Other Central Bank Meetings on Thursday
September 9, 2009
Central bank rate announcements will also be made in South Korea, Peru and New Zealand, the last of which is due in less than two hours. From a high of 8.25% in the summer of 2008, the Reserve Bank of New Zealand implemented 575 basis points worth of cuts in the following sequence: 50 basis points a year ago on September 11, 2008, then 100 bps on October 23, 150 bps on December 4 and again January 29, and finally 50 bps each on March 12 and April 30. The current 2.5% level is the lowest cash rate level since March 1999 and was retained at the past two meetings on June 11 and July 30. Even then, however, the central bank kept an easing bias, asserting the cash rate “could still move modestly lower over coming months.” Since then, New Zealand economic data have improved enough for the central bank governor to declare recently that the long and deep recession has ended. On the other hand, the kiwi has appreciated 6.8% against its U.S. counterpart since the meeting on July 30 and 24.0% since the last rate cut on April 30th. This meeting is full of possibilities from eliminating the rate bias in preparation for a rate hike in early 2010 to exercising the bias to perhaps cut the rate further to offset tightening monetary conditions due to exchange rate appreciation.
The Bank of Korea reduced its benchmark rate by 325 basis points from 5.25% at the start of October 2008 to 2.0% by mid-February 2009. Like much of Asia, Korea’s economy is bouncing back strongly, advancing by more than 10% last quarter at an annualized rate. Growth last quarter was broadly based, with consumption, business investment, and exports all firing away. Consumer confidence is at a 7-year high. CPI inflation stands at 2.2%. Korea’s will be one of the first central banks to tighten in 2010, but officials will not switch gears just yet.
The last Peruvian central bank meeting on August 7 resulted in a larger rate cut of 75 basis points than the 50-bp cut analysts were forecasting. The current 1.25% benchmark interest rate is at a 5-year low and compares to 6.5% at the start of 2009. CPI inflation has dropped more than four percentage points since November and is now below target. Analysts are not expected the Central Reserve Bank of Peru to cut its key rate further tomorrow.
Copyright Larry Greenberg 2009. All rights reserved. No secondary distribution without express permission.
Tags: Aussie Dollar/Kiwi
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