Monetary Policy Week in Review - June 30, 2012

    The past week in monetary policy saw interest rate decisions by five central banks around the world, with two cutting rates due to a slowing economy and lower inflationary pressure. The other three central banks left rates unchanged.

    

    MONETARY POLICY DECISIONS:

    

    COUNTRY                NEW RATE            PREVIOUS RATE         RATE 1 YEAR AGO

    

    ISRAEL                        2.25%                        2.50%                               3.25%   

    HUNGARY                   7.00%                        7.00%                               6.00%

    ROMANIA                    5.25%                        5.25%                               6.25%

    CZECH REPUBL          0.50%                        0.75%                               0.75%

    COLOMBIA                  5.25%                        5.25%                              4.50%

    NEXT WEEK:

    Looking at the central bank calendar for next week, Australia kicks off the meeting schedule but the focus will remain largely in Europe with policy decisions by both the Bank of England and the European Central Bank.

Central Bank News Link List - June 29, 2012

    Here's today's Central Bank News link list, click through if you missed the previous link list. The list is updated during the day with the latest news about central banks so readers don't miss any important developments.

• Colombia keeps 5.25% rate for fourth month as economy slows (Bloomberg)
• Chile May manufacturing beats view, rate seen held (Reuters)
• EU deal for Spain, Italy buoys markets but details sketchy (Reuters)
• China central bank says to push ahead with reforms (Reuters)
• FSA finds banks guilty of mis-selling to small firms (BBC)
•  Fed official floats stress test of money funds (Reuters) 
• Dollar share of global reserves steady in Q1-IMF (Reuters)

www.CentralBankNews.info

UK banks should boost capital during EU crises - BOE

    UK banks should continue to limit dividends and executive compensation and instead use the funds to boost their capital cushion to absorb any possible losses during the current risk to financial stability from the crises in the euro area, the governor of the Bank of England said.

    In his prepared remarks for a press conference, Mervyn King said the cushion that banks should build up may even be larger than the current planned increase toward meeting the tougher Basel III capital requirements.

    “The Committee continues to believe that there is a need for banks temporarily to raise their levels of capital, in view of the exceptional threats they currently face,” King said presenting the bank’s Financial Stability Report.

Czech central bank cuts interest rate to record 0.5%

    The Czech central bank cut its key policy rate by 25 basis points to a record low of 0.50 percent, as widely expected, to counter a weakening economy and declining inflation.

    “Both headline and monetary-policy relevant inflation will fall slightly below the target in 2013,” the Ceska Narodni Banka said in a statement, adding that four out of three board members voted in favor of the cut.

    “Developments in industrial production, construction output and retail sales in April indicated persistent weakness in economic activity.”

Central Bank News Link List - June 28, 2012

    Here's today's Central Bank News link list, click through if you missed the previous central bank news link list. The list is updated during the day with the latest news about central banks so readers don't miss any important developments.

    If you want to submit links for inclusion in the daily link list, just email them through to us or post them in the comments section below.

• Reserve Bank says India is facing inflation, growth risk (Bloomberg)
• "Done...for you big boy": how emails nailed Barclays (Reuters) 
• www.CentralBankNews.info

Central Bank News Link List - June 27, 2012

    Here's today's Central Bank News link list, click through if you missed the previous central bank news link list. The list is updated during the day with the latest news about central banks so readers don't miss any important developments.

    If you want to submit links for inclusion in the daily link list, just email them through to us or post them in the comments section below.

• Romania central bank retains interest rate (RTT News)
• Czech central bank will probably cut main rate to record low (Bloomberg)
• IMF clears Hungary bank law; aid talks in sight (Reuters)
• Tunesia president sacks central bank governor (Al Arabiya)
• Central banks urged to be prudent amid uncertainties (Saudi Gazette)
• Congressional panel clears way for Fed audit bill (Reuters)

Hungary central bank keeps rate steady at 7%

    The Hungarian Central Bank left is benchmark base rate unchanged at 7.0 percent for the sixth month in a row, as forecast, saying inflation is expected to remain above its target for a "protracted period" even if the economy is first expected to expand in 2013.

