Fed maintains rate but to end QE and raise rate 'soon'

      The U.S. Federal Reserve left its key interest rate unchanged but said "with inflation well above 2 percent and a strong labor market, the Committee (the Fed's policy-making body) expects it will soon be appropriate to raise the target range for the federal funds rate," a message financial markets expected.
      The Federal Open Market Committee (FOMC) also said it had decided to "reduce the monthly pace of its net asset purchases, bringing them an an end in early March," with a reduction in the size of its balance sheet to begin after the benchmark federal funds rate has been raised.
      The Fed kept its target for the federal funds at 0.0 to 0.25 percent, unchanged since March 2020 when the rate was lowered twice in a single month by a total of 1.50 percentage points.

      Today's statement continues the Fed's pivot toward monetary tightening after the policy stance was kept ultra easy for five quarters while economic activity gradually recovered from the devastating hit from the COVID-19 pandemic and inflation rose.

       In November 2021 the Fed finally joined the global trend toward monetary tightening - central banks raised rates 124 times last year to combat rising inflation - and trimmed its monthly purchases of Treasury securities and mortgage-backed securities.

      In December last year the Fed then sped up the pace of monetary tightening further by trimming asset purchases even more and dropped its description of inflation as "transitory" as it raised its forecast for inflation and projected three rate hikes of 25 basis points each in 2022 and another three in 2023.

      With inflation continuing to rise - headline inflation hit 7 percent in December, the highest since June 1982 from 6.8 percent - Fed Chairman Jerome Powell this month kept up his hawkish message, describing inflation as a "severe threat" to a Senate hearing on Jan. 11, boosting market expectations the Fed may even raise rates four times this year.

      Today marks another critical step forward in the normalization of global monetary policy and follows on the heels of the Bank of Canada's message earlier today that interest rates need to be raised.

      As in December, the Fed said economic activity and employment have continued to improve though there are still risks to the outlook from new variants of the virus, such as the Omicron variant.

     However, the Fed also acknowledged inflation is "well above" its 2 percent target and the labor market was strong, the two conditions it had laid out in order to tighten monetary policy.

      To wrap up its asset purchases - known as Quantitative Easing (QE) and used as an addition tool to ease policy -  the Fed said it would purchase at least $20 billion of Treasury securities at least $10 billion of agency mortgage-backed securities in February to continue to smooth market functioning and support the flow of credit.

     However, next month will be the final month of asset purchases that will end in early March.

     The Fed said a reduction of its balance sheet - which contains some $8.8 trillion of bonds and securities - "will commence after the process of increasing the target range for the federal funds rate has begun."

This week in monetary policy: Kazakhstan, Pakistan, Hungary, Nigeria, Kenya, Canada, Mozambique, USA, Chile, South Africa, Malawi, Angola & Colombia

     This week - January 24 through January 29 - central banks from 13 countries or jurisdictions are scheduled to decide on monetary policy: Kazakhstan, Pakistan, Hungary, Nigeria, Kenya, Canada, Mozambique, United States, Chile, South Africa, Malawi, Angola and Colombia.

     Following table includes the name of the country, the date of the next policy decision, the current policy rate, the local time a policy decision is announced, the result of the last policy decision, the change in the policy rate year to date, and the rate one year ago.
    The table is updated when the latest decisions are announced and can always be accessed by clicking on This Week.

WEEK 4
JAN 24 - JAN 29, 2022
KAZAKHSTAN	24-Jan	9.75%	15:00	0	0	9.00%	FM
PAKISTAN	24-Jan	9.75%		100	0	7.00%	EM
HUNGARY	25-Jan	2.40%		30	0	0.60%	EM
NIGERIA	25-Jan	11.50%		0	0	11.50%	FM
KENYA	26-Jan	7.00%		0	0	7.00%	FM
CANADA	26-Jan	0.25%	10:00	0	0	0.25%	DM
MOZAMBIQUE	26-Jan	13.25%	16:00	0	0	13.25%
UNITED STATES	26-Jan	0.25%	14:00	0	0	0.25%	DM
CHILE	26-Jan	4.00%	18:00	125	0	0.50%	EM
SOUTH AFRICA	27-Jan	3.75%		25	0	3.50%	EM
MALAWI	28-Jan	12.00%		0	0	12.00%
ANGOLA	28-Jan	20.00%		0	0	15.50%
COLOMBIA	28-Jan	3.00%		50	0	1.75%	EM

