US Signs Iran Central Bank Sanctions Into Law

The US President, Barack Obama, has signed into law new sanctions on Iran's central bank that will punish foreign financial institutions that do business with Iran's central bank, The Central Bank of the Islamic Republic of Iran.  The new sanctions will begin taking effect in 60 days, but the tougher sanctions will come in around 6 months from now.  The sanctions will essentially shut off access of a non-compliant institution to the US financial markets and banking system.  The sanctions target both private and government-controlled financial institutions (including central banks).  The President is able to grant 120-day waivers if it is in the national security interest of the US, or for the sake of energy market stability.  The President can also exempt institutions in a country that has significantly reduced its dealings with Iran.

Monetary Policy Week in Review - 31 Dec 2011

The past week in monetary policy saw just three central banks meeting to review monetary policy settings.  Israel held its interest rate at 2.75%, and Taiwan held its interest rate at 1.875% during its quarterly interest rate review, while Uruguay bucked the trend, lifting its interest rate 75 basis points to 8.75% as inflation proved the greater risk.

Central Bank of Uruguay Raises Rate 75bps to 8.75%

The Banco Central del Uruguay increased its benchmark interest rate by 75 basis points to 8.75% from 8.00% previously.  The Bank said [translated]: "the inflation rate has accelerated and expectations remain that inflation will be well above the target range, emphasizing the perception that price stability is the main concern in the current macroeconomic context. In order to provide a fee structure consistent with contractionary monetary policy, the Central Bank of Uruguay deemed it convenient in this instance, raise the policy rate."

Central Bank of Taiwan Holds Interest Rate at 1.875%

The Central Bank of the Republic of China (Taiwan) held its discount rate unchanged at 1.875% and the collateralized loan rate at 2.250% and the unsecured loans rate at 4.125%.  Bank Governor, Perng Fai-nan, said: "Overall, Taiwan's economy continues to register moderate growth amid global economic uncertainties, while the 2012 price trends still require close monitoring. In addition, interest rates are at low levels. Against this backdrop, the Board judges that the current policy stance is conducive to economic and financial stability and will support economic growth in Taiwan."

2012 Central Bank Meeting Calendar Launched

Central Bank News has launched the 2012 Global Central Bank Calendar, providing dates of the scheduled monetary policy meetings for over 20 of the major central banks around the world.  The central banks featured in the table span the key developed market banks such as the US Federal Reserve, the ECB, and also features many key emerging market central banks such as the Banco Central do Brasil, Bank Indonesia, and others.  The central bank monetary policy meeting calendar complements the other central banking resources available on the Central Bank News website.

What Will 2012 Bring for Global Monetary Policy?

The year of 2011 was an interesting and eventful year in monetary policy.  As the chart below shows, the GDP weighted average interest rate of central banks crept up in the first half of the year as commodity prices remained buoyant, economic recoveries showed signs of gaining momentum, and inflation was the key concern in emerging markets.  But this was then followed by a reversal in course in the later part of the year as the specter of the European debt crisis and slowing global growth raised downside risks for growth and price stability, spurring central bankers to cut rates and otherwise ease policy settings.

National Bank of Belarus Increased Rate 500bps to 45.00%

The National Bank of the Republic of Belarus hiked its refinancing rate by another 500 basis points to 45.00% from 40.00% on the 12th of December.  The Bank said [translated]: "Further tightening of monetary policy is warranted due to the necessity of fixing the positive trends in the balance of payments and foreign exchange market. Besides these measures will reduce inflation and devaluation expectations in the economy, which would be more limiting factor by way of the growth rate of prices. The National Bank will continue to monitor the situation in the economy and monetary developments and to take the necessary decisions on interest rate policy."

Bank of Israel Pauses Interest Rate at 2.75%

The Bank of Israel held its benchmark interest unchanged at 2.75%.  The Bank said the decision is "consistent with the interest rate policy that is intended to entrench the inflation rate within the price stability target of 1–3 percent inflation a year over the next twelve months, and to support growth while maintaining financial stability. The path of the interest rate in the future depends on developments in the inflation environment, growth in Israel, the global economy, the monetary policies of major central banks, and developments in the exchange rate of the shekel."