    "The volatile risk environment and above-target inflation for an extended period continue to warrant a cautious policy stance," the Monetary Council of  Magyar Nemzeti Bank said in a  statement.

Central Bank News Link List - June 26, 2012

    Here's today's Central Bank News link list, click through if you missed the previous central bank news link list. The list is updated during the day with the latest news about central banks so readers don't miss any important developments.

    If you want to submit links for inclusion in the daily link list, just email them through to us or post them in the comments section below.

• Pessimistic UK central bank sees outlook worsening (Reuters)
• Italy approve Monte di Paschi aid (WSJ)
• Wheeler to lead N.Z. central bank as kiwi hits exports (Bloomberg) 

• And then there were five: Cyprus seeks EU aid (Reuters)
• Hungary to hold rate for sixth month as timing of reduction eyed (Bloomberg)
• Moody's cuts debt ratings of 28 Spanish banks (AP) 
• Libor guardians said to resist changes to broken rate (Bloomberg)
• Thai banks ready for Basel III (Bangkok Post)
• The great central bank bridge to nowhere (WSJ)
• Monetary policy has limits, but it should do its job (Slate)
• Counterparties: central banks warn about central banks (Reuters blog)
• www.CentralBankNews.info

Too much finance can suffocate a country - BIS economist

    Like cancer, a nation’s financial sector can grow so large that it starts to devour its host, according to the chief economist of the respected Bank for International Settlements (BIS).

    “Beyond a certain point, financial development is bad for an economy. Instead of supplying the oxygen that the real economy needs for healthy growth, it sucks the air out of the system and starts to slowly suffocate it,” said Stephen Cecchetti, chief economic adviser to the BIS, known as the central bankers’ bank.

    “Households and firms end up with too much debt. And valuable resources are wasted.”

Bank of Israel cuts policy rate 25 bps to 2.25%

   The Bank of Israel cut its interest rate by 25 basis points to 2.25 percent to help ward off any negative effects on the economy from developments in Europe. A decline in inflation to below the center of the bank's target range gave the bank room to cut, the bank said, adding the rate cut was expected by most forecasters.

    "The interest rate reduction will contribute to strengthening the Israeli economy's ability to deal with the impact of potential negative consequences from the global economy," the bank said in a statement.

Central Bank News Link List - June 25, 2012

    Here's today's Central Bank News link list, click through if you missed the previous central bank news link list. The list is updated during the day with the latest news about central banks so readers don't miss any important developments.

    If you want to submit links for inclusion in the daily link list, just email them through to us or post them in the comments section below.

• Central banks commit to ease as threat of lost decades rises (Bloomberg)
• Spain formally request European aid for its banks (Reuters)
• Australian banks top global profit ranking (Radio Australia)
• Analysis:Money's retreat home threatens globalization (Reuters) 
• Central banks to press on with easing (fund web) 
• BRICs biggest currency depreciation since 1998 to worsen (Bloomberg)

Source:www.CentralBankNews.info

BIS: Growing risks from more central bank stimulus

     The benefits from additional monetary stimulus by central banks in advanced economies are shrinking while the risks are likely growing,  Jaime Caruana, general manager of the respected Bank for International Settlements (BIS) said.

    Central banks have been highly successful in driving down long-term interest rates to help stimulate economic recovery, but the success can create unrealistic expectations of the power of central banks, warned Caruana in a speech to the annual meeting of BIS in the Swiss border city of Basel.

    “Monetary policy can buy time needed for other policies to correct fundamental balance sheet problems. But even in this transitory role, monetary policy is not without limits or risks. Under current circumstances, the benefits of continued monetary easing cannot be taken for granted,” he said.

