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  • Monetary Policy Week in Review - 3 September 2011
    The past week in monetary policy saw just 4 central banks review interest rate settings: Belarus increased +500bps to 27.00%, Brazil dropped -50bps to 12.00%, Israel held at 3.25% and Ghana held at 12.50%.  Aside from interest rates, the People's Bank of China was reported as planning to increase the scope of its Required Reserve Ratio, which by some estimates would amount to an effective 100 basis point increase.  Also on required reserves, the State Bank of Vietnam raised its foreign currency required reserve ratios by 100 basis points.

    Following are some of the key quotes from the monetary policy statements and media releases from the banks that reviewed interest rates over the past week:
    • Banco Central do Brasil (dropped rate -50bps to 12.00%): "Reevaluating the international scenario, the committee considers that there has been substantial deterioration, shown by, for example, generalized and large reductions in growth projections for the principal economic blocks.  The committee understands that this increases the chances that restrictions that are today seen in various mature economies will prolong themselves for a longer period than expected." ..."Therefore, the committee understands that the international scenario shows a bias toward disinflation on the relevant horizon."
    • National Bank of Belarus (increased rate +500bps to 27.00%): [GoogleTranslated]: "Such an increase in refinancing due to the need to tighten monetary policy to stabilize the foreign exchange market and reduce the intensity of price increases. In addition, increasing the refinancing rate will increase the amount of compensation to depositors of costs associated with inflationary pressures, and will be an additional deterrent to the growth of money supply."
    • Bank of Israel (held rate at 3.25%): "The decision to leave the interest rate for September at 3.25 percent is consistent with the process of returning the inflation rate to within the target price-stability range of 1–3 percent a year within the next twelve months, and with supporting economic growth while maintaining financial stability.  The future direction of changes in the interest rate will be dependent on the inflation environment, economic growth in Israel and abroad, the monetary policy of the leading central banks, and developments in the exchange rates of the shekel."
    • Bank of Ghana (held rate at 12.50%):"Inflation expectations are well-anchored and have  stabilized along the single digit path, supported by favourable food prices. The rate has continued to decline and the 9 per cent target for the year is achievable." However the Bank also noted: "Despite the improved macroeconomic fundamentals, upside risks to inflation are emerging in the form of the adjustment in utility tariffs, wage pressures and other oil-induced and external pressures that may result in the overheating of the economy."

    Looking to the central bank calendar, next week is set to be a busy one on the monetary policy front with 11 central banks scheduled to review interest rate levels and monetary policy settings.  The Fed will also release its Beige Book economic report on the 7th, and China will release inflation data on Friday.
    • AUD - Australia (Reserve Bank of Australia) - expected to hold at 4.75% on the 6th of Sep
    • SEK - Sweden (Riksbank) - expected to hold at 2.00% on the 7th of Sep
    • PLN - Poland (National Bank of Poland) - expected to hold at 4.50% on the 7th of Sep
    • JPY - Japan (Bank of Japan) - expected to hold at 0.10% on the 7th of Sep
    • CAD - Canada (Bank of Canada) - expected to hold at 1.00% on the 8th of Sep
    • IDR - Indonesia (Bank Indonesia) - expected to hold at 6.75% on the 8th of Sep
    • KRW - South Korea (Bank of Korea) - expected to hold at 3.25% on the 8th of Sep
    • MYR - Malaysia (Bank Negara Malaysia) - expected to hold at 3.00% on the 8th of Sep
    • PHP - Philippines (Bangko Sentral ng Pilipinas) - expected to hold at 4.50% on the 8th of Sep
    • GBP - United Kingdom (Bank of England) - expected to hold at 0.50% on the 8th of Sep
    • EUR - Eurozone (European Central Bank) - expected to hold at 1.50% on the 8th of Sep
    Sep 02 7:10 PM | Link | Comment!
  • Monetary Policy Week in Review - 27 August 2011
    The past week in monetary policy saw 8 central banks reviewing interest rates and monetary policy settings.  Just one bank adjusted its main interest rate, with Thailand adding  +25bps to 3.50%.  Meanwhile the other central banks held interest rates unchanged: Turkey 5.75%, Hungary 6.00%, Namibia 6.00%, Egypt 8.25%, Sierra Leone 23.00%, Denmark 1.55%, and Mexico 4.50%.  Aside from interest rates, the much watched annual Jackson Hole Economic Policy Symposium kicked off, with Ben Bernanke presenting the keynote speech where he stopped short of signalling QE3 but noted that the FOMC is actively considering options, and also talked at length about the role of fiscal policy in maximizing sustainable long term economic growth.