  

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Fed speeds up pace of tapering, sees 3 rate hikes '22

      The U.S. Federal Reserve left its key interest rate steady but tightened its monetary policy stance for the second month in a row by lowering the amount of monthly bond purchases amid rising inflation and an improving labour market, and pulled forward the day when the interest rate will be raised.
     The Federal Reserve's policy-making body, the Federal Open Market Committee (FOMC), left its target for the federal funds rate at 0.0-0.25 percent, unchanged since March last year when the rate was lowered twice in a single month by a total of 1.50 percentage points.

     As last month, the FOMC said economic activity and employment in the U.S. economy have continued to strengthen, but in an important shift - which had been telegraphed by Fed Chair Jerome Powell - the description of inflation as a "transitory" phenomenon was dropped from the statement.

      Instead, a unanimous FOMC said "supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation."

      Echoing this change, the FOMC raised its forecast for inflation this year through 2023 and its forecast for how high and how fast it expects the federal funds rate to be raised.

      The latest projection for the fed funds rate sees the rate rising to 0.9 percent in 2022 - up from the September forecast of 0.3 percent - implying 3 rate hikes of 25 basis points each.

      In 2023 the Fed is expected to raise the rate another 3 times to 1.6 percent in 2023, up from the earlier forecast of 1.0 percent.

      In 2024 the feds funds rate is seen rising further to 2.1 percent from 1.8 percent, which is still below the estimated longer-run rate of 2.5 percent.

      The Fed's preferred measure of inflation, the personal consumption expenditure (PCE), is seen averaging 5.3 percent this year, up from the September forecast of 4.2 percent and October's 5.0 percent reading.

      PCE inflation is expected to ease next year and average 2.6 percent, up from the previous forecast of 2.2 percent and then fall to 2.3 percent in 2023 and 2.1 percent in 2024.

       Inflation has been accelerating across the world in recent months due to a combination of higher energy and commodity prices on the back of strengthening demand and economic activity as countries slowly recover from the devastating hit from COVID-19 pandemic.

      Central banks have responded to the rise in inflationary pressures and above-target inflation readings by unwinding last year's extraordinary stimulus and raising interest rates with smaller economies that are more susceptible to the impact of higher prices leading the charge.

      Mozambique, for example, was the first bank to raise interest rates in January due to rising inflation followed by Angola, which levied fees on bank's excess liquidity as it shifted to a more restrictive policy.

       Year-to-date 38 central banks worldwide - including 13 from emerging markets and 22 from frontier and other economies - have raised interest rates a total of 112 times and begun to unwind some of the other tools used last year to boost economic activity, such as bond purchases.

       Central banks in developed economies, for example Norway, New Zealand, Australia, Canada, Singapore and event the European Central Bank, have also pivoted from monetary stimulus to tightening.

        In November the Fed joined the global trend toward monetary tightening by cutting its monthly purchases of Treasury securities and mortgage-backed securities by $15 billion to $105 billion.

       Today, the Fed sped up its pace of monetary tightening by reducing monthly asset purchases by $30 billion ($20 billion of Treasuries and $10 billion of mortgage-backed securities) with the result its holdings of Treasury securities will increase $40 billion beginning in January and the holdings of mortgage-backed securities by $20 billion.

       With this pace, the Fed will wrap up its asset purchases - known as quantitative easing - by March instead of June, paving the way for rate hikes.

