Interest rates have stopped rising, but 2023 hikes could still cause recession for some economies

Central banks in the US, UK and Europe have been trying to slow inflation without creating a recession. eamesBot/Shutterstock

Central banks on both sides of the Atlantic kept their main interest rates unchanged for the fourth successive month in December 2023. These rates are closely watched because they set the minimum interest at which your bank borrows and lends. This determines the cost of credit for all firms and households with mortgages or other loans.

The European Central Bank (ECB), the US Federal Reserve and the UK Bank of England have raised interest rates sharply since the start of 2022. This was in response to a surge in inflation – the annual increase in consumer prices – far above the 2% rate that all these central banks now target.