Monetary Policy Week in Review – Jan. 12, 2013: Two of 10 central banks cut as global rates continue to move lower

     Last week monetary policy committees from 10 central banks met to decide on policy with eight banks (Romania, Thailand, Indonesia, United Kingdom, the euro area, South Korea, Mozambique and Peru) keeping rates on hold and two banks (Poland and Kenya) cutting rates, illustrating that official interest rates continue to head lower.

    Through the first two weeks of 2013, 12 central banks have met to decide on policy, with 10 keeping rates unchanged and two cutting.

    As last year, the uneven pace of economic activity worldwide was in evidence, with Europe at the center of economic malaise while countries in Asia look forward to improving growth prospects this year and 2014.

    The Bank of Thailand’s slightly hawkish statements about the risks from credit growth and rising household debt were a bit of a surprise and even the Bank of Korea, which cut its growth forecasts, sees expansion in the second half of this year, while the Bank of Indonesia sees continued robust growth that becomes stronger this year and next.

    The improving growth prospects in Asia is giving rise to the first sliver of optimism in Europe with the European Central Bank looking to exports to support recovery later this year. And the National Bank of Poland, which cut its rate as the slowdown continues, was slightly less hawkish than last month, saying it may cut rates further if the economy continues to worsen compared with the statement that it “will” cut rates.

    The cautious optimism is also spreading to Africa, with the Central Bank of Kenya reporting that the private sector is optimistic about a strong recovery this year and Mozambique trimming the growth in its monetary base.

LAST WEEK’S (WEEK 2) MONETARY POLICY DECISIONS:

COUNTRY	MSCI	NEW RATE	OLD RATE	1 YEAR AGO
ROMANIA	FM	5.25%	5.25%	5.75%
THAILAND	EM	2.75%	2.75%	3.00%
POLAND	EM	4.00%	4.25%	4.75%
INDONESIA	EM	5.75%	5.75%	6.00%
UNITED KINGDOM	DM	0.50%	0.50%	0.50%
EURO AREA	DM	0.75%	0.75%	1.00%
KENYA	FM	9.50%	11.00%	18.00%
SOUTH KOREA	EM	2.75%	2.75%	3.25%
MOZAMBIQUE		9.50%	9.50%	15.00%
PERU	EM	4.25%	4.25%	4.25%

    Next week (Week 3) five central banks are scheduled to decide on monetary policy, including Russia, Barbados, Brazil, Serbia and Mexico. Hungary's central bank also meets but this is not a rate-setting meeting. 

COUNTRY	MSCI	MEETING	RATE	1 YEAR AGO
RUSSIA	EM	15-Jan	8.25%	8.00%
BARBADOS		15-Jan	3.00%	3.00%
BRAZIL	EM	16-Jan	7.25%	10.50%
SERBIA	FM	17-Jan	11.25%	9.50%
MEXICO	EM	18-Jan	4.50%	4.50%

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