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  • Monetary Policy Week In Review – Aug 11-15, 2014: 3 Banks Cut As Geopolitical Uncertainty Gnaws At Sentiment

    Last week in global monetary policy three central banks (South Korea, Chile and Armenia) cut their key rates to shore up economic growth amidst deep concern over geopolitical stability, a theme that is now reverberating through financial markets.
    Four of the nine central banks that issued policy statements last week specifically referred to geopolitical developments with the National Bank of Georgia again noting that domestic and external demand had already been impacted and this would further delay what it described as a necessary exit from accommodative monetary policy.
    The impact of international tensions in Ukraine and the Mideast on monetary policy was also referred to by Mark Carney, Bank of England (NYSE:BOE) governor, in his press conference last Wednesday, though at this point it has not had any affect on U.K. policy.
    "I would say it's early days, but it's something we obviously have to monitor and if it becomes an important determinant obviously we'll talk more directly to it," Carney said, adding that geopolitical events can evolve rapidly.
    In addition to Georgia, South Korea, Armenia and Uganda's central banks also referred to geopolitical uncertainties in their policy statements.
    "Financial and commodity markets also remain vulnerable to instability as geopolitical risks remain elevated," the Bank of Uganda said.
    The other recurring theme among central banks was the coming shift in monetary policy in the United States and the U.K., with emerging market central banks continuing to position themselves to avoid a repeat of last summer's "taper tantrum" when global capital reversed course and started flowing out of emerging markets and back to advanced economies.
    "Looking ahead, there are a number of global risks that we need to be wary of, among other things, the normalization of Fed policy and the Bank of England, and the risk of spillovers and spillback from the weakening economy of emerging markets," Bank Indonesia (BI) said.
    Indonesia, along with Turkey, India and South Africa, were among those countries that were most seriously affected by the outflow of capital, with their central banks forced to raise interest rates to project their currencies and rein in accelerating inflation.
    South Korea was less affected by the last year's shift in capital flows, but is still aware of the potential disruptions to global financial markets and economic growth from geopolitical tensions and the coming tightening in U.S. monetary policy.
    "The Committee forecasts that the global economy will sustain its modest recovery going forward, centering around advanced economies, but judges that the possibility exists of its being affected by the changes in global financial market conditions stemming from the shift in the US Federal Reserve's monetary policy stance, by the weakening of economic growth in some emerging market countries and by geopolitical risks," the Bank of Korea (BOK) said last week.

    Boosted by last week's three rate cuts, the 90 central banks followed by Central Bank News have now cut their policy rates 44 times through the first 33 weeks of this year. Fourteen percent of this year's 312 policy decisions have favored rate cuts, up from 12 percent at the end of the first half and 12 percent at the end of the first quarter.
    But the trend toward higher global rates continues to simmer under the surface, with policy rates so far this year raised 33 times, or 10.6 percent of the decisions taken, up from 9.3 percent at the end of June and 8.7 percent at the end of March.

    LIST OF LAST WEEK'S CENTRAL BANK DECISIONS:

     


    TABLE WITH LAST WEEK'S MONETARY POLICY DECISIONS:

    COUNTRYMSCINEW RATEOLD RATE1 YEAR AGO
    ARMENIA 6.75%7.00%8.50%
    GEORGIA 4.00%4.00%3.75%
    MOZAMBIQUE 8.25%8.25%8.75%
    SOUTH KOREAEM2.25%2.50%2.50%
    INDONESIAEM7.50%7.50%7.00%
    UGANDA 11.00%11.00%11.00%
    CHILEEM3.50%3.75%5.00%
    SRI LANKAFM6.50%6.50%7.00%
    BOTSWANA 7.50%7.50%8.00%

    This week (Week 34) only two central banks are scheduled to decide on monetary policy: Namibia and Iceland.

