Supporting Weakening Currencies, Several Central Banks Raise Interest Rates

16/08/2018 12:43 WIB

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Central banks in several developing economies have been forced to raise their benchmark interest rates to support their currencies against declines.

Central Bank Interest Rate Hikes/Cuts in Several Countries (Jan-Aug 2018)

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Supporting Weakening Currencies, Several Central Banks Raise Interest Rates

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Central Bank Interest Rate Hikes/Cuts in Several Countries (Jan-Aug 2018)

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Several central banks in developing economies have been forced to raise their benchmark interest rates to support their currencies against a decline. The strength of the US dollar against major world currencies has dragged down several currencies in countries such as Venezuela, Argentina, and Turkey.

From January to August 2018, the Argentine central bank raised its benchmark interest rate by 1,125 basis points to 40% after its currency depreciated by more than 36%. The Turkish central bank also raised its benchmark interest rate by 950 basis points to 17.5%. Similarly, Bank Indonesia raised its 7-day Repo Rate by 125 basis points to 5.5% this year due to the weakening rupiah.

The improving US economy, coupled with the Fed's interest rate hikes to curb inflation, has driven up the US dollar. In addition, President Donald Trump's protectionist policies, including raising tariffs on goods entering the United States, have created uncertainty in the global financial markets.

"Disclosure: This is an AI-generated translation of the original article. We strive for accuracy, but please note that automated translations may contain errors or slight inconsistencies."