The past week in monetary policy saw interest rate decisions by 11 central banks around the world, with two banks cutting rates (Latvia and Mozambique), one bank raising rates (Russia), and the remaining 8 banks (United States, New Zealand, the Philippines, Switzerland, Indonesia, South Korea, Chile and Ghana) keeping rates unchanged.
Although the Federal Reserve kept rates unchanged, it continued to stimulate the U.S. economy, this time specifically targeting the employment-sensitive home and construction sector by buying housing-related debt in what is known as Quantative Easing 3 (QE3). The Fed also prolonged its time frame for holding rates close to zero to at least mid-2015, up from the previous target of late 2014.
To avoid the impression that U.S. economic growth will remain sluggish for another 3 years, the Federal Reserve added that this “highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens.”
The overall message from last week’s 11 central bank statements was the continuing adjustment to slower global growth.
Other notable moves last week was Russia’s decision to raise rates to restrain inflation that was boosted by poor harvests, and Chile’s mention that international financial conditions had improved following the European Central Bank’s plan to buy an unlimited amount of bonds of euro zone members, if needed.
LAST WEEK’S MONETARY POLICY DECISIONS:
| COUNTRY | NEW RATE | PREVIOUS RATE | RATE 1 YEAR AGO |
| MOZAMBIQUE | 10.50% | 11.50% | 16.00% |
| UNITED STATES | 0.25% | 0.25% | 0.25% |
| NEW ZEALAND | 2.50% | 2.50% | 2.50% |
| THE PHILIPPINES | 3.75% | 3.75% | 4.50% |
| SWITZERLAND | 0.25% | 0.25% | 0.25% |
| INDONESIA | 5.75% | 5.75% | 6.75% |
| SOUTH KOREA | 3.00% | 3.00% | 3.25% |
| CHILE | 5.00% | 5.00% | 5.25% |
| GHANA | 15.00% | 15.00% | 12.50% |
| LATVIA | 2.50% | 3.00% | 3.50% |
| RUSSIA | 8.25% | 8.00% | 8.25% |
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NEXT WEEK:
The central bank calendar for next week calls for 6 central banks to decide
monetary policy, with India, Sri Lanka, South Africa and Taiwan expected to
keep rates steady. There is speculation that Turkey may ease policy due to weaker growth and in Japan the rise in the yen has sparked talk that the Bank of Japan may intervene.
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