Monday, May 5, 2014

Monetary Policy Week in Review – Apr 28-May 2, 2014: 2 central banks cut, but news reinforces hawkish trend

    The central banks of Hungary and Azerbaijan cut interest rates last week but the trend toward tighter global monetary policy was reinforced by positive economic news and a growing sense of the need for major central banks to pull back from ultra-easy policy.
    The shift in tone was most glaring in the euro zone where news of a tick-up in April inflation to 0.7 percent from 0.5 percent reduced the chances of the European Central Bank embarking on extraordinary measures, a surprisingly sharp turnaround from the previous week when it seemed almost certain that the ECB would spring into action to fend off the threat of deflation.
    In the United States, a surprisingly strong jobs report that included a drop in the April unemployment rate to 6.3 percent, immediately caused traders to advance their rate rise expectations by six weeks to June 2015.
    And in the U.K. there were fresh warnings by two members of the Bank of England’s monetary policy committee of the risk of rising property prices and the risk of raising rates too late, illustrating just how the public debate has shifted toward the timing of a rate rise and away from the need to keep policy accommodative to boost the sluggish economy.
    And even in Japan, where any policy tightening is far off in the horizon, the confirmation that members of the Bank of Japan’s policy board in their latest outlook forecast rising inflation led to a decline in the chances of additional monetary easing this year.
    The Bank of Albania, which has maintained its rate since February after slashing it by 250 basis points since October 2011, summed up the positive mood, describing 2014 as a possible “turning point for economic activity.”
    Through the first 18 weeks of this year, central banks have now raised and cut their policy rates by the same number of times, a sign that the days of easier monetary policy are behind us but the trend toward tighter policy is still in its infancy.
    Rates have now been raised 17 times and cut 17 times by the 90 central banks followed by Central Bank News.


COUNTRY MSCI      NEW RATE            OLD RATE         1 YEAR AGO
ISRAEL DM  0.75% 0.75% 1.75%
ANGOLA 9.25% 9.25% 10.00%
EGYPT  EM 8.25% 8.25% 9.75%
MAURITIUS FM 4.65% 4.65% 4.90%
HUNGARY EM 2.50% 2.60% 4.75%
UNITED STATES DM  0.25% 0.25% 0.25%
JAPAN DM                   N/A                  N/A                  N/A
ALBANIA  2.75% 2.75% 3.75%
KENYA FM 8.50% 8.50% 9.50%
AZERBAIJAN 4.25% 4.75% 4.75%
UZBEKISTAN 10.00% 10.00% 12.00%
UGANDA 11.50% 11.50% 12.00%
MALAWI 25.00% 25.00% 25.00%
    This week (Week 19) 15 central banks will be deciding on monetary policy, including Australia, Romania, Poland, the Czech Republic, Georgia, the Euro Area, Serbia, the United Kingdom, Norway, the Philippines, Malaysia, Indonesia, Peru, Zambia and South Korea.
    In addition, on May 6 the OECD releases its latest economic outlook in Paris.

AUSTRALIA DM 6-May 2.50% 2.75%
ROMANIA FM 6-May 3.50% 5.25%
POLAND EM 7-May 2.50% 3.00%
CZECH REPUBLIC EM 7-May 0.05% 0.05%
GEORGIA 7-May 4.00% 4.25%
EURO AREA DM 8-May 0.25% 0.50%
SERBIA FM 8-May 9.50% 11.25%
UNITED KINGDOM DM 8-May 0.50% 0.50%
NORWAY DM 8-May 1.50% 1.50%
PHILIPPINES EM 8-May 3.50% 3.50%
MALAYSIA EM 8-May 3.00% 3.00%
INDONESIA EM 8-May 7.50% 5.75%
PERU EM 8-May 4.00% 4.25%
ZAMBIA 9-May 12.00% 9.25%
SOUTH KOREA EM 9-May 2.50% 2.50%


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