BoE's inflation fight - https://www.reuters.com/graphics/GLOBAL-CENTRALBANKS/znpnblbzxpl/chart.png
5) AUSTRALIA
Australia's central bank raised its key rate by a quarter point to 3.6% in March, the highest since May 2012, but hinted rate hikes may be over for now. Reserve Bank of Australia governor Philip Lowe said on March 8 monetary policy was now "in restrictive territory" and said the bank's board was ready to react if economic data supported a pause.
Graphic: Taming inflation - https://www.reuters.com/graphics/GLOBAL-MARKETS/THEMES/lbpgglyzypq/chart.png
6) NORWAY
Norway's central bank meets next week and is expected to raise rates by 25 bps to contain above-target inflation.
Norges Bank has raised its key policy rate eight times since late 2021, hiking it to 2.75% from zero, and has said it is likely to increase it to 3% in March.
Graphic: Norway's inflation trouble - https://www.reuters.com/graphics/GLOBAL-CENTRALBANKS/byvrlmlrnve/chart.png
7) EURO ZONE
The ECB raised its key rate by another 50 bps to 3% on Thursday, its sixth successive hike and the highest level since October 2008, despite turmoil in financial markets that has raised fears about a global banking crisis.
It said that future rate increases would depend on incoming data as it sticks with a plan to bring inflation down to its 2% medium-term target.
Graphic: ECB sticks to big hike ECB sticks to big hike - https://www.reuters.com/graphics/GLOBAL-CENTRALBANKS/gdvzqkyzbpw/chart.png
8) SWEDEN
The Riksbank raised Swedish borrowing costs by 50 bps in February, to 3%, and signalled more tightening is coming. Its next decision is on April 26.
Inflation was red-hot in February, with the underlying rate, stripping out volatile energy prices, jumping to 9.3%, the fastest pace since July 1991.
Graphi: Further Riksbank hikes expected amid record inflation - https://www.reuters.com/graphics/GLOBAL-CENTRALBANKS/xmvjkbkogpr/chart.png
9) SWITZERLAND
Having just pledged $54 billion to prop up Credit Suisse, the Swiss National Bank has more to worry about than inflation, although that's certainly a headache.
Headline annual inflation rose in February to a higher than expected 3.4%.
Nonetheless, banking system stress means traders now expect a 25 bps rate increase on March 23, a step down from a 50 bps rise, to 1%, in December.
Graphic: More rate hikes - https://www.reuters.com/graphics/CEN-WRAP/lbvggjnqevq/chart.png
10) JAPAN
The Bank of Japan, the most dovish major global central bank, maintained ultra-low interest rates at its March meeting, the final one for retiring BOJ governor Haruhiko Kuroda.
The BOJ resisted changing its controversial yield curve control policy, which it uses to cap interest rates on longer-term debt. Investors expect Kuroda's successor Kazuo Ueda to phase the programme out, maybe as soon as this year, as inflation now exceeds the BOJ's 2% target.
Graphic: BOJ under fire - https://www.reuters.com/graphics/JAPAN-ECONOMY/BOJ/xmvjkbozkpr/chart.png