Friday, January 7, 2022

Four central banks raise rates in first week of 2022

      During the past week - week 1 of 2022 - five central banks took monetary policy decisions, resulting in four changes to policy interest rates as four rates was raised while no rates were cut.
     The remaining decision resulted in unchanged interest rates.

      Year-to-date central banks worldwide have taken 5 monetary policy decisions, with the policy rate lowered 0 times, the rate increased 4 times and the rate left unchanged 1 time.
      Cuts to interest rates thus account for 0.0% of all changes to the policy rate year-to-date.
      Rate increases account for 100% of all changes to the policy rate year-to-date.

      LIST OF 4 RATE RISES in 2022 BY 4 CENTRAL BANKS: Poland, Uruguay, Argentina and Peru.
      In addition to raising or lowering the policy rate, central banks also change their monetary policy stance by other tools, such as raising or lowering banks' reserve requirements, asset purchases or changing foreign exchange rates.

      Last week (week 1 of 2022) central banks made 4 changes to their overall policy stance, including 4 changes to the policy rate.
     Year-to-date central banks have made 4 changes to their monetary policy stance, with decisions aimed at easing the policy stance accounting for 0.0% of changes.
      In comparison, in 2021 central banks took 50 steps toward easing their monetary policy stance, which accounted for 24.9% of all changes to monetary policy, whereas in 2020 monetary easing steps accounted for 96.3% of all changes to monetary policy.
     Rate cuts accounted for 0.0% of all changes to the monetary policy stance in 2022, compared with 8.5% in 2021.

      Decisions aimed at tightening the monetary policy stance accounted for 100% of all changes to monetary policy in 2022, up from 87.0% in 2021.
      Interest rate increases account for 100% of all changes to monetary policy in 2022, up from 61.7% in 2021.
      CUMULATIVE SIZE OF RATE CUTS 2022: 0 basis points
      CUMULATIVE SIZE OF RATE RISES 2022: 375 basis points

      NET CHANGE IN RATES 2022: +375 basis points

      GLOBAL MONETARY POLICY RATE: 5.55%, up 4 basis points since start of 2022.


      2021: 50 central banks tightened monetary policy and 27 eased, global net tightening by 23 central banks.
      2020: 10 central banks tightened monetary policy and 93 eased, global net easing by 83 central banks.
      2019: 17 central banks tightened monetary policy and 67 eased, global net easing by 50 banks
      2018: 43 central banks tightened monetary policy and 32 eased, global net tightening by 11 banks
      2017: 28 central banks tightened monetary policy and 34 eased, global net easing by 6 banks
      2016: 29 central banks tightened monetary policy and 46 eased, global net easing by 17 banks
      2015: 48 central banks tightened monetary policy and 34 eased, global net tightening by 14 banks


      TIGHTENING: Poland, Uruguay, Argentina and Peru raise rates.



     EMERGING MARKETS: Central banks in emerging markets have decided on monetary policy 2 times in 2022, with 2 decisions by 2 central bank ending in rate hikes: Poland and Peru.

     OTHER MARKETS: Central banks in other markets have decided on monetary policy 2 times in 2022 with 2 central banks deciding to raise rates: Uruguay and Argentina. 

     Central Bank News, which tracks the monetary policy stance of 104 central banks, publishes Global Monetary Policy Changes (GMPC), a country-by-country overview of changes to monetary policy. 
     GMPC aims to capture changes to a wide range of monetary policy instruments, not just key interests rates but also changes to reserve requirements, bond purchases or foreign exchange rates to understand whether the monetary conditions become tighter of easier.
     GMPC complements Central Bank News' other products, such as the Global Interest Rate Monitor (GIRM), which tracks official policy rates, and Global Monetary Policy Highlights (GMPH), which summarizes interest changes each month.
     GMPC includes an alphabetical list of countries with changes to their monetary policy and can always be accessed by clicking here.

     2022 GMPC


Jan 6: benchmark 28-day Leliq rate raised 200 bps to 40.0% as part of a redesign of monetary policy instruments to meet the 2022 goal of setting interest rates that result in a positive real return on investments in pesos, and preserve monetary and exchange rate stability.


Jan 6: reference rate raised 50 bps to 3.0% and board expects to continue normalizing monetary policy stance in coming months based on current information.


Jan. 4: reference rate raised 50 bps to 2.25% to reduce inflation to its target, with extent of monetary tightening needed to reach goal to depend on new information about inflation, economic growth and the labour market.