    Outlined below are some of the key quotes and comments from the central bankers that reviewed monetary policy settings in the past week:

    • Bank of Thailand (increased rate +25bps to 3.50%): "The MPC agreed that the slowdown in advanced economies would partially weigh on Thai exports.  However, expanding  intra-regional trade  in tandem with the continued growth of domestic demand  in Asian economies as well as export diversification to new markets will help mitigate the impact.  Domestic consumption and investment are expected to expand due to favorable employment conditions, improved confidence, robust growth in credit demand, and fiscal stimulus going forward."
    • Banco de Mexico (held rate at 4.50%): "productive activity in Mexico maintains a positive trend, although the rate of growth has lost some momentum,"... and "If the performance of the national economy and international financial markets results in an unnecessary tightening of monetary policy, the Governing Board will reflect on the appropriateness of adjusting it,"
    • Danmarks Nationalbank (held rate at 1.55%):  "The interest rate reduction follows Danmarks Nationalbank's purchase of foreign exchange in the market.  The short euro market rates have fallen and the spread to the equivalent Danish rates has tended to strengthen the Danish krone."
    • Magyar Nemzeti Bank (held rate at 6.00%): "Hungary has also been affected by the decline in global risk appetite due to the euro-area sovereign debt crisis and uncertainty surrounding the outlook for growth in developed countries.  The Monetary Council has decided to leave interest rates unchanged in light of the above considerations.  Over the period ahead, the Council's interest rate decisions may be influenced by the success of measures to solve the euro-area debt crisis, in addition to expected developments in domestic inflation." 
    • Central Bank of the Republic of Turkey (held rate at 5.75%): "The Committee has agreed that the measures taken at the interim meeting on August 4, 2011 have contained the downside risks for the economy for the time being, and thus decided to keep the policy instruments unchanged at this meeting.  However, given the uncertainties regarding the global economy, it is important to monitor all developments closely, and to deliver the required policy response in a timely manner.  The Committee has also reiterated that all policy instruments may be eased should global economic problems further intensify and the  slowdown in domestic economic activity becomes more pronounced."

    Looking to the central bank calendar, next week should be relatively quiet on the monetary policy front with only two central banks scheduled to meet.  Elsewhere the US Federal Reserve will release the minutes from the 9th of August FOMC meeting on the 29th of August.
    • ILS - Israel (Bank of Israel) - expected to hold at 3.25% on the 29th of August
    • BRL - Brazil (Banco Central do Brasil) - expected to hold at 12.50% on the 31st of August


    Article source:
    Aug 26 6:13 PM | Link | Comment!
  • ECB Adds 14.3 B to SMP, Total Buying Now 110.5 B
     The European Central Bank (ECB) spent a further 14.3 billion euros on bond purchases last week, down from 22 billion in the previous week, as part of the expanded SMP (Securities Market Program).  The purchases of the past two weeks eclipse the previous record of 16.5 billion euros that the ECB undertook when it began buying Greek government debt in May 2010.  The latest buying brings the total value of purchases under the program to 110.5 billion euros since the program began in May 2010.  According to Reuters, much of the buying last week was concentrated in Italian bonds, while Greek debt makes up the majority of the total purchases in the program to date (which also includes Irish, Spanish and Portuguese bonds).

    The ECB last raised its interest rates by 25 basis points at its July meeting; pausing in May and June, after increasing the rate by 25 basis points to 1.25% in April
     this year.  The ECB paused the rate hikes when it met earlier in August, but announced a resumption of its bond buying program; which initially had been focused on Greece, Portugal, and Ireland.  The initial absence of Spain and Italy from the resumed bond buying program contributed to the deteriorating financial market sentiment that saw significant volatility in asset markets in early August.  The ECB next reviews monetary policy settings on the 8th of September, meanwhile Jean Claude Trichet will be attending the Jackson Hole Economic Policy Symposium
     this week, and is expected to be one of the keynote speakers, including Ben Bernanke.
    Aug 22 5:43 PM | Link | Comment!
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