Monetary Policy Week in Review - 24 Dec 2011

The past week in monetary policy featured decisions from 8 central banks around the world from Europe to Africa.  Those that changed interest rates were; Sweden -25bps to 1.75%, Hungary +50bps to 7.00%, and Russia -25bps to 8.00%.  Meanwhile, those that announced no changed to interest rates were; Morocco 3.25%, Japan 0.10%, the Czech Republic 0.75%, Ghana 12.50%, and Turkey 5.75%.  Brazil also announced some fine tuning measures to the way it pays interest on reserves, effectively further loosening monetary policy settings.

Central Bank of Russia Cuts Rate 25bps to 8.00%

The Central Bank of Russia dropped its benchmark refinancing rate by 25 basis points to 8.00%.  The Bank said: "The said decision was made considering the assessment of inflation risks and risks to the sustainability of economic growth, including those associated with the global economic uncertainty. Narrowing of the gap between interest rates on the Bank of Russia liquidity providing and absorbing operations is neutral in terms of monetary policy stance. It should contribute to restraining money market rates volatility and strengthening of the interest rate channel of monetary policy transmission to inflation."

Central Bank of Turkey Holds Repo Rate at 5.75%

The Central Bank of the Republic of Turkey kept its benchmark 1-week repo rate unchanged at 5.75%.  The Bank said: "The Committee has indicated that tight monetary policy should be maintained for a while in order to keep inflation outlook consistent with the medium term targets. However, given the prevailing uncertainties regarding global economy, it would be appropriate to preserve the flexibility of monetary policy. Therefore, the impact of the measures undertaken on credit, domestic demand, and inflation expectations will be monitored closely and the amount of Turkish lira funding via one-week repo auctions will be timely adjusted on either direction, if needed."

Bank of Ghana Holds Lending Rate at 12.50%

The Bank of Ghana held its key lending rate unchanged at 12.50%.  Bank of Ghana Governor, Kwesi Amissah-Arthur, said: "The thrust of monetary policy in 2011 is to further strengthen macroeconomic stability, delivering an end-year inflation of 9.0 per cent (with an annual average rate of 8.7 percent) and accumulation of gross external reserves of not less than 3-months of import cover. Latest revised GDP figures from the Ghana Statistical Service estimate real GDP growth at 13.6 per cent for 2011, marginally down from the earlier expected growth of 14.4 per cent. Non-oil real GDP growth is however estimated to be stronger at 8.0 per cent compared from 7.5 per cent earlier projected."

Ceska Narodni Banka Holds Repo Rate at 0.75%

The Ceska Narodni Banka held the two-week repurchase rate at 0.75% as expected, and kept the discount rate unchanged at 0.25% and Lombard rate at 1.75%.  The Bank said: "The risks to the forecast for inflation and interest rates are slightly on the upside compared to the baseline scenario of the existing forecast.  The risks to the forecast for GDP and the exchange rate are tilted towards the alternative scenario as foreign developments have moved towards the materialisation of this alternative."

Bank of Japan Holds Rate, Announces Liquidity Measures

The Bank of Japan kept its interest rate unchanged at 0-0.10% and made no changes to its 55 trillion yen quantitative easing program.  The Bank said: "The pick-up in Japan's economic activity has paused, mainly due to the effects of a slowdown in overseas economies and of the appreciation of the yen.  As for domestic demand, business fixed investment has been on a moderate increasing trend and private consumption has remained firm.  On the other hand, exports and production have remained more or less flat, due in part to the effects of the slowdown in overseas economies and of the yen's appreciation as well as of the flooding in Thailand.  Improvement in business sentiment has slowed on the whole despite steady improvement in domestic demand-oriented sectors."