Jan 5: reference rate raised 75 bps to 6.50% and rate expected to be raised by the same magnitude at the next two monetary policy meetings so the rate reaches a neutral level by the beginning of the second quarter.

     OVERVIEW OF 2021:


      EASING: China cuts reserve requirement, main interest rate and offers low-cost green loans, Taiwan rolls over special credit facility for banks by 6 months,Turkey cuts rate, ECB to increase monthly asset purchases in Q2 and Q3, 2022, Japan extends special Covid-19 financing 6 months, UAE extends several economic support measures and Saudi Arabia extends deferred payment program.
      TIGHTENING: Moldova, Georgia, Poland, Brazil, Ukraine, Poland, Pakistan, Armenia, Hungary, Chile, Costa Rica, Norway, United Kingdom, Mexico, Azerbaijan, Russia, Colombia, Jamaica, Paraguay, Czech Republic, Sierra Leone and Dominican Republic raise rates. 
      USA to reduce asset purchases by $30 billion a month, ECB to end pandemic asset purchases in March 2022 and Japan to end additional purchases of CP and corporate bonds end March, 2022, as scheduled.

      EASING: Turkey cuts rate.
      TIGHTENING: Australia discontinues yield target on 3-year government bond, the US begins to reduce monthly asset purchases by $15 billion, Hungary ceases using FX swaps to provide forint liquidity and to use new discount bills to help sterilize liquidity, and makes interest rate corridor asymmetric by raising overnight deposit, lending and one-week lending rates.
      The following 18 banks raise rates: Poland, Czech Republic, Romania, Mexico, Uruguay, Peru, Jamaica, Hungary, Iceland, South Africa, Pakistan, Ghana, Paraguay, Lesotho, New Zealand, Zambia, Dominican Republic, South Korea and Kyrgyzstan raise rates. 

      EASING: Uganda lets credit relief measures expire but continues with interventions for those sectors that remain under lockdown and liquidity assistance maintained, and Turkey cuts rate.
      TIGHTENING: Romania, Moldova, Uruguay, New Zealand, Iceland, Poland, Peru, Chile, Hungary, Paraguay, Russia, Tajikistan, Kazakhstan, Brazil, Zimbabwe, Azerbaijan and Colombia raise rates. Serbia raises rate on reverse repo auctions and cancels repo auctions, Kuwait starts unwinding crises measures, Singapore raises slope of S$ policy band and Canada ends quantitative easing.

      EASING: Australia extends weekly bond purchases of $4B by 3 months, Mozambique lowers reserve requirement, Saudi Arabia extends deferred payment program, and Turkey and Denmark cut rates.
      TIGHTENING: Moldova, Ukraine, Peru, Russia, Kazakhstan, Armenia, Azerbaijan, Pakistan, Hungary, Paraguay, Brazil, Norway, Czech Republic, Mexico, Jamaica and Colombia raise rates, ECB reduces asset purchases in Q4 moderately, UAE starts gradual and well-calibrated withdrawal of extraordinary stimulus measures, Iceland raises countercyclical capital buffer and caps debt service-to-income ratios and Dominican Republic starts normalization of monetary policy.

      EASING: Liberia
      TIGHTENING: Armenia, Georgia, Brazil, Czech Republic, Uruguay, Mexico, Peru, Sri Lanka, Paraguay, Hungary, Iceland, South Korea and Chile raise rates. Czech Republic also raises countercyclical capital buffer.

      EASING: China cuts required reserve ratio for all banks, Fiji increases size of disaster and rehabilitations containment facility and Seychelles cuts minimum reserve requirement.
      TIGHTENING: Angola, Chile, Belarus, Ukraine, Russia, Kazakhstan, Kyrgyzstan, Hungary, Tajikistan and Moldova raise rates, Israel ends business loan program, Australia trims weekly bond purchases from September, New Zealand ends asset purchases, and Canada trims weekly bond purchases.

      EASING: ECB to purchase assets under PEPP at significantly higher pace in Q3 that in first months of year, Japan extends COVID-19 special financing program 6 months until end-March, 2022, Uganda, Democratic Republic of Congo and Seychelles cut rates, Saudi Arabia extends Covid-19 financing support program for micro, small and medium enterprises and Fiji lowers interest rate on disaster and rehabilitation containment facility.
      TIGHTENING: Russia, Armenia and Brazil raise rates, Ukraine phases out Covid-19 crises measures, Hungary raises rate and closes crises lending program Funding for Growth Go!, and Czech Republic and Mexico raise rates.

