A slew of central banks announced policy decisions in the wake of the Federal Reserve's final meeting of 2018, when U.S. rate setters lifted the funds target range to 2.25% to 2.50% and signaled a less aggressive approach to rate changes in 2019.
In Europe, the Swedish central bank raised its repo rate by 25 basis points to negative 0.25%, marking its first hike since 2011. Sveriges Riksbank said the next hike will "probably" take place in the second half of 2019, after which it sees approximately two rate increases per year of 25 basis points each.
The actions of the Riksbank are seen as a significant indicator for the direction the European Central Bank will take, according to David Owen, chief European economist at Jefferies, and "sets the stage for the ECB raising rates."
"The justification is pretty obvious; you have some rollover indicators globally but wage pressures are growing. Central banks are adjusting to the new normal where they can. We know 2019 is the year the ECB will try to raise rates," Owen said in an interview.
The Czech Republic's Ceská národní banka held its key rates steady, keeping the two-week repo rate at 1.75%, discount rate at 0.75% and the Lombard rate at 2.75%. The bank raised interest rates at five of the eight policy meetings held through 2018.
Bank of Japan Gov. Haruhiko Kuroda
Source: Associated Press
In Asia, the Bank of Japan and the Central Bank of the Republic of China (Taiwan) held their respective benchmark rates steady, while the Hong Kong Monetary Authority raised its base rate by 25 basis points to 2.75% to match the Fed's move.
Bank Indonesia held its key seven-day reverse repo rate at 6.00%, capping off a 175-basis-point hiking spree this year.
In a report released one week after the U.S. rate hike in December, the Bank of Korea said it will stick to its "accommodative" monetary policy in 2019, although it was open to evaluating that stance amid changes to the pace of rate hikes by the Fed and signs of global economic growth slowdown.
Bank of Korea Gov. Lee Ju-yeol
Source: Associated Press
Ahead of the Fed action, the Bank of Thailand voted to raise its policy rate by 25 basis points to 1.75%, logging its first increase since 2011.
Among central banks in Gulf countries, the Central Bank of Bahrain, Qatar Central Bank, Saudi Arabian Monetary Authority and the Central Bank of the United Arab Emirates lifted their respective key rates following the Fed action. The Central Bank of Kuwait kept its discount rate unchanged. Unlike its Gulf peers, Kuwait ties its dinar to a basket of currencies instead of the U.S. dollar.
Elsewhere, Banco de México lifted the target for the country's overnight interbank interest rate by 25 basis points to 8.25%, though the central bank reportedly plans to distance itself from the Fed when it makes monetary policy decisions this year.
Colombia's Banco de la República kept its monetary policy rate at 4.25% amid stable inflation levels and higher rates from the U.S.
Banco Central del Paraguay decided to hold its benchmark interest rate at 5.25% on the back of global economic uncertainties.
In Africa, the Bank of Ghana and Morocco's Bank Al-Maghrib kept rates on hold at their final policy meetings last year. The Banco de Moçambique, meanwhile, slashed the key lending rate by 75 basis points to 14.25% amid slowing inflation.