       Although the Fed said new variants of the coronavirus still pose a risk to the economic outlook, it raised its forecast for growth in 2022 to 4.0 percent from September's forecast of 3.8 percent. Growth this year is seen weaker than earlier projected, at 5.5 percent compared with 5.9 percent.

       In 2023 growth is seen slowing further to a more sustainable 2.2 percent, down from the previous forecast of 2.5 percent, and then stabilizing at 2.0 percent in 2024, slightly above the long-run average estimate of 1.8 percent.

Fed holds rate but begins to reduce bond purchases

      The U.S. Federal Reserve left its key interest rates steady but joined other central banks worldwide that are rolling back the extraordinary stimulus injected into the global economy last year by trimming the purchase of bonds later this month.

      The Federal Reserve (Fed) left its target range for the federal funds rate at 0.0 - 0.25 percent, unchanged since March last year when it lowered the rate twice by a total of 1.50 percentage points.

      As in September, when the Fed's policy-making arm the Federal Open Market Committee (FOMC) last met, it said economic activity and employment had continued to strengthen though the rise in COVID-19 cases in recent months slowed the recovery of some sectors that were hardest hit by the pandemic.

     "In light of the substantial further progress the economy has made toward the Committee's goals since last December, the Committee decided to begin reducing the monthly pace of its net asset purchases by $10 billion for Treasury securities and $5 billion for agency mortgage-backed securities," FOMC said.

     As many other central banks, such as the Bank of Canada, Bank of England and European Central Bank, the Fed used bond purchases, known as quantitative easing, to keep interest rates low and stimulate economic activity.

     But with economic activity worldwide bouncing back from the pandemic and inflation rising, central banks are now tightening the reins and in some cases - such as the Reserve Bank of Australia and the Bank of Canada - starting by reducing the injection of liquidity into financial markets.

     Starting this month, the Fed will cut its monthly purchases of Treasury securities to $70 billion from $80 billion and the purchase of agency mortgage-backed securities to $35 billion from $40 billion for a total reduction of $15 billion to $105 billion from the previous $120 billion.

     This reduction will continue in December, with the monthly purchase lowered by another $15 billion to a total of $90 billion, with this pace in the reduction of purchases likely to continue unless there is a change in the economic outlook, the FOMC said.

     If the Fed maintains this pace of reducing purchases, it will first end all asset purchases - known as quantitative easing - in eight months, or June 2022. In comparison, the Bank of Canada began lowering its asset purchases in April this year and ended it in seven months later in October.

     Reiterating its recent guidance, the Fed said there were still risks to the economic outlook from the public health crises and it is "prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals.

     As in most other countries, inflation has risen faster than expected only a few months ago and in September the Fed raised its forecast for inflation this year and pulled forward the timing of rate hikes.

     Although the Fed is still using to use word "transitory" to describe inflation, it made a slight, but important, change to its statement that signals it is less confident the rise in inflation is purely temporary.

     In today's statement the FOMC inserted the word "expected" about the transitory factors that are leading to elevated inflation as compared with September when it said, matter-of-factly, these factors were transitory.

     The Fed added supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to sizable price increases.

This week in monetary policy: Australia, Armenia, Malaysia, Malawi, Poland, Albania, USA, Norway, UK & Czech Rep.

     This week - November 1 through November 6 - central banks from 10 countries or jurisdictions are scheduled to decide on monetary policy: Australia, Armenia, Malaysia, Malawi, Poland, Albania, United States, Norway, United Kingdom and Czech Republic.

     Following table includes the name of the country, the date of the next policy decision, the current policy rate, the local time a policy decision is announced, the result of the last policy decision, the change in the policy rate year to date, and the rate one year ago.
    The table is updated when the latest decisions are announced and can always be accessed by clicking on This Week.