BIS warns central banks' credibility under threat

     Central banks’ hard-won credibility and independence is threatened by the growing dependence on easy and abundant money by governments and financial markets, the Bank for International Settlements (BIS) said.

    The inability of many governments to tackle major challenges, both short-term deficits and the looming costs of unfunded pensions and healthcare systems, may put central banks under pressure to provide further stimulus, especially if economic growth remains sluggish.

    “However, there is a growing risk of overburdening monetary policy,” BIS said in its annual report. “Any positive effects of easy monetary policy may be shrinking whereas the negative side effects may be growing.”

BIS: Fix banks to break the vicious economic cycles

    The global economy is trapped in a maelstrom of vicious cycles and the best way to halt this downward spiral is to recapitalize banks so they no longer burden governments and can return to their role of supporting economic growth, the Bank for International Settlements (BIS) said.

    Major parts of the economy - households and firms, governments and banks – must improve their financial positions but they are stuck in vicious cycles: As households and firms cut debt, it hampers the recovery of governments and banks. As governments cut spending, it hurts households and banks, and as banks recognize losses, they have less money to lend.

    “Each sector’s burdens and efforts to adjust are worsening the position of the other two,” said BIS, known as the central bankers’ bank, in its annual report.

Monetary Policy Week in Review - June 23, 2012

    The past week in monetary policy saw interest rate decisions by six central banks around the world, with all banks keeping rates unchanged, citing strains in global financial markets from 

the euro area's debt crises.

    Although the banks affirmed their readiness to respond in the event of a shock to the global financial system, monetary policy worldwide is currently in a wait-and-see mode as Europe's politicians try to dig their way out of the debt and institutional crises.

    

    The six banks that kept rates unchanged were:

    India - 8.0%, CRR at 4.75%

    Morocco - 3.0%

    United States - 0-0.25%

    Norway - 1.5%

    Turkey - 5.75%

    Taiwan - 1.875%

    NEXT WEEK:

    Looking at the central bank calendar for next week, monetary policy will be quiet, with only Israel and Hungary set to take decisions. 

    Israel kept its interest rate unchanged at 2.5 percent last month, citing inflation in the middle of its target range, but noting that uncertainty about Europe's economy had intensified.

    The focus in Hungary is on the law governing the central bank. A law passed last year was criticized for threatening the central bank's independence, but a revision, which could be approved early next month, is expected to open the way for fresh loan talks with the International Monetary Fund and the European Union.

    At its last rate-setting meeting, the Hungarian central bank left the base rate unchanged at 7 percent due to inflation above target. But the economy is contracting and the bank first expects growth to return in 2013.

    The focus will return to the euro area on Thursday and Friday when European Union heads of state meet in Brussels for a summit that will be dominated by efforts to transform the monetary union into some form of banking and fiscal union.

    MEETINGS:

Jun-25	ILS	Israel	Bank of Israel
Jun-26	HUF	Hungary	The Magyar Nemzeti Bank

www.CentralBankNews.info

Central Bank News Link List - June 22, 2012

    Here's today's Central Bank News link list, click through if you missed the previous central bank news link list. The list is updated during the day with the latest news about central banks so readers don't miss any important developments.

    If you want to submit links for inclusion in the daily link list, just email them through to us or post them in the comments section below.

•  Bundesbank swipes at Draghi as European fault lines deepen (Bloomberg)
•  Euro's big four agree on growth boost, split on bonds (Reuters)
•  IMF urges eurozone to make more determined, collective response to crises (IMF)
•  Press Release: Systemic risk remains high in EU - (ESRB)
•  NY Fed names Potter as head of markets group (Reuters) 
•  Market rules out rate cut in July (Business Standard-India) 
•  Hungary submits central bank bill (WSJ)
•  Moody's cuts ratings of 15 banks (Reuters) 
• We can't keep borrowing, central bank governor says (Times Colonist-Canada)

Source:www.CentralBankNews.info

Central Bank News Link List - June 21, 2012

    Here's today's Central Bank News link list, click through if you missed the previous central bank news link list. The list is updated during the day with the latest news about central banks so readers don't miss any important developments.

