Skip navigation Scroll to top
Scroll to top

LGT Navigator: Central banks are stepping up the fight against inflation

September 23, 2022

After the Federal Reserve's recent sharp interest rate hike, the central banks of the UK, Switzerland and Norway also followed suit with interest rate increases. The focus of all central banks is on fighting high inflation, even if this means accepting an economic slowdown or recession. On the stock markets, the tightening of financing conditions because of the interest rate hikes led to selling pressure. The mood on the trading floor was also dampened by the further escalation in the Ukraine war and the high volatility on the foreign exchange markets. On the bond market, the yield on ten-year US government bonds climbed to its highest level in eleven years. 

Central banks are stepping up the fight against inflation

In New York, the Dow Jones Industrial closed Thursday at 30'076.68 points, losing -0.35% from the previous day's close. During the trading day, the Dow fell below 30'000 for the first time in three months. The S&P 500 fell -0.84% to 3'757.99 points and on the Nasdaq technology exchange, the indices fell by about -1.2%. In the bond market, quotations came under further pressure and the yield on the benchmark ten-year US government bonds rose to 3.7% – the highest level since 2011.

In the Asia-Pacific region, stock indices fell sharply at the end of the week. While in Japan because of a holiday the stock exchanges remained closed, the Hang Seng Index in Hong Kong loses about -0.9%. The Shanghai Composite trades around -1.1% lower and the Shenzhen Component gives -1.8%. In Australia, the S&P/ASX 200 falls -2.3% after returning to trading after a holiday, its lowest level since July. In South Korea, the Kospi loses around -1.8%. The broadest MSCI index for Asia-Pacific shares outside Japan notes a daily minus of -1.4%. The inflationary pressure has also increased significantly in Asia, as evidenced by the latest data from Singapore, where the annual inflation rate reached +7.5% in August, the highest level in 14 years.

Japan’s authorities are giving the yen a helping hand

For the first time since 1998, the Japanese Ministry of Finance intervened directly in the foreign exchange market to support the domestic currency. The yen had fallen to its lowest level against the US dollar in 24 years. Tokyo said it was very concerned and would continue to monitor developments. Yesterday, Japan's central bank had left its expansionary monetary policy unchanged, while the other major central banks continued to raise interest rates. This further weakened the yen. This morning, the Japanese yen is trading just above 142 against the greenback.

Bank of England tightens monetary policy further

Britain's central bank stepped up its fight against high inflation by raising interest rates for the seventh time in a row. As expected, the key interest rate was raised by 50 basis points to +2.25%. However, the decision was not unanimous. Of the nine council members, three voted for an even larger rate hike of 75 basis points and one voted for a more moderate tightening of 25 basis points. Inflation in the UK is now close to +10% and the central bank expects inflation to rise further.

SNB takes strong step away from negative interest rates

As anticipated by the financial markets, the Swiss National Bank (SNB) raised its key interest rate by 75 basis points to +0.5%, thus ending the eight-year phase of negative interest rates. In view of the increasing inflationary pressure in Switzerland as well, SNB President Thomas Jordan held out the prospect of further interest rate hikes.

Norway's central bank also raises key rate

Norges Bank is also fighting inflation with a further tightening of interest rates. As expected, the central bank in Oslo raised its key interest rate by 50 basis points to +2.25%.

ECB top representative reaffirms prospect of further interest rate hikes, but also lower inflation again in the longer term

According to ECB Executive Board member Isabel Schnabel, the ECB will have to raise interest rates further to combat inflation in the euro area. How big the next interest rate step will be on Oct. 27 and up to which level the central bank will have to raise key rates cannot be said now, Schnabel said in an interview. He said the ECB is taking a sighted view and must reassess economic and inflation data before making any decision. The ECB will fight inflation resolutely and ensure that inflation settles back at the targeted 2% level in the medium term, he said.

Economic Indicators September 23

MEZ Country Indicator Last period
06:00 JP Holiday
09:00 ES GDP Q2 (q/q) +1.1%
09:15 FR PMI Composite (September) 50.4
09:30 GE PMI Composite (September) 46.9
10:00 EZ PMI Composite (September) 48.9
10:30 UK PMI Composite (September) 49.6
15:45 US PMI Composite (September) 44.6
17:30 GE Bundesbank President Nagel speaks
17:30 SZ SNB President Jordan speaks
20:00 US Fed Chairman Powell speaks


Earnings Calender September 27

Country Company Period
SZ Georg Fischer Capital Markets Day


LGT helps you make informed investment decisions

All about global economic and market trends at a glance

Subscribe to LGT's research newsletters

You can also follow us on Facebook or LinkedIn – or visit MAG/NET and discover interesting background articles. If you have questions, a consultant from the bank will be happy to help you.


Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, E-Mail:
Source: LGT Bank (Switzerland) Ltd.


Risk Disclosure (Disclaimer)
This publication is an advertising material / marketing communication. This publication is intended only for your information purposes. It is not intended as an offer, solicitation of an offer, or public advertisement or recommendation to buy or sell any investment or other specific product. The publication addresses solely the recipient and may not be multiplied or published to third parties in electronic or any other form. The content of this publication has been developed by the staff of LGT and is based on sources of information we consider to be reliable. However, we cannot provide any confirmation or guarantee as to its correctness, completeness and up-to-date nature. The circumstances and principles to which the information contained in this publication relates may change at any time. Once published information is therefore not to be interpreted in a manner implying that since its publication no changes have taken place or that the information is still up to date. The information in this publication does not constitute an aid for decision-making in relation to financial, legal, tax or other matters of consultation, nor should any investment decisions or other decisions be made solely on the basis of this information. Advice from a qualified expert is recommended. Investors should be aware of the fact that the value of investments can decrease as well as increase. Therefore, a positive performance in the past is no reliable indicator of a positive performance in the future. The risk of exchange rate and foreign currency losses due to an unfavorable exchange rate development for the investor cannot be excluded. There is a risk that investors will not receive back the full amount they originally invested. Forecasts are not a reliable indicator of future performance. In the case of simulations the figures refer to simulated past performance and that past performance is not a reliable indicator of future performance.

The commissions and costs charged on the issue and redemption of units are charged individually to the investor and are therefore not reflected in the performance shown. We disclaim, without limitation, all liability for any losses or damages of any kind, whether direct, indirect or consequential nature that may be incurred through the use of this publication. This publication is not intended for persons subject to a legislation that prohibits its distribution or makes its distribution contingent upon an approval. Persons in whose possession this publication comes, as well as potential investors, must inform themselves in their home country, country of residence or country of domicile about the legal requirements and any tax consequences, foreign currency restrictions or controls and other aspects relevant to the decision to tender, acquire, hold, exchange, redeem or otherwise act in respect of such investments, obtain appropriate advice and comply with any restrictions. In line with internal guidelines, persons responsible for compiling this publication are free to buy, hold and sell the securities referred to in this publication. For any financial instruments mentioned, we will be happy to provide you with additional documents at any time and free of charge, such as a key information document pursuant to Art. 58 et seq. of the Financial Services Act, a prospectus pursuant to Art. 35 et seq. of the Financial Services Act or an equivalent foreign product information sheet, e.g. a basic information sheet pursuant to Regulation EU 1286/2014 for packaged investment products for retail investors and insurance investment products (PRIIPS KID).