Morocco Central Bank Holds Interest Rate at 3.25%

The Bank al-Maghrib of Morocco kept its main policy rate steady at 3.25%.  The Bank said: "In this context where the central inflation forecast is permanently consistent with the price stability objective and the balance of risks is tilted to the downside, in conjunction with international developments, the Board decided to keep the key rate unchanged at 3.25 percent."

Hungary Central Bank Raises Rate 50bps to 7.00%

The Magyar Nemzeti Bank hiked its central bank base rate by another 50 basis points to 7.00% from 6.50% to help boost the forint.  The Bank said: "The Monetary Council decided to raise the base rate by 50 basis points in view of increased perceptions of the risks associated with the economy and upside risks to inflation. If risk perceptions and the outlook for inflation deteriorate significantly further, it may prove necessary to raise interest rates again."

Sweden's Riksbank Cuts Repo Rate 25bps to 1.75%

Sweden's Riksbank cut its benchmark repo rate by 25 basis points to 1.75% from 2.00%.  The Bank said: "There is still considerable uncertainty regarding the public-finance problems in, above all, the euro area and several euro countries are expected to implement more stringent fiscal tightening than was previously assumed. Growth in the euro area is therefore expected to be low in the period ahead. However, the global economy as a whole is growing at a relatively good rate."

Monetary Policy Week in Review - 17 Dec 2011

The past week in monetary policy saw interest rate decisions announced by 11 central banks.  Of those adjusting interest rates, all were reductions; Mozambique -100bps to 15.00%, Mauritius -10bps to 5.40%, Norway -50bps to 1.75%, and Denmark -10bps to 0.70%.  Meanwhile those that held interest rates unchanged were: US 0-0.25%, Hong Kong 0.50%, Chile 5.25%, Switzerland 0-0.25%, Sri Lanka 7.00%, India 8.50%, and Colombia 4.75%.  The US FOMC also announced no changes to its quantitative easing programs, and the Swiss National Bank maintained a strong stance on its exchange rate floor with the Euro.

Central Bank of Colombia Holds Interest Rate at 4.75%

The Central Bank of Colombia held its monetary policy interest rate unchanged at 4.75%.  The Bank said [translated]: "the main risk to inflation coming from excessive expansion in demand or increases in cost overruns, with strong and lasting effects on expectations and credibility of monetary policy. In a longer time horizon, excessive credit growth and continued low interest rates could be a source of financial imbalances have negative consequences on the sustainability of economic growth. In accordance with this assessment of the balance of these risks, Board decided to keep interest rates unchanged."

Reserve Bank of India Pauses Repo Rate at 8.50%

The Reserve Bank of India [RBI] paused its repo rate at 8.50% and also held the reverse repo rate at 7.50%, and cash reserve ratio at 6 percent.  The RBI said: "On the domestic front, growth is clearly decelerating. This reflects the combined impact of several factors: the uncertain global environment, the cumulative impact of past monetary policy tightening and domestic policy uncertainties.Both inflation and inflation expectations are currently above the comfort level of the Reserve Bank. However, reassuringly, inflationary pressures are expected to abate in the coming months despite high crude oil prices and rupee depreciation. The growth deceleration is contributing to a decline in inflation momentum, which is also being helped by softening food inflation."

HKMA Keeps Interest Rate at 0.50% Following Fed

The Hong Kong Monetary Authority sustained its base interest rate unchanged at 0.50% following the decision of the US Federal Reserve to leave the fed funds rate unchanged at 0-0.25%.  The HKMA said in a report: "Worries about the global economic prospect have escalated over the past few months. The pace of recovery in the G2 economies has been much weaker than expected, triggering repeated downgrades of their output growth projections. Market confidence has also become fragile, following the downgrade of the US sovereign rating and the slow progress in resolving the intensifying debt crisis in the euro area."

Central Bank of Sri Lanka Retains Interest Rate at 7.00%

The Central Bank of Sri Lanka kept its benchmark repurchase rate steady at 7.00%, and also held the reverse repurchase rate at 8.50%, and the Statutory Reserve Ratio at 8%.  The Bank said: "While supply side improvements, particularly with respect to agricultural produce, have helped bring down domestic prices, the expected favourable performance of the domestic agricultural sector in the forthcoming year coupled with the ongoing improvements to infrastructure includingtransportation, will help mute inflationary pressures in the period ahead."