    If you want to submit links for inclusion in the daily link list, just email them through to us or post them in the comments section below.

•  Auditors: Spain's banks may need up to $78 billion (Marketwatch)
•  Taiwan central bank keeps interest rate flat; cools home market (WSJ)
•  Polish central banker: July CPI may lead to rate cut (Reuters)
•  BOJ policymaker says ready to take bold action as needed (Reuters) 

Source:www.CentralBankNews.info

Turkey keeps rates steady, monitors economy closely

    Turkey's central bank kept its policy rate unchanged but is closely monitoring the economy during the current global uncertainties and will adjust funding to banks as needed.
    In a statement following a meeting of the bank's Monetary Policy Committee, the Central Bank of the Republic of Turkey said leading indicators suggested that domestic demand had recovered in the second quarter and exports continued to grow despite the weakening global outlook.

    "The Committee stated that, given the prevailing uncertainties regarding the global economy, it would be appropriate to preserve the flexibility of the monetary policy. Therefore, the impact of the measures undertaken on credit, domestic demand, and inflation expectations will be monitored closely and the funding amount will be adjusted in either direction, as needed," the bank said.

Fed holds rate, extends 'Operation Twist' until end-2012

    The U.S. Federal Reserve maintained the target for its key policy rate, the federal funds rate, at 0-0.25 percent and said it expected to maintain rates at these "exceptionally low levels" at least through late 2014.
    As expected, the Federal Reserve extended its policy of increasing the average maturity of its securities -- known as Operation Twist -- by purchasing U.S. Treasuries worth $267 billion by the end of the year. Operation Twist was due to expire at the end of June. 
    The Federal Reserve has been extending the maturity of its holdings of U.S. Treasury bonds by purchasing bonds with maturities of six to 30 years, and selling or redeeming the corresponding amount of bonds with maturities of 3 years or less.
    "This continuation of the maturity extension program should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative," the Federal Open Market Committee (FOMC) said. The FOMC is the Federal Reserve's main policy making body.

Central Bank News Link List - June 20, 2012

      Here's today's Central Bank News link list, click through if you missed the previous central bank news link list. The list is updated during the day with the latest news about central banks so readers don't miss any important developments.

    If you want to submit links for inclusion in the daily link list, just email them through to us or post them in the comments section below.

•  ROUNDUP: Analyst predictions for FOMC (Wall Street Journal)
•  Minutes of BOE's monetary policy committee meeting June 6, 7 (BOE)
•  Bank of England split 5-4 on more stimulus (Daily Telegraph)
•  China's central bank willing to share $3 trillion (Forbes) 
•  Turkey central bank 'outsmarted' many investors, Soc-Gen says (Bloomberg)
•  Austria central bank head warns too much austerity led to Nazism (Calgary Herald) 
• G20 backs Europe's plans for overhaul to fight crises (Reuters)       
• 
  

Source:www.CentralBankNews.info

Norway central bank keeps rate at 1.5%

    Norway's central bank, as expected, kept it key policy rate unchanged at 1.50 percent, citing uncertainty surrounding the euro area but a slightly better-than-expected domestic economy.
    Central Bank Govenor Oystein Olsen said the central bank's executive board had decided the policy rate should remain in the 1-2 percent range unless the Norwegian economy was exposed to major shocks. It said the key rate should remain around this level towards the end of 2012 and then gradually rise towards a more normal level.
    "The level of uncertainty surrounding developments in Europe is now higher than it has been for some time. Although domestic developments have been slightly stronger than expected, the turbulence and weak growth prospects abroad suggest the key policy rate should be kept on hold," said Olsen in a statement.

