Last week six central banks
took policy decisions with two major banks in emerging markets (Turkey and
Brazil) changing their rates in opposite direction while the other four central
banks (Canada, Sweden, Mozambique and Sri Lanka) kept rates steady as inflation
remains sticky despite weak global growth.
Brazil’s 25 basis point rate hike - well-flagged
and overdue - was significant because it illustrates that inflationary
pressures are building in some emerging markets, specifically Asian countries, and central bankers will defend
their inflation-fighting credentials.
Brazil’s move was in contrast
to decisions by Canada and Sweden to further push back the time frame for rate
rises, showing how the euro area’s severe crises is hampering economic recovery
throughout advanced economies while growth in many emerging markets is
accelerating.
While inflation remains an
issue in many emerging countries, disinflation – or deflation in the case of
Japan - haunts many advanced economies as long unemployment lines holds down
wage pressure along with excess industrial capacity.
Sweden’s Riksbank specifically
cited the need to keep policy rates low for longer than forecast because
inflation will take longer to return to target than expected. For 2013
inflation is forecast to average a mere 0.1 percent.
Weaker-than-expected growth is
also holding back inflation in Canada, with the Bank of Canada now first
expecting inflation to return to target by mid-2015, at least six months later
than it expected in January.
Turkey, which bounced back swiftly from the global financial crises but
then was hit by slow growth last year, cut its rate by a larger-than-expected
50 basis points despite inflation above the central bank’s target.
The latest central bank decisions
came as policy makers gathered in Washington D.C. for the annual meeting of the
International Monetary Fund.
While the IMF trimmed its 2013
global growth forecast, it also said the global economy was taking on the
characteristics of a three-speed recovery. Growth in emerging and developing
markets is still strong, the U.S. is getting back on its feet, but the euro area
is continuing to contract with adverse feedback loops between weak banks, weak
sovereigns and low economic activity reinforcing each other.
Through the first 16 weeks of
this year, 77 percent of the 147 policy decisions taken by the 90 central banks
followed by Central Bank News have lead to unchanged rates, the same ratio as
after 15 weeks.
Globally, 19 percent of policy
decisions this year have lead to rate cuts - largely by central banks in
emerging economies – unchanged from last week and slightly down from
20 percent the week before then.
| COUNTRY | MSCI | NEW RATE | OLD RATE | 1 YEAR AGO |
| MOZAMBIQUE | 9.50% | 9.50% | 13.50% | |
| SRI LANKA | FM | 7.50% | 7.50% | 7.75% |
| TURKEY | EM | 5.00% | 5.50% | 5.75% |
| BRAZIL | EM | 7.50% | 7.25% | 9.00% |
| SWEDEN | DM | 1.00% | 1.00% | 1.50% |
| CANADA | DM | 1.00% | 1.00% | 1.00% |
Next week (week 17) features nine central bank policy decisions, including
Hungary, Namibia, New Zealand, Philippines, Fiji, Japan (including the economic
outlook), Mexico, Colombia, and Trinidad and Tobago.
| COUNTRY | MSCI | DATE | RATE | 1 YEAR AGO |
| HUNGARY | EM | 23-Apr | 5.00% | 7.00% |
| NAMIBIA | 24-Apr | 5.50% | 6.00% | |
| NEW ZEALAND | DM | 24-Apr | 2.50% | 2.50% |
| PHILIPPINES | EM | 25-Apr | 3.50% | 4.00% |
| FIJI | 25-Apr | 0.50% | 0.50% | |
| JAPAN | DM | 26-Apr | 0.00% | 0.10% |
| TRINIDAD & TOBAGO | 26-Apr | 2.75% | 3.00% | |
| MEXICO | EM | 26-Apr | 4.00% | 4.50% |
| COLOMBIA | EM | 26-Apr | 3.25% | 5.25% |
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