The US Federal Reserve indicated at the meeting this week that rate hikes and quantitative tightening may be a less remote prospect than previously thought while Norway central bank prepared investors for four rounds of rate hikes through mid-2022.

Debates about the timeframe of winding down stimulus introduced to counter adverse impact of the pandemic have already begun - given the robust recovery in advanced economies as COVID-19 vaccinations gather pace.

These are the countries that can the first to enter a tightening cycle:

  • Norway. The Central Bank of Norway is at the forefront of tapping brakes at monetary stimulus. It could raise its key interest rate twice in the second half of 2021 and twice more during the first half of 2022, central bank governor Eystein Olsen said on Thursday.
  • Canada. By announcing tapering of asset purchases in April, the Central Bank of Canada indicated that its key interest rate could rise from a record low of 0.25% in the second half of 2022.
  • United States. The Fed on Wednesday indicated that it may soon start discussing an exit from the ultra-easy credit policy. Majority of FOMC members now expect that at least 1 rate hike will happen in 2023, with 13 of the 18 management members expecting borrowing costs to skyrocket in 2023, and 11 - a rate 50 bp rate hike.
  • United Kingdom. Inflation in the UK in May beat the Bank of England's 2% target for the first time in two years - enough food for thought at the upcoming BoE meeting. Nonetheless, economists expect the Bank of England to ignore temporary increases in price pressures and avoid explicit hints about policy tightening.