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Wednesday, May 22, 2024

Countries that were the first to raise rates are now reducing them

Welcome to The Economist’s audio edition, where you can enjoy insightful podcasts and hear from experts on current global monetary policy. Today, we’re discussing the economic fortunes of a group of eight countries known as Hikelandia. These countries, including Brazil, Chile, Hungary, New Zealand, Norway, Peru, Poland, and South Korea, chose to tighten their monetary policies well ahead of the Federal Reserve and the European Central Bank. However, their efforts didn’t yield the desired results at first. Inflation continued to rise despite their hawkish stance.

In a recent turn of events, Hikelandian countries are now experiencing a decline in inflation at a rapid pace. This has led their central bankers to make a surprising move by cutting interest rates, something the rest of the world hasn’t done yet. Lower interest rates have also contributed to the economic growth of Hikelandia, which was previously on a declining trajectory.

While inflation slowdowns are evident in most Hikelandian countries, some are still struggling with high prices, particularly in Norway. However, core inflation in other countries like Hungary has fallen significantly, indicating a lower cost of production due to decreased energy prices.

Additional data shows that inflation is becoming less entrenched, with prices for various goods and services rising at a slower pace than before. Wage growth is also moderating, contributing to the overall decline in inflation across Hikelandia.

While Hikelandia’s central bankers continue to emphasize their commitment to fighting inflation, the overall decline is certainly good news. The fact that they are now cutting interest rates might also set a precedent for other countries to follow suit.

For more expert analysis of the biggest stories in economics, finance, and markets, sign up for Money Talks, our weekly subscriber-only newsletter. It’s your go-to source for staying informed about global economic developments.

We hope you enjoyed this insightful discussion on Hikelandia’s changing economic landscape. To stay updated on similar topics, be sure to download The Economist’s app on iOS or Android. Thank you for listening.

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