      EASING: India provides liquidity to health sector, including vaccine and oxygen producers, and launches a second round of government bond purchases in Q2 FY22 and Ghana cuts rate.
      TIGHTENING: Armenia, Brazil and Iceland raise rates, Kyrgyzstan reduces excess liquidity in banking system to limit inflationary pressures, Czech Republic raises countercyclical capital buffer, and US Fed winds down corporate bond portfolio.
      EASING: Congo and UAE extends pandemic loan program, and Moldova cuts reserve requirements (twice)
      TIGHTENING: Belarus, Ukraine, Russia, Kyrgyzstan, Georgia and Tajikistan raise rates and Canada reduces asset purchases.

      EASING: United States extends Paycheck Protection Program 3 months, Moldova cuts reserve requirement, Brazil extends temporary cut in reserve requirement, ECB to purchase assets under PEPP at significantly higher pace in Q2, Congo and North Macedonia cuts rates and Mongolia adds further longer-term refinancing.
      TIGHTENING: Ukraine raises key rate, Belarus suspends permanent liquidity facility to strengthen control of monetary base and money supply to limit inflation, Georgia raises key rate, United States to cease regular purchases of agency commercial mortgage-backed securities, Brazil raises rate, Turkey raises rate, Russia raises rate and Angola raises rate on liquidity absorption facility.

      EASING: Australia boosts purchases of government bonds $100 billion, Mexico cuts its key interest rate, Uganda extends credit relief and liquidity measures and Indonesia cuts its rate.
      TIGHTENING: Armenia raises policy rate, Tajikistan raises policy rate and reserve requirements that were cut temporarily last year from April 1 to Dec. 31, 2020, Zambia raises rate, Zimbabwe raises rate, Kyrgyz Republic raises rate and Turkey raises reserve requirement.

      EASING: Romania cut its key rate, Israel announced how much foreign exchange it would purchase in 2021 to deal with the rise in the shekel and thus support the economy while Costa Rica increased the size of its special medium-term lending facility.
      TIGHTENING: Mozambique raised its key interest rate due to rising inflation while Angola's central bank began to levy a fee on banks' excess liquidity as it begins to implement a more restrictive monetary policy.

     DEVELOPED MARKETS: Central banks in developed markets have decided on monetary policy 84 times in 2021, with 4 banks raising rates 6 times: Denmark raised its rate in a technical adjustment while Norway (twice), New Zealand (twice) and United Kingdom raised rates to tighten policy stance. Australia also discontinued its yield target.
      One bank, Denmark, also cuts its rate to defend the peg with the euro.
      The other 77 decisions have ended with unchanged rates. 

     EMERGING MARKETS: Central banks in emerging markets have decided on monetary policy 181 times in 2021, with 53 decisions by 13 central banks ending in rate hikes: Turkey (four times) Brazil (seven, Russia (seven), Hungary (seven), Czech Republic (five), Mexico (five), Chile (four), Peru (five), South Korea (twice), Pakistan (three), Colombia (three), Poland (three) and South Africa.
     Seven decisions ended in rate cuts (Mexico, Indonesia, Turkey (four) and China), and 121 decisions ended in unchanged rates.

      FRONTIER MARKETS: Central banks in frontier markets decided on monetary policy 77 times in 2021, with 2 banks cutting rates (Romania and Ghana) and 5 banks raising rates 12 times: Ukraine (five times), Kazakhstan (three), Sri Lanka, Romania (twice) and Ghana.
      The other 63 decisions have resulted in unchanged rates.
      OTHER MARKETSCentral banks in other markets decided on monetary policy 213 times in 2021, with 19 banks raising rates a total of 53 times: Mozambique, Angola, Armenia (six),Tajikistan (four), Zambia (twice), Zimbabwe (twice), Kyrgyzstan (four), Belarus (twice), Georgia (four), Iceland (four), Moldova (four), Uruguay (three), Paraguay (five), Azerbaijan (three), Jamaica (three), Lesotho, Dominican Republic (twice), Costa Rica and Sierra Leone.
     Rates have been cut 7 times by 4 banks: Congo (three times), North Macedonia, Uganda, Seychelles, and Liberia.
     The other 153 decisions resulted in unchanged rates.


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