    The Norwegian central bank surprisingly cut its rate in March, citing a weak outlook for the international economy and a strong Norwegian krone.

    www.CentralBankNews.info

FSB: Emerging markets fear for credit under new rules

    Developing nations fear that credit and liquidity in their markets will dry up as major international banks struggle to meet tougher global rules, the Financial Stability Board said.

    In a report on the effect on emerging markets from Group of 20-led regulatory reforms, the FSB said some developing economies were worried that higher capital requirements levied on major international banks could have unintended consequences, both on their own financial markets and domestic banks.

    The FSB, which carried out a study with the International Monetary Fund (IMF) and World Bank, also found that emerging economies were concerned over a "home bias" in the design or implementation of the reforms that would have adverse effects on their own financial institutions.

    Click to read: Identifying the Effects of Regulatory Reforms on Emerging Market and Developing Economies: A Review of Potential Unintended Consequences.

    www.CentralBankNews.info

FSB: No need for treaty, Swiss law OK for now

    The Financial Stability Board, the global financial reform body that was created by Group of 20 leaders without a formal legal status, does not believe it needs the legitimacy of an international treaty to carry out its work right now, the FSB said in a report to the G20.
    Instead, the FSB, whose legitimacy has been questioned, said it could be given a legal form by creating an association under Swiss law and a draft of the articles should be formulated.
    The FSB, which is widening its steering committee to make it more representative, said it would not levy membership fees but continue to rely on the Bank for International Settlements (BIS) for funding.
    And in a move that should appease critics of its lack of transparency, the FSB said it "should adopt a structured mechanism for public consultation on FSB policy proposals; it should also engage in dialogue with market participants and other stakeholders, including through round-tables, hearings and other appropriate events."


    Click to read "Report to the G20 Los Cabos Summit on Strengthening FSB Capacity, Resources and Governance."


    www.CentralBankNews.info

Central Bank News Link List - June 19, 2012

     Here's today's Central Bank News link list, click through if you missed the previous central bank news link list. The list is updated during the day with the latest news about central banks so readers don't miss any important developments.

    If you want to submit links for inclusion in the daily link list, just email them through to us or post them in the comments section below.

•  Los Cabos 2012 Summit documents (University of Toronto)
•  G20 backs Europe's plans for overhaul to fight crises (Reuters)       
•  BOJ chief says central banks stand ready to pump in liquidity (Reuters)
•  U.S. recovery risks may stir Fed into action (Reuters)
•  Morocco central bank keeps key interest rate unchanged at 3% (Bloomberg)
•  Brazil central bank president sees growth accelerating (Nasdaq)

Source:www.CentralBankNews.info

Central Bank News Link List - June 18, 2012

    Here's today's Central Bank News link list, click through if you missed the previous central bank news link list. The link list is updated during the day with the latest news about central banks so readers don't miss any important developments.
    Remember, if you want to submit links for inclusion in the daily link list, just email them through to us or post them in the comments section below.

• China leads nations boosting IMF's firewall to $456 billion (Bloomberg)
• Euro crises shifts to Spain as Merkel faces G-20 pressure (Bloomberg)
• Europe needs comprehensive action to revive growth (IMF)
• Backing grows for one EU bank supervisor (FT)
• BRICS to study cbank foreign exchange swaps and reserve pooling (WSJ)
• Ortiz says ECB can stop European crises 'almost immediately' (Bloomberg)
•  Australia central banker urges Europe to act (Marketwatch)
• Dollar shortage seen in $2 trillion gap says Morgan Stanley (Bloomberg)
• Chile central bank cuts CPI view, maintains GDP view (Reuters) 
• Fed seen twisting to risk management to spur U.S. growth (Bloomberg)
• Hale Franc tests Swiss bank's mettle (Wall Street Journal)
• Bank sector is Spain's main problem - ECB's Nowotny (Reuters)
• RBA rate cut a line-ball call amid Europe woes (Sydney Morning Herald)
• Source:www.CentralBankNews.info