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Over the past months, the Federal Reserve has been relentlessly on its rate tightening path; it raised interest rates on eleven out of twelve occasions. It was only in June that it took a  pause on the anticipated lines and kept the rates unchanged in the range of 5.00% to 5.25%. However, the European Central Bank and the Bank of England decided to go ahead with the rate hikes as scheduled.

After the Fed’s decision to pause in its June 2023 meeting, the European Central Bank (ECB) and the Bank of England (BoE) took different approaches. The ECB decided to raise its interest rates by 25 basis points in response to high and persistent inflation. With inflation projected to average 5.4% in 2023, the ECB deemed tighter monetary policy necessary. Meanwhile, the BoE chose not to set the stage for a pause in its rate hike cycle, unlike the Fed. The BoE continues to monitor the impact of higher rates on economic growth and jobs. These actions reflect the differing economic situations and inflationary pressures faced by each central bank.