New Overnight Developments Abroad - Daily Update

Significant Monetary Policy Changes in Japan and Russia

October 31, 2014

Quantitative and qualitative monetary stimulus was expanded sharply in Japan by a 5-4 vote, with the central bank governor and two deputy governors siding with the majority.  The impact of the decision to boost annual JGB buying from 50 trillion yen to 80 trillion yen, triple holdings of ETFs and J-REITS, and lengthen the average […] Read Article

Foreign Exchange Insights and Next Week

Next Week

October 24, 2014

Central bank policy meetings are scheduled in the United States, Japan, Sweden, New Zealand, Russia, Brazil, Colombia, Mexico, Hungary and Israel.  The Bank of Japan publishes its quarterly outlook on economic activity and prices on Friday, and the FOMC meeting is not one of those to be followed by a press conference. European clocks are […] Read Article

Central Bank Watch

Bank of Japan Halloween Surprise

October 31, 2014

Most analysts including myself didn’t expect a policy change, and the package of stimulus enhancements announced by the BOJ Board was approved by only a 5-4 majority, albeit one that included Governor Kuroda and his two Deputies.  This was the first modification of quantitative and qualitative easing (QQE)launched some 19 months ago.  The changes look […] Read Article

Deeper Analysis

A Third of a Century of U.S. Disinflation

October 24, 2014

After accelerating from 7.0% per annum during the three years to end-1978 to 11.0% during the three years to end-1981, core consumer price inflation slowed to 4.7% per year between end-1981 and end-1984, 4.1% in 1985-87, 4.7% in 1988-90, 3.6% in 1991-3, 2.8% in 1994-96, 2.2% in 1997-1999, 2.4% in 2000-02, 1.8% in 2003-05, 2.3% […] Read Article

Central Bank Watch

Bank of Mexico Keeps 3.0% Overnight Rate

October 31, 2014

Taking into account the above, the Governing Council has decidedto keep in 3 percent goal forthe interbank interest rate overnight, which estimated that the monetary stance is consistent with the efficient convergence of inflation to the target of 3 percent. Forward, it will remain attentive to the performance of all the determinants of inflation andexpectations […] More

New Overnight Developments Abroad - Daily Update

The Reaction to the Fed Statement

October 30, 2014

The FOMC communique was more hawkish than expected.  Weak growth in Europe and enhanced global market volatility since the prior policy meeting did not deter monetary officials from ending the third phase of quantitative easing  and declaring that U.S. deflationary risks had diminished.  There was also a shift in direction of dissenting votes on the […] More

Central Bank Watch

Reserve Bank of New Zealand Continues 3.5% Official Cash Rate

October 29, 2014

Four 25-basis point interest rate hikes were implemented this year at meetings in March, April, June and July, but this month’s meeting like that in September kept policy on hold.  Indeed, the kiwi remains too high, CPI inflation is still only modest, and house price pressures have eased significantly. Lower commodity prices and increased global […] More

Central Bank Watch

FOMC Statement Review

October 29, 2014

The FOMC statement upgrades the assessment of labor market conditions, calling employment growth solid and unemployment lower, and terminates QE3.  Moreover, the statement does not cite slower global growth, and it says the likelihood of inflation persistently below 2% has diminished somewhat.  The language of forward interest rate guidance was not changed, however, anticipating no immediate […] More

New Overnight Developments Abroad - Daily Update

Waiting for the Fed Announcement

October 29, 2014

The dollar and yen have slipped 0.4-0.5% against the euro, Swiss franc and Aussie dollar. Japan’s Nikkei and Hong Kong’s Hang Seng closed 1.5% and 1.3% stronger.  Stocks are up 0.6% in Germany and Britain. The Japanese 10-year JGB fell a basis point to 0.45%, while the German bund and British gilt marked time. Oil […] More

Central Bank Watch

Magyar Nemzeti Bank

October 28, 2014

Hungary’s benchmark interest rate was reduced at every monthly meeting over the two years between August 2012 and July 2014, falling to 2.1% from 7.0%.  It is now time to retain the low interest rate for an extended time frame through at least the end of 2015.  That’s the reaffirmed message of today’s statement that […] More

Central Bank Watch

A Full-Court Press to Lift Inflation in Sweden

October 28, 2014

Drastically low inflation and expected inflation call for extraordinary action.  The Executive Board lopped off the last 25 basis points on its benchmark repo rate today.  The interest rate had been at 2.0% prior to December 2011 but reduced a percentage point to 1.0% by end-2012.  Another cut of 25 bps was administered in December […] More

New Overnight Developments Abroad - Daily Update

Some Good Economic News for a Change

October 28, 2014

Industrial profits in China reverted to positive on-year growth in September, albeit a gain of only 0.4%.  A 0.6% decline in the year to August was negative for the first time in almost two years. Japanese retail sales increased 2.7% on month in September, three times more than forecast, and posted the largest on-year advance, […] More

Central Bank Watch

Bank of Israel Keeps Benchmark Interest Rate at 0.25%

October 27, 2014

A dozen interest rate reductions were implemented by the Israeli Monetary Policy Committee between September 2011 and August 2014 including three this year.  According to a statement explaining today’s decision, “the effects of the recent interest rate reductions, which brought the interest rate to a level of 0.25 percent, have not yet been fully reflected […] More

New Overnight Developments Abroad - Daily Update

Muted Market Reaction to European Bank Stress Test Results

October 27, 2014

The stress test results were officially announced Sunday but largely leaked on Friday and hence did not carry an element of surprise.  Moreover, no German, French or Spanish banks were listed, and about three-fourths of the collective extra capital needed to be raised by banks has been done.  The dollar is unchanged against the euro, […] More

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