Swiss National Bank Maintains Monetary, Currency Policy

The Swiss National Bank held its target for the 3-month franc LIBOR unchanged at 0-0.25 percent, and reaffirmed its commitment to the EURCHF 1.20 floor set on the 6th of September.  The Bank said it "will continue to enforce the minimum exchange rate of CHF 1.20 per euro with the utmost determination. It is prepared to buy foreign currency in unlimited quantities... Even at the current rate, the Swiss franc is still high and should continue to weaken over time. The SNB stands ready to take further measures at any time if  the economic outlook and the risk of deflation so require."

Denmarks Nationalbank Cuts Rate Further 10bps to 0.7%

The Danmarks Nationalbank cut its key lending rate by 10 basis points to 0.70% from 0.80% and reduced the current account rate 5bps to 0.25%, effective from 16 December.  The Bank also cut rates on the 8th of December following the ECB rate cut, at that time it cut the lending rate 40bps to 0.8%, and reduced its other interest rates by 25 basis points.  The Bank said in its press release: "The interest rate reduction follows Danmarks Nationalbank's purchase of foreign exchange in the market."

Norway Central Bank Slashes Rate 50bps to 1.75%

Norway's central bank, Norges Bank, dropped its key monetary policy rate by 50 basis points to 1.75% from 2.25% previously.  The Bank's Deputy Governor, Jan F. Qvigstad, said: "The turbulence in financial markets has intensified and external growth is now expected to be clearly weaker, particularly in the euro area. In order to dampen the impact on the Norwegian economy, the Executive Board has decided to lower the key policy rate."  The Bank further noted: In order to guard against an economic setback and even lower inflation, we are of the view that a reduction in the key policy rate is now appropriate."

Central Bank of Chile Maintains Policy Rate at 5.25%

The Banco Central de Chile held its monetary policy interest rate unchanged at 5.25%.  The Bank noted: "Domestically, economic activity has evolved somewhat below projections, while domestic demand is still strong. Labor market conditions continue to be tight. Financial conditions are somewhat more constrained, reflecting the situation in global markets. Headline inflation has exceeded expectations somewhat, due to the incidence of fuels and foodstuffs. Core inflation figures remain contained. Inflation expectations are close to the target."

US FOMC Maintains Policy, Rate Unchanged at 0-0.25%

The US Federal Open Market Committee (FOMC) held the fed funds rate unchanged at 0 to 0.25 percent, and made no other changes to its policy. The Fed said: "To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate."

Bank of Mauritius Cuts Rate 10bps to 5.40%

The Bank of Mauritius trimmed its benchmark interest rate by 10 basis points to 5.40% from 5.50%.  The bank said: "The MPC observed a decline in externally-generated inflationary pressures.... The MPC is of the view that the Key Repo Rate is  broadly appropriate in view of the expected impact of the 2012 budget measures. However, to signal its concern about the low level of business and consumer confidence, it has decided to cut the Key Repo Rate by 10 basis points."

Bank of Mozambique Drops Rate 100bps to 15.00%

The Bank of Mozambique dropped its standing facility lending interest rate by 100 basis points to 15.00% from 16.00% previously.  The Bank also reduced the required reserve ratio by 25bps to 8.5% from 7 Jan 2012.  The Bank said [translated]: "The Monetary Policy Committee considers it important to consolidate the results macroeconomic obtained until now, through the continuous enhancement of policy coordination and determination of policy instruments used to regulate liquidity in the market, with a focus on inflation targeting in the short to medium term. In this context, considers the relevant economic agents and the general public redouble efforts to maintain price stability, which is the festive season approaches."

