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Central banks around the world follow the Fed in stepping down rate hikes - CNN

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London CNN  — 

Central banks around the world are joining the Federal Reserve in slowing down the pace of interest rate hikes as decades-high inflation shows signs of easing.

The Bank of England and the European Central Bank both hiked rates by half a percentage point on Thursday in their final meetings of the year. Previously, they had gone with increases of three-quarters of a percentage point.

The central banks are trying to tame inflation without putting too much pressure on the economy.

The United Kingdom is already sliding into a recession, and Europe may not be far behind.

The ECB said GDP across the 19 countries that use the euro may contract this quarter and next due to high energy prices, ongoing uncertainty, weak global activity and tighter financial conditions.

According to the bank’s projections, a recession “would be relatively short-lived and shallow,” it added.

Both central banks indicated that they expect to keep hiking interest rates in the new year. But early indications that inflation may have peaked are allowing policymakers to start taking it easier, following an unprecedented sprint over the past 12 months.

Annual consumer inflation in the United Kingdom was 10.7% in November, down from 11.1% in October. In Europe, consumer prices rose 10% in the year to November compared to a record 10.6% in October.

The Bank of England has now raised borrowing costs at nine consecutive meetings starting in December 2021. Its larger hike in November was its biggest in 33 years.

The European Central Bank started increasing rates in July. It opted for larger hikes at its last two meetings.

— This is a developing story and will be updated.

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