The Monetary Policy Hub (MPH) tracks central banks’ efforts to achieve price stability, maximum employment, and sustainable growth. With inflation near forty-year highs in many advanced economies, major central banks, including the US Federal Reserve, are raising interest rates and shrinking their balance sheets to control inflation. Our Hub provides real-time information about central banks’ tools, including rate hikes and balance-sheet policies, and details their impact on each country’s economy and financial system.
Scroll to explore the Monetary Policy Hub data explorer, our in-depth look at key central banks, and economic factors impacting inflation.
Key Challenges for 2023
How sticky will inflation prove to be?
Entering 2023, headline inflation in the United States and eurozone has started to soften. Certain goods, such as used cars, are showing a deflationary trend. But central bankers remain worried about the risk of price pressures broadening. Inflation across the services sector is increasingly outpacing price increases for goods while labor markets in advanced economies remain resilient, creating the possibility of wage-price spirals. The strong employment numbers paired with slowing inflation are also fueling hopes that soft landings can be achieved.
A new (or old) shock could tip the scales
Energy and food prices, pushed sharply higher by the war in Ukraine, have started to come down and supply-chain disruptions have eased. The prices to move shipping containers across the Pacific are now back to pre-pandemic levels. This helps central banks trying to rein in inflation. However, a more deadly virus variant, significant military escalation by Russia, or a different unexpected shock could trigger renewed price increases, complicating central bankers’ plans.
Central banks have commitment issues
With a recession in 2023 remaining the base case in many advanced economies, including the UK and eurozone, central bankers’ commitment to continue raising rates will be tested by markets and political actors. Central bank heads are wary of lowering rates too early only to have sticky core inflation force a U-turn back to rate hikes. One way for central banks to delay lowering rates in case of a recession or financial accident might be to pause their balance-sheet tightening.