Global Economy: Fed moves the cheese

• For the first time in three years, the US (United States) Federal Reserve (Fed) raised the policy rate (25 basis points to 3.75-4.0%) at its September meeting. The Fed dot plot indicates another rate hike is likely this year
• Inflation in the Eurozone rose further, to 3.2% in August from 2.9% in July. Energy inflation is the key driver of the increase, but non-energy industrial goods are also surging
• • The GEP Global Supply Chain Volatility Index indicates that in August, the supply-chain pressure rose for the first time in three months

Rising inflation expectations due to the conflict in West Asia have increased the likelihood of rate hikes by key central banks across the world. In the US, the Fed raised rates for the first time since 2023 in September as inflation remained above the 2% target.

The European Central Bank and Bank of Japan have also hiked interest rates this year. While the European Central Bank raised rates (25 basis points) for the second time this year at its September meeting, the Bank of Japan raised its key policy rate to 1.25% from 1.0%.

High global energy prices and supply-chain pressures persisted, given the renewed tensions in West Asia.