With inflation rising almost across the board, almost all central banks are raising interest rates rather quickly. This means that countries where the central bank is not raising interest rates are experiencing and will continue to experience a sharp depreciation of their exchange rates, according to analysts at Natixis.

Almost all central banks are raising interest rates fairly quickly

“In a configuration where the vast majority of central banks are raising interest rates and long-term interest rates are rising almost everywhere, countries that keep interest rates low will be penalised by capital outflows and a sharp depreciation of their exchange rates, which is already evident.”

“Except in the extreme case of a central bank that is not interested in inflation or the exchange rate, these countries will eventually have to raise their interest rates as well.”