Saturday, June 23, 2012

Monetary Policy Week in Review - June 23, 2012

    The past week in monetary policy saw interest rate decisions by six central banks around the world, with all banks keeping rates unchanged, citing strains in global financial markets from 
the euro area's debt crises.
    Although the banks affirmed their readiness to respond in the event of a shock to the global financial system, monetary policy worldwide is currently in a wait-and-see mode as Europe's politicians try to dig their way out of the debt and institutional crises.
    The six banks that kept rates unchanged were:
    India - 8.0%, CRR at 4.75%
    Morocco - 3.0%
    United States - 0-0.25%
    Norway - 1.5%
    Turkey - 5.75%
    Taiwan - 1.875%

    Looking at the central bank calendar for next week, monetary policy will be quiet, with only Israel and Hungary set to take decisions. 
    Israel kept its interest rate unchanged at 2.5 percent last month, citing inflation in the middle of its target range, but noting that uncertainty about Europe's economy had intensified.
    The focus in Hungary is on the law governing the central bank. A law passed last year was criticized for threatening the central bank's independence, but a revision, which could be approved early next month, is expected to open the way for fresh loan talks with the International Monetary Fund and the European Union.
    At its last rate-setting meeting, the Hungarian central bank left the base rate unchanged at 7 percent due to inflation above target. But the economy is contracting and the bank first expects growth to return in 2013.
    The focus will return to the euro area on Thursday and Friday when European Union heads of state meet in Brussels for a summit that will be dominated by efforts to transform the monetary union into some form of banking and fiscal union.

Bank of Israel
The Magyar Nemzeti Bank


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