Good day. Monetary policy was tightened throughout much of the world Thursday, with central banks from Norway to South Africa to Indonesia raising interest rates a day after the Federal Reserve decided to move its benchmark rate higher. Many central bank officials, struggling with a crisis of public confidence after initially arguing that inflationary rises would be temporary, are now racing to raise interest rates to catch up with soaring prices, but not so fast that they trigger unnecessary economic pain.

Now on to today’s news and analysis.

Central banks around the world moved Thursday to combat the effects of a soaring dollar and rising inflation, joining the Federal Reserve in risking a recession to rein in climbing prices. In a flurry of central bank meetings, many raised rates by larger-than-expected margins in a day that analysts at ING billed as “Super Thursday.”

• Treasury Yields Surge as Central Banks Respond to Fed, Inflation
• Switzerland Ends Europe's Experiment With Negative Rates
• Japan Has Plenty of Firepower to Fight Yen’s Slide Against the Dollar
• How the 1985 Plaza Accord Ended an Earlier Bout of Dollar Strength

• The Numbers: That Benchmark Mortgage Rate Typically Isn’t Offered

Homeowners with low mortgage rates are balking at the prospect of selling their homes to borrow at much higher rates for their next homes, a development that could limit the supply of houses for sale for years to come.

• The Luxury Home Market Posts Its Biggest Decline in a Decade

Business surveys published on Friday indicate that economic activity in Europe declined sharply in September, raising the risk of recession in one of the world’s industrial powerhouses as governments grapple with surging prices and disruptions from Moscow’s attack on Ukraine.

• U.K. Unveils Biggest Tax Cuts Since 1970s, Sending Pound Lower

2 p.m.: Fed’s Powell, Brainard and Bowman speak at Fed Listens event on transitioning to the postpandemic economy

8:30 a.m.: CFNAI Chicago Fed National Activity Index
10 a.m.: Boston Fed’s Collins speaks to Greater Boston Chamber of Commerce
12 p.m.: Atlanta Fed’s Bostic in interview with Washington Post
12:30 p.m.: Dallas Fed's Logan speaks at Independent Bankers Association of Texas convention
4 p.m.: Cleveland Fed’s Mester speaks at Massachusetts Institute of Technology event

Three decades after Britain was forced to leave the European Exchange Rate Mechanism, fears of a new sterling crisis are spreading across markets, writes WSJ's Jon Sindreu. The currency is hitting 37-year lows against the U.S. dollar just as the country’s current account is at a record deficit and borrowing is about to jump to finance new Prime Minister Liz Truss‘ plan to freeze energy bills, which could cost north of £150 billion, equivalent to around $169 billion. But worries about the pound might be exaggerated. Mr. Sindreu adds that the pound is holding up better against the euro, indicating that this is mostly a strong-dollar story, not a specifically British crisis. Ms. Truss’s plans aren’t likely to change the big picture and might improve it by reducing headline inflation. The U.K. has enough problems to add a made-up one to the list.

The stock market is almost always late to wake up to the threat of recession, but it’s increasingly hard to miss the warnings from the Federal Reserve. Not only might there be a recession, but the Fed has no intention of stepping in to save investors this time, says WSJ's James Mackintosh, adding that investors still aren’t factoring in much threat to earnings, even though recessions almost always hit earnings hard.

• Manufacturing activity in the central U.S. region expanded marginally in September, broadly at the same pace as it did in August, according to data from the Kansas City Fed. The Tenth District manufacturing survey's composite index fell to 1 in September from 3 in August, the lowest reading since July 2020. Economists polled by The Wall Street Journal expected the index to come in at 5. (Dow Jones Newswires)
• Consumer confidence in the eurozone declined in September amid concerns about increased costs of living and slowdown of the economy, falling to its lowest level on record. The European Commission said its measure of consumer confidence in the region fell to minus 28.8 from a revised reading of minus 25 in August. (DJN)
• Singapore's consumer prices rose at their quickest pace in 14 years in August, mostly due to higher private transport costs and the pickup in core inflation. The consumer-price index rose 7.5% in August from a year earlier, the Department of Statistics said Friday. The reading matched the 7.5% rise recorded in June 2008 and compared with the median estimate for a 7.2% increase in a Wall Street Journal survey of nine economists. The city-state's CPI rose 7.0% in July. (DJN)
• The eurozone composite purchasing managers index fell to 48.2 in September from 48.9 in August, according to the preliminary reading. This is in line with the forecast of economists polled by The Wall Street Journal. Readings below 50 point to a contraction in activity. (DJN)
• U.K. consumers turned more pessimistic in September as high inflation and rising interest rates outweighed any effect from recent government measures to freeze households' rising energy bills. (DJN)

This newsletter was compiled by Michael Maloney in New York and Perry Cleveland-Peck in Barcelona.

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