Why some countries’ central banks follow the Fed’s lead

The Bank of England announced Thursday that it raised interest rates by a quarter of a percentage point, just like the Federal Reserve did Wednesday. In fact, the Fed coordinates with other central banks around the globe — especially in times of economic stress, like now. How does it do this, and why?

There are different levels of global central bank coordination. When everything is hunky-dory, the world’s central bankers just keep in touch.

“In normal times, there’s lots of ordinary information sharing,” said David Wilcox of the Peterson Institute for International Economics and Bloomberg Economics.

But these, of course, are not normal economic times. “When financial markets are more turbulent, there’s a second level of coordination, and that involves these swap lines,” Wilcox said.

Swap lines are how the U.S. exchanges dollars for other…

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