Monetary Policy Week in Review - 10 Dec 2011

The past week in monetary policy saw interest rate decisions announced by 14 central banks around the world.  Those changing interest rates were: Australia -25bps to 4.25%, EU -25bps to 1.00%, and Serbia -25bps to 9.75%.  Meanwhile those holding rates unchanged were: Canada 1.00%, Armenia 8.00%, Iceland 4.75%, Poland 4.50%, Namibia 6.00%, New Zealand 2.50%, UK 0.50%,  Botswana 9.50%, Peru 4.25%, Korea 3.25%, and Indonesia 6.00%. 

China Central Bank to Create $300 Billion Investment Fund

The People's Bank of China announced that it plans to create an investment fund to manage $300 billion worth of foreign exchange reserves in more aggressive investments and largely internationally.  According to Reuters the fund would invest in the US via the Hua Mei fund, and Europe via the Hua Ou fund.  It is understood that the fund has been under development for some time, and will seek to invest in real assets and company shares, rather than government securities such as US treasuries.  

Serbia Central Bank Cuts Rate a Further 25bps to 9.75%

The National Bank of Serbia cut its 2-week repo rate by 25 basis points to 9.75% from 10.00% previously.  The Bank said: "The key disinflationary factors, both now and in the foreseeable future, will be weaker cost-push pressures arising from administered and food prices as well as low aggregate demand. The process of disinflation will be further aided by the continued drop in inflationary expectations. Inflation is expected to retreat within the target tolerance band in the first quarter of the next year."

Bank Indonesia Pauses Interest Rate at 6.00%

Indonesia's central bank, Bank Indonesia, held the BI reference rate unchanged at 6.00%.  Bank Indonesia Governor, Darmin Nasution, said: "This decision is based on overall assessment on recent economic condition, risk factors, and economic prospects. Board of Governors views that current BI Rate is still consistent with inflation targets, and remains conducive for financial stability and mitigating the impacts of worsening global economic outlook on Indonesian economy. The assessment on economic condition and outlook show that domestic economy remains strong and stable."

Bank of Korea Keeps Interest Rate at 3.25%

The Bank of Korea maintained its 7-day repurchase rate unchanged at 3.25%.  The Bank said: "In Korea, exports have shown a steady increase, but consumption has remained at a level similar to that in the previous month and facilities investment has decreased sharply. The trend of improvement in employment conditions has been sustained, led by the private sector. The Committee anticipates that the domestic economy will not deviate significantly from its long-term trend of growth going forward, but recognizes the situation to be one in which downside risks to growth remain high due to the impact of external risk factors."

Peruvian Central Bank Holds Rate at 4.25%

The Central Reserve Bank of Peru held its monetary policy reference rate unchanged at 4.25%.  The Bank said: "This decision takes into account the lower growth being recorded by some components of expenditure, the current international financial risks, and the rise of inflation associated mainly with temporary supply factors. Future adjustments in the reference interest rate will depend on the evolution of inflation and its determinants."

Botswana Central Bank Keeps Interest Rate at 9.50%

The Bank of Botswana's Monetary Policy Committee kept its benchmark interest rate steady at 9.50%.  The Bank said: "Low growth in domestic demand and the forecast modest external inflationary pressures contribute to the positive inflation outlook in the medium term." also noting "However, in the short-term, inflation is expected to remain above the bank's objective range of 3 - 6 percent due to the impact of transient factors. These include the increase in fuel prices and public transport fares."

Bank of England Holds Bank Rate at 0.50%, APP at 275B

The Bank of England (BoE) maintained the Bank Rate at a record low stimulatory level of 0.50%, and continued with its Asset Purchase Program (Quantitative Easing) target of GBP 275 billion, after increasing it by 75 billion at its October meeting.  On its asset purchase program, the Bank said: "The Committee expects the announced programme to take another two months to complete. The scale of the programme will be kept under review."

ECB Cuts Rate 25bps to 1.00% on Euro Crisis

The European Central Bank (ECB) cut its Main refinancing operations rate by 25 basis points to 1.00% from 1.25%.  ECB governor, Mario Draghi, said: "The intensified financial market tensions are continuing to dampen economic activity in the euro area and the outlook remains subject to high uncertainty and substantial downside risks. In such an environment, cost, wage and price pressures in the euro area should remain modest over the policy-relevant horizon. At the same time, the underlying pace of monetary expansion remains moderate."

