Czech central bank sees inflationary risks on downside

    The Czech central bank, which earlier today left its rock-bottom interest rates unchanged, said the overall risks to inflation were slightly on the downside and monetary-policy relevant inflation will be in the lower half of the bank's tolerance band over the whole forecast horizon.
    The published presentation to a press conference by the Czech National Bank (CNB) showed that the decision to keep the two week repo rate steady at 0.05 percent was unanimous and headline inflation was expected to remain slightly above the CNB's inflation target next year due to tax changes.
    The central bank targets inflation of 2 percent and strives to ensure it doesn't vary by more than one percentage point in either direction. The presentation showed that inflation was forecast to decline further from November's 2.7 percent and then remain above 2 percent most of 2013 before falling below 2.0 percent in the first quarter of 2014.
    The Czech economy shrank further in the third quarter, with net exports the only positive contributor, the bank's presentation showed, and "developments in industrial production, construction output and retail sales in October continue to indicate subdued economic activity."
    The Czech Gross Domestic Product shrank by 0.3 percent in the third quarter from the second for an annual shrinkage of 1.3 percent. The CNB had forecast annual contraction of 0.8 percent.

Bank of Japan Increases APP 10 Trillion Yen to 65 Trillion

The Bank of Japan held its interest rate at 0-0.10% and added 10 trillion to it's now 65 trillion yen quantitative easing program.  The Bank noted that this will mean the Asset Purchase Program will increase by about 22 trillion yen by the end of 2012, compared to the current implemented level of about 43 trillion yen. The Bank said: "Japan's economic activity has been more or less flat, mainly due to the effects of a slowdown in overseas economies and the appreciation of the yen.  On the other hand, financial  conditions in Japan have continued to ease.  On the price front, the year-on-year rate of  change in the CPI (all items less fresh food) is around 0 percent."

Central Bank Inflation Targeting Report Card - 2011

This report provides an update on where inflation is tracking in countries where the central bank has an inflation target.  Central Bank News has compiled a table of countries/central banks that have publicly announced an official inflation target.  In some cases the target is a government target, but in many cases it is one of the central bank's key performance indicators.  Of the 39 countries which have inflation targets that Central Bank News is monitoring; 22 last reported inflation above target, 8 had inflation below target, and 9 reported inflation within their target range. Note, the inflation figures in the table below are all on a headline, or gross, inflation basis.

FOMC Holds Rate at 0-0.25%, Announces Inflation Target, Releases Inaugural Fed Forecasts

The US Federal Open Market Committee (FOMC) kept the fed funds rate steady at 0 to 0.25 percent. The Fed said: "To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy.  In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014."

[Review] Clarity of Central Bank Communication About Inflation

The International Monetary Fund (IMF) has just released a working paper on central bank communication on inflation, which examines whether the clarity of central bank communications have changed with the economic environment.  The key finding of the paper is that there are "no strong indications that central banks were less clear in explaining their policies when faced with higher uncertainty or a less favorable inflation outlook."  However, the authors note that the global financial crisis "did have a negative impact on clarity of central bank communication."  The paper's authors are: Bulir, Ales; Cihák, Martin; and Jansen, David-Jan.

Inflation Targeting in a Rising Inflationary Environment

This report outlines where inflation is tracking in countries where the central bank has an inflation target.  Central Bank News has compiled a table of countries/central banks that have publicly announced an official inflation target.  In some cases the target is a government target, but in many cases it is one of the central bank's key performance indicators.  Of the 32 countries that Central Bank News is monitoring, which have inflation targets; 24 last reported inflation above target, 1 had inflation below target, and 7 reported inflation within their target range. Note, the inflation figures in the table below are all on a headline, or gross, inflation basis.