The ongoing conflict in Iran has brought turmoil to the global economy and has weighed on inflation levels in many countries. Central banks are being forced to react quickly and decisively to limit the impact, either by raising interest rates or issuing warnings about their actions to stabilize prices.
The European Central Bank (ECB) was the first major bank to decide to raise interest rates last week, warning that a peaceful solution to Iran would not immediately bring improvement to the issues facing the economy.
The conflict in the Middle East has not only increased energy prices, but has also caused severe damage to infrastructure, making restoring the oil market difficult and time-consuming.
This situation is particularly worrying as major economies, such as the United States and Britain, are still facing the consequences of the inflationary pressures seen in 2021-2022, with inflation rates remaining above central bank targets.
Her attitude Fed and its effects
New Federal Reserve (Fed) Chairman Kevin Worth struck a stern tone in his first press conference, referring to the Fed's commitment to maintaining price stability. "Inflation remains well above the 2% target," he said, underscoring the need for tight monetary policy.
Financial markets, which initially expected interest rate cuts in 2026, are adjusting their expectations with the prospect of increases, hoping that the Fed's moves will be communicated effectively.
What are the implications for the yen?
The rapid depreciation of the yen is causing concern worldwide and is putting pressure on the Bank of Japan (BOJ) to raise interest rates. According to experts, the Fed's hawkish stance may force the BOJ to accelerate its rate hike process.
The BOJ hiked rates, noting that the yen could affect inflation expectations in Japan . The bank announced that normalization procedures would continue if economic conditions warranted.
Structural reactions from central banks
Similar adjustments are being observed at the Bank of England, which decided to keep interest rates unchanged but left open the possibility of tightening its policy if energy prices show a new increase. According to the estimates of Governor Andrew Bailey, the recent declines in oil prices are a positive sign, but the situation remains unpredictable.
In Norway, Norges Bank kept interest rates at 4,25%, with a forecast for future increases, while the Reserve Bank of Australia decided on a pause in increases with a view to future tight policies.
The challenges for economies like New Zealand and Canada
In New Zealand, the central bank is expected to raise interest rates this summer, facing high inflation and rising unemployment, which puts it in a difficult position. Similarly, the Bank of Canada kept the interest rate at 2,25% and noted that there has been no significant impact from increases in energy costs.
Attention to Sweden and Switzerland
In Sweden, the Riksbank acknowledged the possibility of further interest rate hikes due to inflationary pressure caused by the war, while the Swiss National Bank maintained the interest rate at 0%, remaining cautious in its policies towards the economy and currency appreciation.
## TechNoid.gr's opinion
The global economic map is in a period of significant restructuring, with central banks shouldering the burden of managing inflationary pressures. Monitoring these developments is crucial for Greek consumers and investors, as the Greek economy may be affected by these decisions. It is good to prepare for possible increases in the prices of goods and services, which may escalate in the coming months.
