Monday, December 15, 2014

Monetary Policy Week in Review – Dec 8-12, 2014: Most central banks welcome the impact of lower oil on inflation

   Last week the plunge in oil prices over the last six months took center stage in global monetary policy and financial markets.
   But while stock market investors have become unsettled over the collapse in crude oil prices, most central banks welcome the impact of lower oil prices on inflation and inflation expectations.
    The central banks of Switzerland, New Zealand and Sri Lanka were among the 15 central banks that met last week to point out how lower oil prices will hold back inflation and allow the economic expansion to be sustained for longer than expected along with a more gradual rise in interest rates.
    But oil producing nations, such as Norway and Russia, are already feeling the pinch from the plunge of more than 40 percent in crude oil prices since late June.
    Last week Norway cut its policy rate by 25 basis points due to the expected hit to economic growth and employment from lower export earnings.
   Russia is in a radically different situation than Norway with the fall in oil compounding the challenge of economic stagnation, a collapsing currency and accelerating inflation. For the fifth time this year, the Bank of Russia raised its key rate – it has now raised it by 500 basis points - in an attempt to beat back inflation and shore up the ruble.

    Through the first 50 weeks of this year, the 90 central banks followed by Central Bank News have cut their policy rates 63 times, or 13.5 percent of this year’s 467 policy decisions, unchanged from 13.5 percent at the end of the third quarter but up from 12 percent at the end of the first half, and 12 percent at the end of the first quarter.
    Meanwhile, rates have been raised 50 times, or 10.7 percent of all policy decisions, up from 10.2 percent at the end of September, 9.3 percent at the end of June and 8.7 percent at the end of March.
    The Global Monetary Policy Rate (GMPR) - the average rate of the 90 central banks followed by Central Bank News – was steady at 5.62 percent from the previous week as Russia’s 100 basis point rate hike was partly compensated by the rate cuts by Norway and Iceland.
    But the GMPR was still up from 5.54 percent at the end of the third quarter and 5.53 percent at the end of the second quarter and first quarters.


COUNTRY MSCI      NEW RATE            OLD RATE         1 YEAR AGO
ICELAND 5.25% 5.75% 6.00%
NAMIBIA 6.00% 6.00% 5.50%
SOUTH KOREA EM 2.00% 2.00% 2.50%
PHILIPPINES EM 4.00% 4.00% 3.50%
NEW ZEALAND DM 3.50% 3.50% 2.50%
INDONESIA 7.75% 7.75% 7.50%
NORWAY DM 1.25% 1.50% 1.50%
SWITZERLAND DM 0.25% 0.25% 0.25%
RUSSIA EM 10.50% 9.50% 5.50%
SERBIA FM 8.00% 8.00% 9.50%
CHILE EM 3.00% 3.00% 4.50%
PERU EM 3.50% 3.50% 4.00%
SRI LANKA FM 6.50% 6.50% 6.50%
MOZAMBIQUE 7.50% 7.50% 8.25
UGANDA 11.00% 11.00% 11.50%

    This week (Week 51) 10 central banks or monetary authorities are scheduled to decide on monetary policy:  Sweden, Morocco, Croatia, the Czech Republic, Thailand, the United States, Georgia, Albania, Hungary and Japan.

SWEDEN DM 16-Dec 0.00% 0.75%
MOROCCO FM 16-Dec 2.75% 3.00%
CROATIA FM 17-Dec 5.00% 5.00%
CZECH REPUBLIC EM 17-Dec 0.05% 0.05%
THAILAND  EM 17-Dec 2.00% 2.25%
UNITED STATES DM 17-Dec 0.25% 0.25%
GEORGIA 17-Dec 4.00% 3.75%
ALBANIA 18-Dec 2.25% 3.00%
HUNGARY  EM 18-Dec 2.10% 3.00%
JAPAN 19-Dec                  N/A                  N/A


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