WEEK 44
NOV 1 - NOV 6, 2021
AUSTRALIA	2-Nov	0.10%	14:30	0	0	0.10%	DM
ARMENIA	2-Nov	7.25%		25	200	4.25%
MALAYSIA	3-Nov	1.75%		0	0	1.75%	EM
MALAWI	3-Nov	12.00%		0	0	13.50%
POLAND	3-Nov	0.50%		40	40	0.10%	EM
ALBANIA	3-Nov	0.50%		0	0	0.50%
UNITED STATES	3-Nov	0.25%	14:00	0	0	0.25%	DM
NORWAY	4-Nov	0.25%	10:00	25	25	0.00%	DM
UNITED KINGDOM	4-Nov	0.10%	12:00	0	0	0.10%	DM
CZECH REPUBLIC	4-Nov	1.50%	14:30	75	125	0.25%	EM

 
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This week in monetary policy: Kazakhstan, Ghana, Kyrgyzstan, Hungary, Tajikistan, Pakistan, Lesotho, Nigeria, Kenya, USA, Azerbaijan, Malawi, Moldova, Bulgaria and Colombia

    This week - July 26 through July 31 - central banks from 15 countries or jurisdictions are scheduled to decide on monetary policy: Kazakhstan, Ghana, Kyrgyz Republic, Hungary, Tajikistan, Pakistan, Lesotho, Nigeria, Kenya, United States, Azerbaijan, Malawi, Moldova, Bulgaria and Colombia.

     Following table includes the name of the country, the date of the next policy decision, the current policy rate, the local time a policy decision is announced, the result of the last policy decision, the change in the policy rate year to date, and the rate one year ago.
    The table is updated when the latest decisions are announced and can always be accessed by clicking on This Week.

WEEK 30
JUL 26 - JUL 31, 2021
KAZAKHSTAN	26-Jul	9.00%	15:00	0	0	9.00%	FM
GHANA	26-Jul	13.50%		-100	-100	14.50%	FM
KYRGYZSTAN	26-Jul	6.50%		0	150	5.00%
HUNGARY	27-Jul	0.90%		30	30	0.60%	EM
TAJIKISTAN	27-Jul	12.00%		100	125	10.75%
PAKISTAN	27-Jul	7.00%		0	0	7.00%	EM
LESOTHO	27-Jul	3.50%		0	0	3.50%
NIGERIA	27-Jul	11.50%		0	0	12.50%	FM
KENYA	28-Jul	7.00%		0	0	7.00%	FM
UNITED STATES	28-Jul	0.25%	14:00	0	0	0.25%	DM
AZERBAIJAN	30-Jul	6.25%		0	0	6.75%
MALAWI	30-Jul	12.00%		0	0	13.50%
MOLDOVA	30-Jul	2.65%		0	0	3.25%
BULGARIA	30-Jul	0.00%		0	0	0.00%	FM
COLOMBIA	30-Jul	1.75%		0	0	2.25%	EM

 
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Fed holds policy but pulls forward rate hikes to 2023

     The U.S. central bank left its key interest rates steady along with its level of asset purchases but pulled forward its forecast for raising rates to 2023 from 2024, reflecting the economic recovery and better jobs market from a successful roll-out of vaccines to combat the COVID-19 virus and strong policy support.
      The Federal Reserve (Fed) left its target range for the federal funds rate at 0.0 to 0.25 percent, unchanged since two, rapid-fire rate cuts totaling 1.50 percentage points in March last year at the height of the pandemic.

      In its statement, the Fed's policy-making body, the Federal Open Market Committee (FOMC), unanimously acknowledged the improved growth prospects for the U.S. and raised its forecast for growth this year to 7.0 percent from the March forecast of 6.5 percent.

     Nevertheless, it added there are still risks to the outlook and those sectors of the economy most adversely affected by the pandemic remain weak even if they are improving.

     In 2022 the U.S. economy is seen expanding 3.3 percent, unchanged from the previous forecast, and in 2023 by 2.4 percent, up from 2.2 percent. The unemployment rate is seen steadily falling from 4.5 percent this year to 3.8 percent in 2022 and 3.5 percent in 2023.

