Monetary Policy Week in Review - 20 Nov 2010

Over the past week the central banks of Colombia, Philippines, South Africa, Chile, Sri Lanka, Rwanda, and South Korea all announced monetary policy decisions. The main standouts were interest rate increases by Chile +25bps, and Korea +25bps, as rising activity levels and inflation risks played through. While the central banks of South Africa -50bps, and Rwanda -100bps both loosened policy settings in order to support the economic recovery and spur lending. Of course the other big news piece was China raising the deposit reserve ratio for its banks by another 50bps on Friday, as inflation accelerates in world's second largest economy.

So the trend of growing diversity in economic prospects remains. In some countries the risk of inflation and overheating is starting to outweigh the risks to growth, while others are placing the priority on sustaining the economic recovery. In the coming week there are no major central bank meeting scheduled, but there will be much attention paid to the work underway in Ireland by the EU, IMF, and ECB, to prepare a plan and loan package to deal with the banking sector and fiscal issues. The other possibility is further tightening from China, with the markets having been spooked by the prospects for another rate rise as inflation pressures begin to boil. So keep checking in on CentralBankNews.info for the latest developments in monetary policy.

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