The central banks of Japan and Sweden pulled rabbits out of their hats last week, surprising financial markets with their audacious moves to ease monetary policy, while the United States, Brazil and Russia tightened their policy stance, underscoring the precarious state of the global economy.
The U.S. Federal Reserve stuck to its commitment to end its third round of asset purchases in the last six years, opening a new chapter in global monetary policy and starting the countdown to its first rate rise since June 2006.
But just as the Fed gingerly steps into the world of post-QE (Quantitative Easing), the Bank of Japan (BOJ) delves deeper into QE, boosting its target for expanding the monetary base by 10-20 trillion yen to about 80 trillion.
Despite months of denial that it would undertake additional easing, the BOJ decided it had to take firm action to avoid 15 years of "deflationary mindset" again grabbing hold of the Japanese psyche.
The Riksbank is facing a similar challenge in pulling Sweden out of a deflationary grip - it forecast deflation of 0.2 percent this year - and cut its benchmark repurchase rate to zero percent and pledged to keep it there until mid-2016.
But while Sweden and Japan are combating deflation - and have been criticized for being slow to counter the threat of deflation - Brazil and Russia are in the opposite camp, fighting inflation that continues to accelerate despite already very high interest rates.
The Central Bank of Brazil raised its benchmark Selic rate by 25 basis points to 11.25 percent, restarting its tightening campaign that was paused in May after nine rate rises.
The Bank of Russia, which is combating the twin challenges of international sanctions and falling oil prices, raised its policy rate by 150 basis points to 9.50 percent and now expects inflation to remain above 8 percent in the next several months while the economy is expected to stagnate in the current quarter and in the first quarter of next year.
Through the first 44 weeks of this year, the 90 central banks followed by Central Bank News have cut their policy rates 54 times, or 13.4 percent of this year's 404 policy decisions, down from 13.5 percent at the end of the third quarter but up from 12 percent at the end of the first half and 12 percent at the end of the first quarter.
Meanwhile, rates have been raised 41 times, or 10.1 percent of all policy decisions, down from 10.2 percent at the end of September, but up from 9.3 percent at the end of June and 8.7 percent at the end of March.
Boosted by last week's three rate rises, the Global Monetary Policy Rate - the average rate of the 90 central banks followed by Central Bank News - jumped to 5.56 percent, up from 5.54 percent at the end of the third quarter and 5.53 percent at the end of the second quarter and first quarters.
LIST OF LAST WEEK'S CENTRAL BANK DECISIONS:
- Israel holds rate, past cuts have not yet fully taken effect
- Mauritius maintains rates, forecasts inflation of 3.0%
- Angola raises rate 25 bps as inflation, credit rises
- Albania holds rate but will cut if economy worsens
- Sweden slashes rate to zero, sees first rise in mid-2016
- Hungary holds rate, sees easy policy for extended period
- Fed ends QE3, to hold key rate for "considerable time"
- Brazil surprises markets, raises rate 25 bps to 11.25%
- New Zealand holds rate in pause before next change
- Fiji holds rate, to mull change after 2015 govt budget
- Colombia holds rate, next move depends on data
- BOJ boosts QE to 80 trln yen to avoid deflation mindset
- Russia raises rate 150 bps to curb inflation expectations
- Mexico holds rate on unchanged inflation, growth outlook
TABLE WITH LAST WEEK'S MONETARY POLICY DECISIONS:
|COUNTRY||MSCI||NEW RATE||OLD RATE||1 YEAR AGO|
This week (Week 45) 11 central banks or monetary authorities are scheduled to decide on monetary policy: Australia, Romania, Kenya, Thailand, Iceland, Poland, Malaysia, United Kingdom, euro area, Czech Republic and Zambia.
TABLE WITH THIS WEEK'S MONETARY POLICY DECISIONS:
|COUNTRY||MSCI||DATE||CURRENT RATE||1 YEAR AGO|