     The Fed maintained its guidance for the fed funds rate to remain at the current level until the labour market reaches maximum employment and inflation is on track to reach 2 percent and moderately exceed that for some time.

      It also confirmed its commitment to continue to boost holdings of Treasuries and agency mortgage-backed securities by a total of $120 billion a month until further progress has been made on its goals, with no reference to when it may begin to discuss a tapering of its asset purchases.

     In his press conference, however, Fed Chair Jerome Powell said FOMC members were starting to turn their attention to scaling back bond purchasing, describing it as a "talking-about-talking-about meeting."

      The Fed acknowledged rising inflation by raising its forecast for its preferred gauge - the core personal consumption expenditures (PCE) - in its latest projection to 3.0 percent this year from the March forecast of 2.2 percent.

      Inflation in the U.S., and worldwide, has been rising in recent months as economies bounce back faster than expected from the pandemic, unleashing pent-up demand and pushing up a wide range of prices, especially food, metals and commodity prices.

     In April, core PCE in the U.S. rose to 3.1 percent, the highest annual rate since July 1992.

     Although the FOMC projects core PCE will ease to 2.1 percent in 2022 and remain at this level in 2023 - just over its 2.0 percent target - the forecast for the federal funds rate was raised sharply to 0.6 percent from the March forecast of 0.1 percent.

      The Fed's so-called dot plot, which shows the rate forecast for individual FOMC members and regional Fed presidents, showed 7 of 18 members now look to raise rates in 2022, up from 4 in March.

      But in 2023 a clear majority of 13 of the 18 FOMC members expect the rate to rise, up from only 7 in March, with the level of the fed funds rate in the dot plot indicating multiple rate hikes.

This week in monetary policy: Kyrgyzstan, Kazakhstan, Japan, Sweden, Hungary, Tajikistan, Georgia, USA, Guatemala, Botswana, Egypt, Azerbaijan, Moldova, Malawi, Bulgaria, Zimbabwe & Colombia

    This week - April 26 through May 1 - central banks from 17 countries or jurisdictions are scheduled to decide on monetary policy: Kyrgyz Republic, Kazakhstan, Japan, Sweden, Hungary, Tajikistan, Georgia, United States, Guatemala, Botswana, Egypt, Azerbaijan, Moldova, Malawi, Bulgaria, Zimbabwe and Colombia.

     Following table includes the name of the country, the date of the next policy decision, the current policy rate, the local time a policy decision is announced, the result of the last policy decision, the change in the policy rate year to date, and the rate one year ago.
    The table is updated when the latest decisions are announced and can always be accessed by clicking on This Week.

WEEK 17
APR 26 - MAY 1, 2021:
KYRGYZSTAN	26-Apr	5.50%		50	50	5.00%
KAZAKHSTAN	26-Apr	9.00%	15:00	0	0	9.50%	FM
JAPAN	27-Apr	-0.10%		0	0	-0.10%	DM
SWEDEN	27-Apr	0.00%	9:30	0	0	0.00%	DM
HUNGARY	27-Apr	0.60%		0	0	0.90%	EM
TAJIKISTAN	27-Apr	11.00%		25	25	11.75%
GEORGIA	28-Apr	8.50%		50	50	8.50%
UNITED STATES	28-Apr	0.25%	14:00	0	0	0.25%	DM
GUATEMALA	28-Apr	1.75%		0	0	2.00%
BOTSWANA	29-Apr	3.75%		0	0	4.25%
EGYPT	29-Apr	8.25%		0	0	9.25%	EM
AZERBAIJAN	30-Apr	6.25%		0	0	7.25%
MOLDOVA	30-Apr	2.65%		0	0	3.25%
MALAWI	30-Apr	12.00%		0	0	13.50%
BULGARIA	30-Apr	0.00%		0	0	0.00%	FM
ZIMBABWE	30-Apr	40.00%		0	500	15.00%
COLOMBIA	30-Apr	1.75%		0	0	3.25%	EM

 
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