HONG KONG, March 20: Soaring energy prices are forcing central banks worldwide to consider interest rate hikes, except for the U.S. Federal Reserve. Before the conflict in the Middle East, investors anticipated two rate cuts by the Fed this year; now, they see little chance of any cuts. The euro, yen, sterling, Swiss franc, and the Australian dollar are gaining against the dollar as policymakers prepare for higher interest rates due to rising energy costs.
The euro, slightly down at $1.1569, saw a 1.4% weekly gain. The yen, around 157.88, rose 1.2%, while sterling, at $1.3422, increased by over 1.5%. The European Central Bank kept rates unchanged but warned of inflation driven by energy prices and indicated rate hikes might be discussed starting next month. This contrasts with the Fed's wait-and-see stance.
The Bank of England maintained rates but indicated readiness to act, prompting a sharp drop in short-term gilts. The Bank of Japan signaled a possible hike as early as April, surprising investors. The Reserve Bank of Australia raised rates for the second consecutive month, hinting at more hikes ahead.
Despite a slight dip in crude prices after U.S. President Donald Trump advised against repeated attacks on Iranian facilities, many analysts still predict a rebound for the U.S. dollar in a prolonged conflict scenario.