    TABLE WITH THIS WEEK'S MONETARY POLICY DECISIONS:

    COUNTRYMSCIDATECURRENT RATE1 YEAR AGO
    NAMIBIA 20-Aug5.75%5.50%
    ICELAND 20-Aug6.00%6.00%

    www.CentralBankNews.info

    Aug 17 11:31 PM | Link | Comment!
  • Monetary Policy Week In Review – Aug 4-8, 2014: Romania Cuts Rate, Gambia Raises As Uncertainty Looms

    Last week in global monetary policy Romania returned to its easing cycle while Gambia raised rates for the first time this year as central banks worldwide continued to position themselves in an increasingly uncertain international environment.
    In addition to the pending shift in monetary policy in the United States and the United Kingdom, growing tensions in Ukraine and the Middle East now seem to be weighing on investors' mood, with commentators questioning whether the bull market in major stock markets is coming to an end.
    After hitting 5-year lows in early July, the VIX - seen as a proxy for the global financial cycle - is moving higher, potentially foreshadowing a return of volatility in global financial markets.
    Central banks have for months warned that investors may suddenly turn risk adverse and last week the central banks of Romania, India and Serbia joined the chorus.
    The National Bank of Romania, which cut its policy rate by 25 basis points, said the main risks to its outlook stemmed from an increase in the volatility of capital flows in connection with a worsening of investors' risk aversion to emerging market economies from geopolitical tensions, the ongoing cross-border deleveraging and restructuring of some of Europe's banks, "as well as in the context of uncertainty surrounding the impact of possible monetary policy stance adjustments by major central banks worldwide."
    The National Bank of Serbia, which maintained its rate, said this policy decision "took into account the persistent uncertainties emanating from the international environment, which may negatively impact the country's risk premium and foreign capital flows."

    Raghuram Rajan, the respected governor of the Reserve Bank of India which maintained its rates, noted that capital flows into emerging markets had been rising recently.

    "This implies, however, that EMEs remain vulnerable to changes in investor risk appetite driven by any reassessment of the future path of US monetary policy or possible escalation of geopolitical tensions," said Rajan.
    In addition to his warning in RBI's policy statement, Rajan in an interview returned to one of his favourite themes: The lack of international cooperation in monetary policy.
    Speaking with the Central Banking Journal, Rajan said the global economy bears an increasing resemblance to the 1930s when economies tried to pull out of recession at each other's expense.
    But instead of competitive currency devaluations, countries are now using competitive monetary policy easing in a game that he says is bound to end in disaster.
    Now, as then, "demand shifting" has taken the place of "demand creation." As in the 1930s, this lack of coordination is producing spillovers that may be difficult to control and the world's financial system may soon face fresh turbulence with a sudden shift in asset prices.

    LIST OF LAST WEEK'S CENTRAL BANK DECISIONS:

     

    TABLE WITH LAST WEEK'S MONETARY POLICY DECISIONS:

    COUNTRYMSCINEW RATEOLD RATE1 YEAR AGO
    ROMANIAFM3.25%3.50%4.50%
    AUSTRALIADM2.50%2.50%2.50%
    INDIAEM8.00%8.00%7.25%
    THAILANDEM2.00%2.00%2.50%
    UNITED KINGDOMDM0.50%0.50%0.50%
    EURO AREADM0.15%0.15%0.50%
    SERBIAFM8.50%8.50%11.00%
    PERUEM3.75%3.75%4.25%
    ZAMBIA 12.00%12.00%9.75%
    JAPANDMN/AN/AN/A
    GAMBIA 22.00%20.00%18.00%

    This week (Week 33) seven central banks will decide on monetary policy, comprising the countries and jurisdictions of Armenia, Georgia, Mozambique, South Korea, Indonesia, Uganda and Sri Lanka.

