Friday, October 21, 2011

Monetary Policy Week in Review - 22 Oct 2011

The past week in monetary policy saw interest rate decisions announced by 7 central banks.  The only bank to announce a change to its main monetary policy  interest rate was the Banco Central do Brasil, which cut its interest rate by another 50 basis points to 11.50%.  Meanwhile the other central banks held their key interest rates unchanged: Botswana 9.50%, Norway 2.25%, Thailand 3.50%, Ghana 12.50%, Philippines 4.50%, and Turkey 5.75%.  A common theme mentioned by the central bankers was concern over signs of slowing global growth and the potential risks arising from the ongoing sovereign debt crisis in Europe.
Monetary Policy Week in Review

Some of the key quotes and soundbites from central bankers announcing monetary policy decisions during the past week are included below:
  • Banco Central do Brasil (cut rate -50bps to 11.50%): "Continuing the process of adjusting monetary conditions, the Committee decided unanimously to reduce the Selic rate to 11.50% pa, without bias.  The Monetary Policy Committee believes that the timely mitigate the effects coming from a more restrictive global environment, a moderate adjustment in the level of the base rate is consistent with the scenario of convergence of inflation to the target in 2012."
  • Bank of Thailand (held rate at 3.50%): "The MPC deemed that the current level of the policy rate is appropriate in addressing upcoming inflationary pressure  and supporting economic adjustments amidst heightened uncertainty in the global economy. Meanwhile, with the floods not yet over, their impact on the economy was not fully evident."
  • Central Bank of Turkey (held rate at 5.75%): "Recent data releases suggest that there will be a notable reduction in economic growth in the second half of the year. External demand remains weak, and domestic demand continues to slow down. The deceleration in  credit growth and domestic demand combined with the exchange rate movements have been contributing to the rebalancing of domestic and external demand. Accordingly, the Committee expects a significant improvement in the current account balance in the forthcoming period."
  • Norges Bank (held rate at 2.25%): "The Executive Board is of the view that the outlook and the balance of risks now suggest that the key policy rate should be kept at the current level for some time ahead. If the economic unrest abroad intensifies, money market premiums remain high and the outlook for growth and inflation weakens further, the key rate may be reduced. If financial market turbulence subsides and there are prospects of higher growth and inflation, the key rate may rise."
  • Bank of Botswana (held rate at 9.50%): "While short-term price developments have resulted in inflation remaining above the objective range of 3 - 6 percent, the medium-term outlook for consumer prices is more encouraging. As a result, the Committee judged that maintaining the Bank Rate at the current level is consistent with inflation converging on the objective range in the medium term."
  • Bank of Ghana (held rate at 12.50%): "Looking ahead, wage pressures, payment arrears and recent depreciation of the exchange rate have increased the upside risks to inflation. In the short-term, the impact of these underlying inflationary pressures on the economy remains contained. The Bank's inflation forecasts  show that the end year target will be achieved.  Movements in the exchange rate remain consistent with the delivery of the Bank's inflation target."
Looking at the central bank calendar, next week will be reasonably busy in monetary policy with 9 central banks scheduled to review monetary policy settings.  Also on the radar is the ECB's bank lending survey, due out on Wednesday (and of course the EU leaders are meeting this weekend to try and agree on a plan to stem contagion from the sovereign debt crisis).  The key announcements to watch will be Canada, India, Japan, and Russia.
  • ILS - Israel (Bank of Israel) expected to hold at 3.00% on the 24th of Oct
  • HUF - Hungary (Magyar Nemzeti Bank) expected to hold at 6.00% on the 25th of Oct
  • CAD - Canada (Bank of Canada) expected to hold at 1.00% on the 25th of Oct
  • INR - India (Reserve Bank of India) expected to hold at 8.25% on the 25th of Oct
  • JPY - Japan (Bank of Japan) expected to hold at 0-0.10% on the 27th of Oct
  • NZD - New Zealand (RBNZ) expected to hold at 2.50% on the 27th of Oct
  • SEK - Sweden (Riksbank) expected to raise 25bps from 2.00% on the 27th of Oct
  • COP - Colombia (Central Bank of Colombia) expected to hold at 4.50% on the 28th of Oct
  • RUB - Russia (Bank Rossii) expected to hold at 8.25% on the 28th of Oct


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