Global policy rates fell by a net 425 basis points during March as nine central banks - including four major emerging market central banks - cut rates, pushing the global average policy rate down to 5.79 percent at the end of the first quarter from 5.83 percent after the first two months.
It was the size of the rate cuts by Mexico, Colombia and Poland – each by 50 basis points – that took observers by surprise, with the central banks attempting to give their economies a jolt to avoid disinflation becoming embedded.
India was another major emerging market central bank that cut rates in March, though by an expected 25 basis points, as it is still struggling to dampen inflation amid a weakening economy.
The cumulative 425 basis point cut in policy rates in March was sharply above February’s total decline of 150 basis points and higher than January’s 342 points, signaling growing concern over the strength of global demand.
Through March, global policy rates have fallen by 967 basis points, well below a cumulative fall of 2,162 after the first quarter of 2012, illustrating that rates are heading lower this year, though at a slower pace than last year, as many central banks take a wait-and-see approach to gauge the effect of last year’s substantial rate cuts, the depth of Europe's recession and the impact of U.S. budget cuts.
INTEREST RATE CUTS, YEAR-TO-DATE IN BASIS POINTS, END-MARCH 2013:
|MSCI||CURRENT RATE||YTD CHANGE|
|W. AFRICAN STATES||3.75%||-25|