During January and February 23 central banks cut their benchmark lending interest rates, more than twice the 11 rate cuts seen in the first two months of 2014.
And the rapid pace of cuts to policy rates doesn’t reflect just how loose global monetary policy has become as the European Central Bank ECB) this month embarks on full-scale quantitative easing as its begins purchasing 60 billion euros a month of euro zone government and European institutional bonds with its expanded asset purchase program scheduled to run through September 2016.
Central banks in advanced economies, with the Federal Reserve the great exception, have been especially active so far this year in easing their policy stance to head off the twin threats of deflation and economic stagnation.
Six of this year’s 23 rate cuts have come from advanced economy central banks: Switzerland, Denmark, Canada, Australia, Sweden and Israel.
In comparison, Israel was the only advanced economy central bank to cut its rate in the first two months of 2014.
A hallmark of monetary policy this year is the use of negative rates as the boundaries of monetary policy are pushed further into the unknown.
Benchmark policy rates used by the SNB and Sweden’s Riksbank have been reduced to negative territory while the ECB and Denmark’s Nationalbank have adopted negative deposit rates.
Another feature this year has been the surprises sprung by central banks on financial markets, most glaringly the Swiss National Bank's (SNB) decision to scrap its cap on the franc’s exchange rate against the euro, a move that many observers feel has damaged its credibility.
Singapore’s monetary authority also took markets by surprise - though by a lesser extent than the SNB - by slowing the pace of the appreciation of its dollar against a basket of key currencies in response to the fall in crude oil prices and the accompanying lowering of inflation.
Central banks in emerging markets have also been very active this year and on several occasions caught financial markets by surprise. India's rate cut in January came at an unscheduled policy meeting while investors also were surprised by Russia's and Indonesia's rate cuts.
Nine of this year’s rate cuts have come from emerging market central banks - three times the number of cuts seen in the first two months of 2014 - as they take advantage of lower commodity prices to stimulate economic activity in response to weaker global growth.
China became the latest emerging market central bank to cut rates on Saturday, joining India, Chile, Peru, Egypt, Russia, Indonesia and Turkey, which has cut rates twice.
LIST OF LAST WEEK’S CENTRAL BANK DECISIONS:
- Israel cuts rate 15 bps after shekel's appreciation
- Sri Lanka holds rates, sees "comfortably" low inflation
- Fiji maintains rate, twin objectives still intact
- Kyrgyzstan maintains rate despite rising inflation
- Turkey cuts rate 25 bps, new cuts to depend on inflation
- Hungary holds rate but will consider rate cut in March
- Moldova maintains rate, still sees inflation above limit
- Egypt holds rate, low oil counters supply bottlenecks
- Kenya holds rate, monitors FX rate and inflation
- Angola maintains rates as pace of credit rise eases
- China cuts rate 25 bps after inflation falls to historic lows
TABLE WITH LAST WEEK’S MONETARY POLICY DECISIONS:
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This week (Week 10) central banks from eight countries or jurisdictions are scheduled to decide on monetary policy: Australia, Canada, Brazil, Poland, Albania, Malaysia, the United Kingdom and the euro area.
TABLE WITH THIS WEEK’S MONETARY POLICY DECISIONS:
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