Last week five central banks
took monetary policy decisions, with one bank (Israel) cutting its rates, one
(Uruguay) raising its rates and the other three banks (Botswana, Albania and
Angola) leaving rates on hold, wrapping up a year dominated by monetary easing, whether through conventional or unconventional means.
During 2012 policy rates have
been cut 127 times by the 88 central banks followed by Central Bank News
compared with just 31 rate rises, illustrating how weak global demand has kept
inflation at bay, allowing central banks worldwide to open the flood gates of
easy money and stimulate economic activity.
Last week’s rate cut by Israel
brought the number of rate cuts by developed market central banks to 18
compared with zero rate rises, showing how advanced economies that are fully exposed to global markets have been battered by Europe's political and economic crises.
Israel’s fourth rate cut of the
year was another example of central banks’ taking advantage of the “absence of
inflationary pressures” to give another, and possibly final boost to the
economy which is expected to weaken slightly next year.
But Uruguay’s second rate rise of
the year reminds us that there are still quite a few pockets in the world where
the fight against inflation dominates the central banking agenda. In Uruguay’s
case, inflation is being fuelled by strong economic growth and capital inflows. With inflation substantially above the central bank’s target range, 2013 could bring further rate hikes.
Angola’s central bank, which is
still celebrating inflation falling to its long-held target of single-digits,
held rates steady and is enjoying stable conditions.
Botswana also held rates
steady, citing a positive inflationary outlook based on “weak domestic demand
and modest external inflationary pressures” – a scenario that captures the
conditions facing most central banks worldwide.
LAST WEEK’S
(WEEK 52) MONETARY POLICY DECISIONS:
| COUNTRY | MSCI | NEW RATE | OLD RATE | 1 YEAR AGO |
| ISRAEL | DM | 1.75% | 2.00% | 2.75% |
| BOTSWANA | 9.50% | 9.50% | 9.50% | |
| ALBANIA | 4.00% | 4.00% | 4.75% | |
| ANGOLA | 10.25% | 10.25% | 10.50% | |
| URUGUAY | 9.25% | 9.00% | 8.75% |
NEXT WEEK (Week 1 of 2013)
looks very quiet on the central banking front, with only the Bank of Uganda
scheduled to kick off the new year. Uganda was 2012’s second largest rate
cutter, having cut rates by 11 percentage points, and is benefitting from “subdued”
inflationary pressures.
| COUNTRY | MSCI | MEETING | RATE | 1 YEAR AGO |
| UGANDA | 3-Jan | 12.00% | 23.00% |
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