Global interest rates fell further last month as eight central banks eased their policy stance - most notably the Bank of Japan with its “new phase of monetary easing” - pushing the average global monetary policy rate down to 5.70 percent at the end of April from 5.79 percent at the end of March and 6.2 percent at the end of 2012.
Central banks cut their key rates by a total of 774 basis points in April, the highest monthly amount this year, boosting this year's total rate cuts to 1876 basis points.
Including Brazil's rate rise in April, rates fell by a net 749 basis points, and including rate rises by five central banks this year, the net decline in the first four months amounted to 1716 basis points.
Belarus, Sierra Leone and Mongolia were the top three rate-cutters in April, slashing rates by 150, 300 and 100 basis points, respectively, in response to lower inflationary pressures. Together, these three central banks accounted for 73 percent of the total rates cuts in April and 45 percent of the total decline of rates in the first four months of 2013.
The National Bank of the Republic of Belarus was already the world’s most aggressive rate cutter in 2012 when it slashed rates by 1500 basis points as inflation tumbled from 110 percent to 22 percent.
It is likely to remain in the top tier this year as its policy rate is still 27 percent, the highest among the 90 central banks covered by Central Bank News, and it expects inflation to continue to decline. The world's second highest rate belongs to Malawi, with a rate of 25.0 percent, while Sierra Leone takes the third place, with a rate currently at 17.0 percent.
(To see current rates, see Central Bank News' Global Interest Rate Monitor (GIRM).
As the Bank of Japan’s policy rate was already virtually zero – in October 2010 it was cut to 0-0.10 percent from 0.10 percent – it had to resort to massive asset purchases in an effort to slay deflation. This move is not captured by our table of rate cuts so the BOJ's rate has been set at zero.
As part of the shake-up of its monetary policy framework, the BOJ will no longer target the overnight call rate but rather the country’s monetary base – banks’ reserves at the central bank plus cash in circulation - which it aims to boost to 270 trillion yen by end-2014 from 138 trillion end-2012 through money market operations.
From January through April this year, 22 central banks have cut rates compared with five banks that have raised rates, illustrating that the trend in global monetary policy is still toward lower rates.
Excluding Denmark, which only raised its rate in January due to foreign exchange concerns, the four rate rises were in response to growing inflationary pressure.
Brazil’s central bank was the lone rate-riser in April, ending a six-month hiatus. The Central Bank of Brazil carried out an easing campaign from August 2011 to October 2012 as rates were cut from 12.50 percent to 7.25 percent. Last month it raised its key Selic rate to 7.50 percent as inflation topped its tolerance band but it didn’t indicate a future policy direction.
GLOBAL MONETARY POLICY RATES (GMPR)
CHANGES IN APRIL AND YEAR-TO-DATE, IN BASIS POINTS:
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