RBNZ Continues Hold on OCR at 2.50%

RBNZ keeps the OCR on hold at a record low 2.50%

The Reserve Bank of New Zealand kept the Official Cash Rate (OCR) on hold at 2.50%, noting the impact of global developments.  The Bank Said: "Domestically, economic activity continues to expand, though at a modest pace. Although off their peaks, export commodity prices remain elevated. In addition, the depreciation of the New Zealand dollar provides some support for the tradable sector of the economy. Over time, repairs and reconstruction in Canterbury will also provide a significant boost to demand for an extended period. Annual headline inflation is estimated to have returned within the Bank's 1 to 3 percent target band in the December quarter. Underlying inflation continues to sit close to 2 percent. In addition, wage and price setting pressures have remained contained."

Bank of Namibia Holds Interest Rate at 6.00%

The Bank of Namibia held its benchmark interest rate, the repurchase rate, steady at 6.00%, for the 6th consecutive meeting.  Bank of Namibia Governor Ipumbu Shiimi said: "the MPC is of the view that global economic growth has slowed down noticeably. Global financial markets have shown increasing signs of stress, in both advanced and emerging market economies. The domestic economy continues to grow at a slow pace, particularly in the primary sector. MPC also noted the recent rise in inflation, which was brought about by the rise in prices in specific consumer goods and services."

Polish Central Bank Maintains Interest Rate at 4.50%

The Narodowy Bank Polski's Monetary Policy Council held the benchmark 7-day interest rate unchanged at 4.50%.  The Bank said: "In the opinion of the Council, in the medium term inflation will be curbed by gradually decelerating domestic demand amidst fiscal tightening, including reduced public investment spending, and interest rate increases implemented in the first half of 2011, as well as the expected global economic slowdown. The impact of the situation in the global financial markets on zloty exchange rate continues to be an upside risk to domestic price developments."

Iceland Central Bank Holds Rate at 4.75%

Iceland's Sedlabanki held its seven-day collateral lending rate unchanged at 4.75%.  The Bank said: "The nominal policy rate path required to bring inflation back to target is highly uncertain. In the near term, the current level seems broadly appropriate in light of the economic outlook and potential international headwinds. Looking further ahead, however, it will be necessary to withdraw the current degree of monetary accommodation as the recovery progresses and the slack in the economy disappears. The degree to which such normalisation takes place through higher nominal rates will depend on future inflation developments."

Central Bank of Armenia Holds Rate at 8.00%

The Central Bank of Armenia held its key refinancing rate unchanged at 8.00%.  The Central Bank Board said in its release [translated]: "The Council noted that at present there is no inflationary pressures from penetrating global economy into the RA. With the expected slowdown of the world economic growth is assumed that the market prices of basic raw and food did not significantly change, which corresponds to the baseline scenario the global economy outlined in the "Programme of the monetary policy of the 4th quarter of 2011. " At the same time, there are still uncertainties associated with debt problems in developed countries."

Bank of Canada Keeps Rate on Hold at 1.00%

The Bank of Canada held its target for the overnight rate unchanged at 1.00%; also holding the Bank Rate at 1.25% and the deposit rate at 0.75%.  The Bank noted: "On balance, recent economic indicators in Canada suggest that growth in the second half of this year is slightly stronger than the Bank projected in October. Household expenditures have more momentum than had been expected and business investment remains solid. Going forward, the weaker external outlook is expected to dampen GDP growth in Canada through financial, confidence and trade channels. The economy also continues to face competitiveness challenges, including the persistent strength of the Canadian dollar."