    TABLE WITH THIS WEEK'S MONETARY POLICY DECISIONS:

    COUNTRYMSCIDATECURRENT RATE1 YEAR AGO
    ARMENIA 12-Aug7.00%8.50%
    GEORGIA 13-Aug4.00%3.75%
    MOZAMBIQUE 13-Aug8.25%8.75%
    SOUTH KOREAEM14-Aug2.50%2.50%
    INDONESIAEM14-Aug7.50%7.00%
    UGANDA 14-Aug11.00%11.00%
    SRI LANKAFM15-Aug6.50%7.00%

    www.CentralBankNews.info

    Aug 09 11:00 PM | Link | Comment!
  • Monetary Policy Week In Review – Jul 28 - Aug 1, 2014: 3 Central Banks Cut While Colombia, Philippines Raise Rates

    Last week in global monetary policy three central banks (Israel, Angola and Azerbaijan) cut their policy rates while the Philippines joined Colombia as the latest emerging market central bank to raise rates in recent months to stem inflationary pressures and prepare for any jitters in global financial markets from the coming tightening of U.S. monetary policy.
    Through the first 31 weeks of this year, the 90 central banks followed by Central Bank News have raised their policy rates a total of 32 times, or 11 percent of this year's 292 policy decisions, up from 9.3 percent at the end of June and 8.7 percent at the end of March.
    Central banks in emerging markets have accounted for 16, or half, of those rate increases.
    Central banks in developed economies have raised their rates 4 times, or 12.5 percent of the worldwide rate rises while central banks in frontier markets have raised rates 3 times and central banks in other markets by 8 times.
    Last week's three rate cuts pushed up the number of global rate cuts so far this year to 40, or 13.7 percent of all policy decisions, up from 12 percent at the end of the first half of the year but unchanged from 12 percent at the end of the first quarter.
    Emerging market central banks account for 17, or 42.5 percent of those cuts, central banks in advanced economies for 4 of those cuts, frontier market central banks for 7 and central banks in other markets for 12.
    The month of July was characterized by more than usual activity in global monetary policy with 20 central banks changing rates, around twice the monthly average.
    Of this, 11 central banks cut their rates by a total of 602 basis points while 9 central banks raised their rates by a total 675 points.
    But the Global Monetary Policy Rate (GMPR), the average nominal rate of 90 central banks, ended the month at 5.53 percent, unchanged from the end of June and the first quarter, but up from 5.41 percent at the end of last year.

    LIST OF LAST WEEK'S CENTRAL BANK DECISIONS:

     


    TABLE WITH LAST WEEK'S MONETARY POLICY DECISIONS:

    COUNTRYMSCINEW RATEOLD RATE1 YEAR AGO
    ISRAELDM0.50%0.75%1.25%
    ANGOLA 8.75%9.25%10.00%
    UZBEKISTAN 10.00%10.00%12.00%
    AZERBAIJAN 3.50%4.25%4.75%
    UNITED STATESDM0.25%0.25%0.25%
    ALBANIA 2.50%2.50%3.50%
    FIJI 0.50%0.50%0.50%
    PHILIPPINESEM3.75%3.50%3.50%
    CZECH REPUBLICEM0.05%0.05%0.05%
    COLOMBIAEM4.25%4.00%3.25%

    This week (Week 32) 10 central banks will decide on monetary policy, comprising the countries and jurisdictions of Romania, Australia, India, Thailand, United Kingdom, the euro area, Serbia, Peru, Zambia and Japan.

    TABLE WITH THIS WEEK'S MONETARY POLICY DECISIONS:

    COUNTRYMSCIDATECURRENT RATE1 YEAR AGO
    ROMANIAFM4-Aug3.50%4.50%
    AUSTRALIADM5-Aug2.50%2.50%
    INDIAEM5-Aug8.00%7.25%
    THAILANDEM6-Aug2.00%2.50%
    UNITED KINGDOMDM7-Aug0.50%0.50%
    EURO AREADM7-Aug0.15%0.50%
    SERBIAFM7-Aug8.50%11.00%
    PERUEM7-Aug3.75%4.25%
    ZAMBIA 8-Aug12.00%9.75%
    JAPANDM8-AugN/AN/A

    www.CentralBankNews.info

    Aug 04 2:05 AM | Link | Comment!
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