London – The central banks of the world’s biggest economies have announced they will keep interest rates at levels necessary to control inflation, even as global policy tightening reaches an unprecedented two-year high.

“Higher for longer” is now the official position of the US Federal Reserve, the European Central Bank and the Bank of England, and is echoed by monetary policymakers from Oslo to Taipei.

For central bankers who were first criticized for being slow to detect rising inflation after the coronavirus pandemic and later warned not to overdo their response, the prize of returning the global economy to stable prices without recession is now in sight.

Their aim is to keep financial markets from backing away from early rate cuts and watch out for new risks such as higher oil prices, hoping to help governments prepare budgets that don’t lead to hyperinflation.

Last Thursday, Bank of England Governor Andrew Bailey said after policymakers decided to keep the key interest rate at 5.25 percent, “we need to keep interest rates high enough for long enough to get the job done.”

A day earlier, US Federal Reserve policymakers had a similar message. They kept benchmark interest rates at 5.25 and 5.5 percent, but insisted they would continue the inflation war until 2026.

In Europe, central bank chief Christine Lagarde was adamant last week that a further hike in the 20-nation euro zone could not be ruled out.

The central banks of Norway and Sweden hinted they may raise rates again on Thursday, and the Swiss central bank kept the possibility of raising interest rates further despite inflation at a comfortable 1.6 percent.

In Asia, Taiwan’s central bank signaled the continuation of its hawkish policy while the Turkish central bank confirmed its hawkish shift. The South African Reserve Bank kept its key interest rate steady, but policymakers pointed to continued risks to inflation expectations.

Important are the Bank of Japan and China’s central bank, which kept interest rates extremely low on Friday.

“Monetary policy is now at the right level,” Belgian central bank chief Pierre Funche said Thursday, an early voice urging tougher measures to tackle inflation from the end of 2021.

“At some point, we fell behind and I think there’s some catching up to do,” Funch, a member of the European Central Bank’s governing body, told the Reuters Global Markets Forum. But it’s over. “We caught it.”

Despite the gradual slowdown, inflation in most major economies is still above the two percent target level, which central bankers consider healthy.

Last August, the consumer price index in the United States reached 3.7 percent, but inflation in the euro zone remained high despite falling compared to last year, which reached 5.2 percent.

Still, investors remain skeptical, with central banks skeptical about the strength of the world’s second-largest economy and geopolitical concerns over the Ukrainian war and US-China rivalry.

“By this time next year, we expect 21 of the world’s 30 major central banks to cut interest rates,” Capital Economics said in a report titled “A Turning Point for Global Monetary Policy.”

The potential development rattled markets on Thursday as global stocks fell and the dollar rose, with Treasuries rising to levels last seen before the Great Financial Crisis. The pound sterling and Swiss franc fell.

However, the prospect of global interest rates often nearing peak would be a big relief for emerging economies struggling with heavy debt service burdens.

As the U.S. and Europe are expected to one day avoid outright recession, the alluring vision of a “soft landing” for the global economy is returning to the horizon, thanks mainly to unusually buoyant labor markets.

Policymakers admit they still don’t agree on an explanation. Some point to companies keen to avoid a repeat of the skills shortages they experienced when the global economy took off in 2021 after lockdowns aimed at curbing the pandemic and “labour hoarding”.

This unsolved mystery means that opinions are divided about what constitutes real power in the global economy.

Bank of Japan Governor Kazuo Uede cautioned against declaring victory yet. “We have seen growing hopes for a soft landing for the US. But there is still uncertainty as to whether this is actually happening,” he said.

Some experts, therefore, detect a tone of uncertainty in the US Federal Reserve’s stance on the possibility of raising interest rates again this year.