Monetary Policy Week in Review - July 28, 2012

     The past week in monetary policy saw interest rate decisions by nine central banks around the world, with two large emerging market central banks cutting rates, and the remaining seven banks keeping rates unchanged.

    Both the Colombian and the Philippine central banks that cut rates cited falling inflation that allowed them room to cut rates and help buffer the economy against lower global growth.

     Of note was the statement by the Reserve Bank of New Zealand, which struck a much-less pessimistic view of the euro area debt crises than most other observers, saying there was only a limited risk that conditions there would deteriorate significantly.

    LAST WEEK’S MONETARY POLICY DECISIONS:

  

COUNTRY	NEW RATE	OLD RATE	RATE 1 YR AGO
ISRAEL	2.25%	2.25%	3.25%
HUNGARY	7.00%	7.00%	6.00%
NIGERIA	12.00%	12.00%	8.75%
THAILAND	3.00%	3.00%	3.25%
NEW ZEALAND	2.50%	2.50%	2.50%
PHILIPPINES	3.75%	4.00%	4.50%
COLOMBIA	5.00%	5.25%	4.50%
EGYPT	9.25%	9.25%	8.50%
ZAMBIA	9.00%	9.00%	N/A

   

    NEXT WEEK:

    Looking at the central bank calendar for next week, there is intense speculation that the European Central Bank (ECB) will follow up with measures to ease strains in sovereign bond markets following President Mario Draghi’s statement that the ECB would “do whatever it takes to preserve the euro,” within its mandate.

    Speculation about some form of coordinated central bank action - similar to the November 30, 2011 coordinated expansion in U.S. dollar swap arrangements to ease liquidity strains in markets – was stoked by news that U.S. Treasury Secretary Timothy Geitner would meet top European leaders, including Draghi, on Monday.

    A few days after that coordinated action, the ECB on December 8 launched its two longer-term refinancing operations (LTROs) that quickly eased strains in European debt markets.

    The U.S. Federal Reserve is also expected to expand its stimulus programme while neither the Bank of England or the Reserve Bank of India are expected to cut rates.

   

COUNTRY	MEETING DATE	OLD RATE	RATE 1 YR AGO
INDIA	31-Jul	8.00%	8.00%
UNITED STATES	1-Aug	0.25%	0.25%
UNITED KINGDOM	2-Aug	0.50%	0.50%
EURO ZONE	2-Aug	0.50%	1.50%
CZECH REPUBLIC	2-Aug	0.50%	0.75%
ROMANIA	2-Aug	5.25%	6.25%

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