Global central banks are largely holding steady on their accommodative monetary policies, signaling a commitment to supporting economic recovery despite rising inflation in some regions. The decisions reflect concerns about the uneven pace of global growth and the potential for new economic shocks.

Key Considerations

• Inflation: While inflation has risen in several major economies, central bankers generally view this as a transitory phenomenon related to supply chain bottlenecks and base effects.
• Economic Recovery: The recovery from the COVID-19 pandemic remains uneven, with some sectors and countries lagging behind. Central banks are wary of prematurely tightening monetary policy and potentially derailing the recovery.
• Downside Risks: Policymakers are also mindful of potential downside risks, including new variants of the virus and geopolitical tensions.

Policy Tools

Central banks are employing a range of policy tools to support their economies, including:

• Low Interest Rates: Maintaining near-zero or negative interest rates to encourage borrowing and investment.
• Quantitative Easing (QE): Purchasing government bonds and other assets to inject liquidity into the financial system.
• Forward Guidance: Communicating their intentions to keep interest rates low for an extended period to provide clarity and confidence to markets.

The stance of major central banks suggests a cautious approach, prioritizing support for economic recovery over concerns about rising inflation. This approach is likely to continue until there is clear evidence of a sustained and broad-based recovery.