Friday, December 16, 2011

Monetary Policy Week in Review - 17 Dec 2011

The past week in monetary policy saw interest rate decisions announced by 11 central banks.  Of those adjusting interest rates, all were reductions; Mozambique -100bps to 15.00%, Mauritius -10bps to 5.40%, Norway -50bps to 1.75%, and Denmark -10bps to 0.70%.  Meanwhile those that held interest rates unchanged were: US 0-0.25%, Hong Kong 0.50%, Chile 5.25%, Switzerland 0-0.25%, Sri Lanka 7.00%, India 8.50%, and Colombia 4.75%.  The US FOMC also announced no changes to its quantitative easing programs, and the Swiss National Bank maintained a strong stance on its exchange rate floor with the Euro.

Following are some of the key quotes from the central banks that announced monetary policy decisions over the past week:
  • Reserve Bank of India (held rate at 8.50%):  "On the domestic front, growth is clearly decelerating. This reflects the combined impact of several factors: the uncertain global environment, the cumulative impact of past monetary policy tightening and domestic policy uncertainties.Both inflation and inflation expectations are currently above the comfort level of the Reserve Bank. However, reassuringly, inflationary pressures are expected to abate in the coming months despite high crude oil prices and rupee depreciation. The growth deceleration is contributing to a decline in inflation momentum, which is also being helped by softening food inflation."
  • Norges Bank (dropped rate 50bps to 1.75%):  "The turbulence in financial markets has intensified and external growth is now expected to be clearly weaker, particularly in the euro area. In order to dampen the impact on the Norwegian economy, the Executive Board has decided to lower the key policy rate."  The Bank further noted: In order to guard against an economic setback and even lower inflation, we are of the view that a reduction in the key policy rate is now appropriate."
  • Bank of Mauritius (cut rate 10bps to 5.40%):  "The MPC observed a decline in externally-generated inflationary pressures.... The MPC is of the view that the Key Repo Rate is  broadly appropriate in view of the expected impact of the 2012 budget measures. However, to signal its concern about the low level of business and consumer confidence, it has decided to cut the Key Repo Rate by 10 basis points."
  • Banco Central de Chile (held rate at 5.25%):  "Domestically, economic activity has evolved somewhat below projections, while domestic demand is still strong. Labor market conditions continue to be tight. Financial conditions are somewhat more constrained, reflecting the situation in global markets. Headline inflation has exceeded expectations somewhat, due to the incidence of fuels and foodstuffs. Core inflation figures remain contained. Inflation expectations are close to the target."
  • US Federal Reserve (held rate at 0-0.25%):  "To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate."

Looking at the central bank calendar, there's a couple more Europe area banks meeting which will be interesting in the sovereign debt crisis context, and the Bank of Japan may or may not be interesting. There's also meeting minutes due from the RBA on Tuesday, and the Bank of England on Wednesday.
  • SEK - Sweden (Riksbank) expected to hold at 2.00% on the 20th of Dec
  • HUF - Hungary (Magyar Nemzeti Bank) expected to hold at 6.50% on the 20th of Dec
  • JPY - Japan (Bank of Japan) expected to hold at 0-0.10% on the 21st of Dec
  • CZK - Czech Republic (Czech National Bank) expected to hold at 0.75% on the 21st of Dec
  • GHS - Ghana (Bank of Ghana) expected to hold at 12.50% on the 21st of Dec
  • TRY - Turkey (Central Bank of the Republic of Turkey) expected to hold at 5.75% on the 22nd of Dec

1 comment:

  1. Europe still seems to be the dominant driver of central bank activity, stupid politicians