Focus on Central Banks

January 22, 2014

Bank of Japan Board members went out of their way to dissuade markets from counting on additional monetary policy stimulus soon.  The January meeting left 9-1/2-month-old policy settings intact, reaffirmed the prior meeting’s economic assessment, and released new price and growth forecasts that are very similar to those adopted in October.  Governor Kuroda said the economy is progressing as officials thought such would, predicting the inflation target of 2% would be reached on time.  The coming sales tax hike in April will soften the economy only temporarily, Kuroda maintained.  He also denied that the main intent of the forecast is to weaken the yen.

The Bank of Thailand Monetary Policy Committee left its main interest rate at 2.25%, the level since the last of five 25-basis point cuts implemented between November 2011 and November 2013.  Many analysts had anticipated a 25-bp cut, and in fact 3 of 7 committee members preferred such a move.

Still to come today is the Bank of Canada’s interest rate decision and publication of a new Monetary Policy Update.  The overnight target rate of 1.0% since September 2010 is not expected to change.

Minutes from the Bank of England’s meeting of January 8-9 were published, revealing a unanimous decision not to change the 0.5% Bank Rate of 375 billion pound ceiling on the asset purchase program.  The minutes expressed no urgency to hike interest rates as soon as unemployment falls below the 7.0 level targeted in the Bank’s forward guidance since August.  The ILO-basis jobless rate is presently at 7.1% and has declined faster than anticipated.  Officials are comfortable with the policy status quo.

The dollar shows overnight declines of 0.7% against the Australian dollar, 0.4% versus sterling and 0.1% vis-a-vis the loonie and kiwi.  The greenback firmed 0.1% against the euro and is steady relative to the yen, Swissie and yuan.

Share prices jumped 2.6% in China following Tuesday’s large liquidity injection.  Equities are up 0.6% in New Zealand and Indonesia, 0.4% in India, 0.3% in Taiwan and South Korea, and 0.2% in Japan and Hong Kong.  Aussie stocks fell by 0.2%.  In Europe, share prices have fallen by 0.7% in Spain, 0.2% in France, Germany, and Italy, and 0.1% in Britain.

10-year sovereign debt yields rose four basis points in the U.K. and a basis point in Germany but drifted off a basis point in Japan.

Whereas WTI crude oil prices rose by 0.5% to $95.43 per barrel, gold is unchanged at $1,241.30 per ounce.

Euroland’s debt-to-GDP ratio of 92.7% in the third quarter of 2013 was down from 93.4% in 2Q but above the 90.0% level in 3Q12.  This was the first quarter-to-quarter decline since the final period of 2007.

Australian CPI inflation unexpectedly accelerated to 2.7% last quarter from 2.2% in the year to 3Q13.  Consumer prices climbed 0.8% quarter-on-quarter.  Core inflation of 2.6% was also above the level in 3Q.  Consumer confidence in Australia improved to -1.7% this month from -4.8% in December.

The claimant count of British unemployment fell by 24K in December, somewhat less than forecast, but the associated jobless percent of 3.7% was down from 3.8% in November.  The ILO unemployment ratio, which conforms to international standards, dropped to 7.1% from 7.4% and is just 0.1 percentage points above the Bank of England’s policy guidance threshold.  Wage earnings including bonuses and excluding such were each 0.9% higher than a year earlier during September-November. Public sector borrowing in December was lower than forecast, but the public sector net cash requirement exceeded analyst forecasts.

Danish retail sales fell 0.6% on month and 1.5% on year last month.

The MNI Chinese business climate indicator weakened to 52.2 in January from 58.4 at end-2013.

Japan’s all-industry index, a supply-side monthly proxy of GDP, went up 0.3% in November after falling by 0.4% in October, leaving its 12-month rate of increase unchanged at 1.7%.  Construction and services respectively rose by 1.8% and 0.6%, while industrial production and public administration posted declines of 0.1% and 0.9%.

Japan’s November indices of leading and coincident economic indicators were both revised upward by 0.3 and 0.2 points, respectively, to 111.1 and 110.7.

The World Economic Forum began in Davos, Switzerland today and runs through Saturday.  It’s been noted that this annual ritual has attracted fewer luminaries this time.

A foot of snow in the New York area has been followed by sub-10 degree F temperatures and very strong winds.

Consumer price inflation accelerated by 0.1 percentage point in South Africa to 5.4% in December.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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