With safe-haven capital flows from Russia adding to the perennial upward pressure on the Swiss franc, the Swiss National Bank (SNB) last week joined the small, but select group of central banks - Sweden's Riksbank, Denmark's Nationalbank and the European Central Bank (ECB) - that have experimented with negative policy rates in the latest twist to global monetary policy
Whether last week’s stabilization in oil prices is the first sign of a trend reversal is too early to tell but it’s clear that lower oil prices are exacerbating the deflationary trends in the euro zone and making it even tougher for Japan to escape the “deflationary mindset.”
But for most oil-importing countries, and especially emerging and frontier markets, the decline in oil has been greeted with open arms as it helps compensate for inflationary pressures from the widespread currency depreciation against the U.S. dollar.
Through the first 51 weeks of this year, the 90 central banks followed by Central Bank News have cut their policy rates 65 times, or 13.6 percent of this year’s 479 policy decisions, marginally higher than 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 51 times, or 10.6 percent of all policy decisions, up from 10.2 percent at the end of September, 9.3 percent at the end of June and 8.7 percent at the end of March.
With Russia’s rate rise, central banks in emerging markets have raised rates 24 times this year, almost equaling the 25 rate cuts, an illustration of how emerging markets have had to raise rates to offer competitive returns to global investors who are setting their sights on the first rate rise in the United States at some point in 2015.
As a group, emerging markets have thus accounted for 47 percent of the world’s rate increases this year, easily outpacing the four rises by New Zealand, the only developed market central bank that has raised rates this year.
Central banks in frontier markets have raised rates five times and cut them 14 times while central banks in other markets – which includes such diverse economies as Iceland, Albania and Ghana - have raised rates 17 times, the exact same number of times they have cut rates.
The Global Monetary Policy Rate (GMPR) - the average rate of the 90 central banks followed by Central Bank News – jumped to 5.69 percent from 5.62 percent from the previous week, pushed upward by Russia’s rate hike.
At the end of the third quarter GMPR was 5.54 percent, only slightly up from 5.53 percent at the end of the second quarter and first quarters.
Russia has now raised its rate by a total of 1150 basis points, topping Ukraine's rate rise of 750 points and Ghana's 500 point hike to take the top spot among this year's rate-hikers.
LIST OF LAST
WEEK’S CENTRAL BANK DECISIONS:
- Russia raises rate 650 bps to 17.0 pct to protect ruble
- Sweden holds rate, sees rise H2 2016, plans measures
- Morocco cuts rate 25 bps on "relatively low" inflation
- Hungary holds rate, loose policy for extended period
- Czech may move FX target lower on deflation risk
- Georgia maintains rate, sees inflation at target H2 2015
- Thailand holds rate but 2 members vote to cut by 25 bps
- U.S. Fed holds rate, will be "patient" in normalizing policy
- Swiss impose negative deposit rate, cut Libor target
- BOJ maintains stance but strikes optimistic tone
- Albania maintains rate, may cut further if risks worsen
- Colombia holds rate, no new dollar buying program
TABLE WITH
LAST WEEK’S MONETARY POLICY DECISIONS:
| COUNTRY | MSCI | NEW RATE | OLD RATE | 1 YEAR AGO |
| RUSSIA | EM | 17.00% | 10.50% | 5.50% |
| SWEDEN | DM | 0.00% | 0.00% | 0.75% |
| MOROCCO | FM | 2.50% | 2.75% | 3.00% |
| HUNGARY | EM | 2.10% | 2.10% | 3.00% |
| CZECH REPUBLIC | EM | 0.05% | 0.05% | 0.05% |
| THAILAND | EM | 2.00% | 2.00% | 2.25% |
| UNITED STATES | DM | 0.25% | 0.25% | 0.25% |
| GEORGIA | 4.00% | 4.00% | 3.75% | |
| ALBANIA | 2.25% | 2.25% | 3.00% | |
| SWITZERLAND | DM | -0.25% | 0.25% | 0.25% |
| JAPAN | DM | N/A | N/A | N/A |
| COLOMBIA | EM | 4.50% | 4.50% | 3.25% |
This week (Week 52) three central banks or monetary
authorities are scheduled to decide on monetary policy: Angola, Armenia and Turkey.
TABLE WITH
THIS WEEK’S MONETARY POLICY DECISIONS:
| COUNTRY | MSCI | DATE | CURRENT RATE | 1 YEAR AGO |
| ANGOLA | 22-Dec | 9.00% | 9.25% | |
| ARMENIA | 23-Dec | 6.75% | 7.75% | |
| TURKEY | EM | 24-Dec | 8.25% | 4.50% |
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