Reserve Bank of Australia Cuts Rate 25bps to 4.25%

The Reserve Bank of Australia (RBA) cut the cash rate by 25 basis points to 4.25% from 4.50% previously.  The RBA said: "Overall, the Board concluded, on the basis of all the available information, that the inflation outlook afforded scope for a modest reduction in the cash rate. The Board will continue to set policy as needed to foster sustainable growth and low inflation over time."  The Bank cited the risks of slowing growth in China, and sovereign credit and banking problems in Europe, as well as declining commodity prices; as posing downside growth and inflation risks.

Banco de Mexico Keeps Interest Rate at 4.50%

The Banco de Mexico held its overnight interest rate target steady at 4.50%.  In its monetary policy statement the Bank noted: "Annual general inflation and its core and non-core components have shown a favorable evolution, although there was a slight increase recently," further noting a "persistent slack in the economy, a declining trend in unit labor costs" and "increased levels of competition in some sectors of the economy," adding, "in addition, inflation expectations have not been affected by the recent depreciation of the exchange rate," also commenting that "a currency rate anchored by solid fundamentals of the Mexican economy."

Bangko Sentral ng Pilipinas Holds Rate at 4.50%

The Bangko Sentral ng Pilipinas kept its overnight borrowing rate unchanged at 4.50% and the overnight lending rate at 6.50%, and kept reserve requirements unchanged at 21%.  The Bank said: "decision is based on its assessment that the inflation outlook continues to be manageable, with within-target headline inflation and well-contained inflation expectations. Latest baseline forecasts indicate that the annual inflation rates for 2011-2013 are likely to fall within the 3-5 percent target range. The Monetary Board also took into account the data showing subdued domestic economic activity in the third quarter, due to the weather-related slowdown in the expansion of the agricultural sector, weak global economy and concerns over Europe's sovereign and banking sectors."

Bank of Thailand Drops Rate 25bps to 3.25%

The Bank of Thailand reduced its benchmark 1-day bond repurchase rate by 25 basis points to 3.25% from 3.50%.  Bank of Thailand Assistant Governor, Mr. Paiboon Kittisrikangwan, said: "The MPC assessed that the risk of a global economic slowdown has increased while consumer and business confidence remained weak. With upside inflation risks expected to be limited, the current accommodative monetary policy can provide further support to economic restoration and investment. The MPC therefore voted 5 to 2 to  reduce the policy rate by 0.25 percent, from 3.50 percent to 3.25 percent per annum, with 2 votes in favour of a 0.50 percent reduction."

Central Bank of Kenya Hikes Rate 150bps to 18.00%

The Central Bank of Kenya upped its benchmark lending rate by 150 basis points to 18.00% from 16.50% previously, and held the Cash Reserve Ratio at 5.25%.  The central bank Governor, Njuguna Ndung'u, said: "The Committee noted that although supply shocks continued to drive domestic prices upwards, demand driven inflation pressures arising from the growth of private sector credit continued to persist.  In addition, it was noted that there were exchange rate risks emanating from uncertainty in the global financial markets due to the debt crisis in the eurozone. In order to address these risks, the Committee considered it necessary to further tighten the monetary policy stance at the margin."

Brazil Central Bank Cuts Interest Rate 50bps to 11.00%

The Banco Central Do Brasil reduced the Selic interest rate by another 50 basis points to 11.00% from 11.50% previously.  In its statement, Brazil's Central Bank Monetary Policy Committee (Copom) said [translated]: "Continuing the process of adjusting monetary conditions, the Committee decided unanimously to reduce the Selic rate to 11.00% 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.

Global Central Banks Announce Further Coordinated Liquidity Measures

The European Central Bank (ECB) announced "coordinated central bank action to address pressures in global money markets".  The move follows the announcement of joint USD liquidity operations announced by the bank in mid-September.  As part of the action, the central banks involved (Canada, UK, Japan, EU, US, Swiss) will lower the interest rate on US dollar liquidity provision arrangements by 50 basis points, with the new rate being the US dollar Overnight Index Swap (OIS) rate plus 50 basis points.  The banks also agreed to swap arrangements which would ensure liquidity through to the 1st of February 2013.  The moves are designed to counter the tightening up of credit markets and liquidity in the European banking system.