In the wake of the global financial crisis, the US Federal Reserve was faster than most of its counterparts to slash interest rates to historically low levels. For nearly a decade, the Fed kept its benchmark rate just above zero, until December of last year, when it finally hiked by a quarter of a percentage point. Today, a year later, it has hiked again.
It’s been a slow change, but now the Fed’s policy rate seems more “normal” than that of its peers in the Group of Seven. Other central banks, such as the European Central Bank and Sweden’s Riksbank, hiked rates prematurely and have since had to cut them more aggressively. Some countries didn’t cut them enough to start with and now have deeply negative interest rates.
The US now has the highest benchmark rate in the Group of Seven and consequently is further along the path of normalization. It’s not likely its peers catch up soon—Japan is still trying to fend off deflation, economic growth in Europe is sluggish and the UK is contending with the uncertainty of Brexit.