The past week in monetary policy saw interest rate decisions by 12 central banks, with only the Philippines cutting its rate, as expected, while the remaining 11 central banks (Sri Lanka, Canada, Botswana, United States, Namibia, Georgia, New Zealand, Sweden, Mexico, Trinidad & Tobago and Colombia) held interest rates unchanged.
One message from this week’s decisions by central banks was that global inflation remains largely under control even though some countries are concerned over too low a rate (Sweden and Georgia) while others, such as Mexico, are fighting to restrain inflationary expectations.
Another message, illustrated by 11 of 12 banks keeping rates on hold, was the high degree of uncertainty that surrounds the global economic outlook, mainly due to the political decisions around Europe’s debt problems and the fiscal adjustment in the United States.
Despite this shadow of uncertainty, it was noted by several banks that easier monetary policy in recent months had improved financial market sentiment and, as New Zealand said, made the risks to the global outlook more balanced. Other central banks, such as Colombia’s, said interest rates in many countries are expected to remain low for a while, helping global economic prospects, and there was already signs of a stabilization in the slowdown of major emerging economies.
A less pessimistic mood was also noted in Namibia’s statement, which saw signs of improvement in its trading partners in the next 6-9 months.
The Bank of Canada, which prides itself of transparency and clear communication, was in the unusual situation of giving a mixed message to markets. A slight change to its forward guidance statement, plus recent statements by the bank’s governor, left economists scratching their heads as to whether the bank had turned more or less hawkish.
By the end of the week, however, it was clear that the bank’s basic stance hadn’t fundamentally changed and it was still trying to strike the right balance between weak global growth and a healthy domestic economy where many debt-laden households will encounter hardship when interest rates eventually start rising.
LAST WEEK'S MONETARY POLICY DECISIONS:
|COUNTRY||MSCI||NEW RATE||OLD RATE||RATE 1 YEAR AGO|
|TRINIDAD & TOBAGO||2.75%||2.75%||3.00%|
NEXT WEEK (week 44) features policy meetings by eight central banks, including heavyweights Japan and India.
|COUNTRY||MSCI||DECISION||CURRENT RATE||RATE 1 YEAR AGO|