The three major central banks have raised interest rates to leverage the market situation

[The Bank of England raised interest rates by 50 basis points as scheduled]

The Bank of England raised interest rates by 50 basis points as scheduled, but will slow down rate hikes in the future. On Thursday local time, the Bank of England raised interest rates for the 10th time in a row, reaching the highest level in 14 years, trying to curb the local double-digit inflation rate. While the hike was in line with many economists' forecasts, this time the Bank of England signaled a policy shift, saying it would not ""force"" a rate hike if necessary.

[The Federal Reserve raised interest rates by 25 basis points]

The Fed raised interest rates moderately by 25 basis points this week and will slow down the pace of interest rate hikes in the future. After the first policy meeting in 2023, the Federal Reserve announced on Thursday that it would raise the federal funds rate by 25 basis points to a range of 4.5-4.75%. The decision was in line with market expectations. In its policy statement, the Fed stated that "continued rate hikes" would be appropriate and was considering the "degree" of future rate hikes.

[Euro zone interest rates raised by 50 basis points]

The European Central Bank announced on the 2nd that it will raise the three key interest rates in the euro zone by 50 basis points, and reiterated that it will maintain the scale of balance sheet reduction and continue to maintain the pace of monetary tightening. Analysts believe that although the European Central Bank's continuous and substantial interest rate hikes will help curb rising inflation, at the same time it will raise borrowing costs and curb economic activities. The euro zone economy may be weak in the short term. Preliminary statistics from Eurostat showed that the inflation rate in the euro zone was 8.5% on an annualized basis in January, lower than the 9.2% in December last year, and slowed down for three consecutive months due to the decline in energy prices.

[There is downward pressure on the dollar]

Fed policy changes in the first quarter of 2023 will set the stage for a longer-term decline in the dollar. The market is pricing in our long-running forecast that the Fed will be forced to cut rates in the second half of 2023. It would be a mistake for the Fed to insist on raising key interest rates well above current levels and keeping them there for an extended period of time if inflation continues to fall unexpectedly. We still expect Fed policy changes in the first quarter of 2023 to set the stage for a longer-term decline in the dollar.

[The rise of the euro exchange rate will help the European Central Bank fight inflation]

A stronger euro helps the European Central Bank fight inflation. A stronger euro makes most of the euro zone's imports, especially energy, cheaper, helping to curb inflation. For businesses and households in the euro zone, the cost of borrowing has risen with interest rates. The bank loan survey released by the European Central Bank on January 31 showed that as the central bank has raised interest rates several times in a row, banks in the euro area are substantially raising various lending standards, and the degree of tightening of corporate credit standards has reached the highest level since the European debt crisis.

[Weak UK economic outlook puts pressure on the pound]

The International Monetary Fund has issued a relatively negative forecast for the UK's economy, predicting that its gross domestic product will contract by 0.6% in 2023. The Bank of England also believes that the country's economy is heading for a recession, but it may be "minor" and not too worrying at all.

[IMF lowers UK GDP forecast in 2023]

In its report, the International Monetary Fund (IMF) cut its GDP forecast for the UK in 2023 from a growth of 0.3% to a contraction of 0.6%. The UK became the only Group of Seven (G7) economy expected to contract in the report. The main reasons for the IMF's forecast include public sector strikes for wages and inflation still above 10%. In the IMF's forecast for the other G7 countries, the GDP of the United States is expected to grow by 1.4% in 2023, Germany is expected to grow by 0.1%, France is expected to grow by 0.7%, Italy is 0.6%, Japan is 1.8%, and Canada is 1.5%.

[Britain's salary incentives reached a 30-year high]

Provisional data released by XpertHR, a human resources information provider, shows that the median increase in salary incentives for British employers in January will reach 6%, the highest in more than 30 years. Bank of England Deputy Governor Broadbent warned that the current wage level is not in line with the central bank's 2% target. BoE Governor Bailey said officials had been surprised by the strength of the private sector wage deal, although he added there were signs that could ease later this year. The Bank of England is watching the pay agreement data for signs that a recent surge in inflation will have a lasting impact on wage growth, which could lead to more persistent inflationary pressures in the coming years and could prevent the Bank of England from cutting interest rates.