[이데일리 방성훈 기자] The US Federal Reserve (Fed) raised the key interest rate by 0.5 percentage point for the first time in 22 years on the 4th (local time), and central banks around the world are also raising the base rate one after another.
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According to major foreign media such as Reuters, the central banks of Saudi Arabia, the United Arab Emirates (UAE), Qatar and Bahrain raised their key interest rates by 0.5 percentage points immediately after the US Federal Reserve raised interest rates on the same day. The Central Bank of Kuwait also raised its key interest rate by 0.25%.
The reason these countries react immediately to the Fed’s interest rate hike is to prevent the depreciation of their currencies and ultimately to prevent the fall of international oil prices. Except for Kuwait, four countries have introduced a fixed exchange rate system (dollar peg) that links their currencies to the US dollar.
An increase in the US interest rate could cause the dollar to strengthen, which could lead to a fall in oil prices. Kuwait abandoned the dollar peg in 2007, but the dollar has the largest portion of its international currency basket.
The central bank of Brazil also raised the key interest rate by 1 percentage point from 11.75% to 12.75% on the same day. This is the highest level in more than five years since 13.0% in January 2017. Brazil has raised interest rates 10 times in a row since March of last year.
Earlier on the 3rd, the Reserve Bank of Australia raised the key interest rate from 0.10% to 0.25%. It was the first rate hike in 11 years and 6 months since November 2010.
The market is also predicting that the Bank of England (BOE), which will hold a monetary policy meeting on the 5th, will also raise the base rate by 0.25 percentage points from 0.75% to 1.0%. If the key interest rate is raised again this time, it will be the fourth consecutive hike, the highest level in 13 years since February 2009.
In addition, central banks around the world, including Korea as well as the European Central Bank (ECB), are expected to strengthen austerity policies one after another. According to Bloomberg News, “the era of ‘easy money’, which was released to stimulate the economy, is over.”
