The past week in monetary
policy saw interest rate decisions by 7 central banks around the
world, with all banks (India, Sri Lanka, Turkey, Japan, South Africa, Taiwan and Nigeria) keeping rates unchanged.
Monetary policy, however, was
still loosened as Japan raised its asset purchase program, India trimmed its
cash reserve ratio and Turkey cut the top rate on its interest corridor. Both India
and Turkey cited inflationary pressures that limited their ability to ease
policy.
All 7 central banks observed
a weaker global economy with the Bank of Japan turning pessimistic after
previously expecting a moderate recovery. Taiwan, in contrast, expects the
economic outlook to improve slightly in the second half of the year.
Another message from last
week’s central bank statements was concern over the impact of the Federal
Reserve’s launch of a new round of asset purchases, known as Quantitative
Easing 3, along with a forecast of holding rates close to zero until mid-2015.
Taiwan and Nigeria expressed
concern that the Fed’s latest move would lead to inflows of short-term money to
emerging economies. The problem with so-called hot money is that it can be
financially destabilizing by pushing up exchange rates and inflation of the
destination country. Then, as soon as financial conditions change, the money evaporates, scouring the globe for the next opportunity.
LAST WEEK'S MONETARY POLICY DECISIONS:
| COUNTRY | NEW RATE | PREVIOUS RATE | RATE 1 YEAR AGO |
| INDIA | 8.00% | 8.00% | 8.25% |
| SRI LANKA | 7.75% | 7.75% | 7.00% |
| TURKEY | 5.75% | 5.75% | 5.75% |
| JAPAN | 0.10% | 0.10% | 0.10% |
| SOUTH AFRICA | 5.00% | 5.50% | 5.50% |
| TAIWAN | 1.88% | 1.88% | 1.88% |
| NIGERIA | 12.00% | 12.00% | 9.25% |
NEXT WEEK:
The central bank calendar next week looks quiet, with 6 central banks
meeting: Israel, Hungary, Georgia, Romania, Czech Republic and Colombia.
Hungary may cut rates again while the Czech central bank may follow
some of the other major central banks and embark on some form of quantitative
easing given a shrinking economy and a policy rate of 0.5 percent.
Another event to keep en eye on is Mexico City, where Group of 20
deputy finance minsters and central bank governors meet Sunday and Monday, Sept. 23 and 24.
| COUNTRY | MEETING | CURRENT RATE | RATE 1 YEAR AGO |
| ISRAEL | 24-Sep | 2.25% | 3.00% |
| HUNGARY | 25-Sep | 6.75% | 6.00% |
| GEORGIA | 26-Sep | 5.75% | 7.50% |
| ROMANIA | 27-Sep | 5.25% | 6.35% |
| CZECH REPUBLIC | 27-Sep | 0.50% | 0.75% |
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