Monetary Policy Week in Review – Aug. 11, 2012: Is the worst behind us?

  The past week in monetary policy saw interest rate decisions by 10 central banks around the world, with one raising rates, one cutting rates and the remaining 8 banks keeping rates unchanged.

     Several central banks, such as Peru, Russia, Armenia and Sri Lanka, took note of higher inflation from drought hitting food prices but considered the rise to be merely temporary so there was no need to adjust interest rates.

     While the global economic slowdown has dampened growth in most countries, there were indications from several central banks last week that the worst may be behind us.

     The Reserve Bank of Australia said China’s economy did not appear to be slowing further, the Bank of Japan said overseas economies were emerging from a phase of deceleration and Sri Lanka’s central bank said the adverse effects of the slowdown were not expected to be worse than already anticipated.

     That optimistic view, however, was contrasted by the Bank of Korea, which saw the global economic recovery as “very moderate” and uncertainties surrounding Europe would persist.

      LAST WEEK’S MONETARY POLICY DECISIONS:

COUNTRY	NEW RATE	OLD RATE	RATE 1 YR AGO
AUSTRALIA	3.50%	3.50%	4.75%
SRI LANKA	7.75%	7.75%	7.00%
SOUTH KOREA	3.00%	3.00%	3.25%
SERBIA	10.50%	10.25%	11.75%
JAPAN	0.10%	0.10%	0.10%
INDONESIA	5.75%	5.75%	6.75%
PERU	4.25%	4.25%	4.25%
ARMENIA	8.00%	8.00%	8.50%
PAKISTAN	10.50%	12.00%	13.50%
RUSSIA	8.00%	8.00%	8.25%

    NEXT WEEK:  The central bank calendar for next week is quiet, with only two banks holding monetary policy meetings.

    Turkey: There is continued speculation that the Central Bank of the Republic of Turkey will narrow its interest rate corridor, which is adjusted daily. The 11.50 percent lending rate forms the upper limit of the corridor and the 5.0 percent overnight rate forms the lower limit. The benchmark one-week repurchase rate has been unchanged since a 50 basis point cut in August, 2011, to 5.75 percent.
     Chile: Banco Central de Chile is expected to keep its benchmark overnight lending rate unchanged at 5.0 percent. The bank last changed its rate in January, when it was cut by 25 basis points.

COUNTRY	MEETING	CURRENT RATE	RATE 1 YR AGO
TURKEY	16-Aug	5.75%	5.75%
CHILE	16-Aug	5.00%	5.25%

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