Friday, December 17, 2010

Monetary Policy Week in Review - 18 Dec 2010

In the past week the central banks of Sri Lanka, US, Hong Kong, Norway, Namibia, Sweden, Botswana, Egypt, Switzerland, India, Poland, Turkey, Chile, Columbia all met to review monetary policy settings. There were a few movements in interest rates with those to tighten being: Sweden +25bps and Chile +25bps, while those that dropped rates were: Namibia -75bps, Botswana -50bps, and Turkey -50bps. While the rest held steady, and the US made no alterations to its quantitative easing program. Of those that made changes, Sweden and Chile were on the path to monetary policy normalization, while Namibia and Botswana dropped their rates to try and spur growth, and Turkey's motive was abating hot capital flows and exchange rate effects. With the US holding steady at 0.25% the Hong Kong Monetary Authority also held steady at 0.50% because the Hong Kong Dollar is fixed against the US dollar.

So it was quite a mixed picture on the monetary policy front in the past week, some held at high rates to control inflation, some held at low rates to spur growth, some raised to begin policy normalisation, some cut to spur growth and influence capital flows. And this is probably the theme for 2011 in monetary policy, i.e. a mixed picture as some economies emerge faster out of the crisis, and some emerge slower. Indeed, in emerging markets the threat of high inflation could see volatile monetary policy as policy setters look to tighten to stem inflation, but if tightening too far, could even be forced to reverse measures if it impacts on growth. Next week the only major bank to announce monetary policy will be the Bank of Japan, also the Bank of England will release the minutes of its last monetary policy meeting.


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1 comment:

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