Not every central bank is waiting for credit markets to completely stabilise before proceeding with further tightening. From Bloomberg yesterday:
Norway's central bank increased its benchmark interest rate for the sixth time this year to contain inflation. It said borrowing costs may rise less than previously forecast as market turmoil threatens to slow economic growth.
Norges Bank raised the deposit rate by a quarter point to 5 percent, as predicted by nine of 21 economists surveyed by Bloomberg. The other 12 had forecast rates would be left on hold.
But even the Norges Bank cannot completely ignore the uncertainty in financial markets.
"The global risk is clearly stronger than we had envisaged a few months ago," central bank Governor Svein Gjedrem told a press conference in Oslo today. Increased corporate borrowing costs worldwide will both delay interest rate increases and reduce the peak, he said.
There is not much chance of a rate hike in the US soon, of course, especially after durable goods orders were reported yesterday to have fallen 4.9 percent in August.
The probability of a rate hike in the UK is also fast diminishing despite a report yesterday showing that the economy grew slightly faster in the first half of 2007 than previously estimated. The findings of a Bank of England survey also released yesterday showed that credit conditions are expected to tighten in the coming months.