Quintet of Central Bank Policy Announcements

December 12, 2013

The Reserve Bank of New Zealand left the 2.5% official cash rate at its record low but served notice that such is headed higher and possibly soon.

The Bank of Korea’s 7-day repo rate was kept at 2.5% as well, its level since May.  Inflation is below target.

Bank Indonesia did not raise its reference BI interest rate further this month.  It’s 7.5%, highest since April 2009.  Better trade figures occurred in October.

Bangko Sentral ng Pilipinas kept its rate structure at a record low — 5.5% on the repo rate and 3.5% for the reverse repo.  Inflation is being watched.

The Swiss National Bank announced continuing imposition of a 1.20 franc per euro cap, first introduced in September 2011.  The 3-month Libor target is 0.0-0.25%.  Inflation was revised marginally lower, and the franc is considered still too high.

Four U.S. indicator releases are due, most notably retail sales but also import prices, business inventories and weekly jobless insurance claims.

Australian labor statistics were mixed.  A 21K increase in workers was double what analysts were projecting, but the unemployment rate ticked upward to a 3-month high of 5.8%, and the participation rate didn’t budge from 64.8%, lowest since October 2006.

Asian stocks suffered further losses on worries about China and expectations that the Fed may start tapering after next week’s FOMC meeting.  Share prices dropped 1.4% in Indonesia, 1.2% in India, 1.1% in Japan, 1.0% in Thailand, 0.9% in Taiwan, 0.8% in Australia, 0.5% in Hong Kong, South Korea and Malaysia and 0.1% in China.  In Europe, equities have so far declined 1.0% in Britain, 0.7% in Germany, 0.5% in Spain, 0.4% in Italy and 0.3% in France.

Ten-year sovereign debt yields have risen three, two, and one basis points in Germany, Britain and Japan.

Gold is 1.2% higher at $1,241.80 per ounce, while West Texas Intermediate crude oil only rose 0.3% to $97.75 per barrel.

The dollar is unchanged against the euro, Australian dollar and Chinese yuan.  The greenback gained 0.3% vis-a-vis the yen but has depreciated 0.6% relative to the kiwi, 0.2% versus the loonie, and 0.1% against the Swiss franc and sterling.

Euroland industrial production, which had been forecast to rise a bit, instead fell 1.1% in October, weighed down by drops of 11.6% in Ireland, 3.5% in the Netherlands and 1.2% in Germany.  Output showed a 12-month uptick of 0.2%, same as in September, but was 0.9% below the 3Q average level.

Several indications of the threat of European deflation were in the overnight news.  Italian CPI inflation held steady in November at 0.7%, while French inflation ticked a tenth of a percentage point higher to 0.8%.  Irish consumer prices dipped 0.2% on month and were just 0.3% above their November 2012 level.  Sweden posted headline and core inflation rates of 0.1% and 0.3%. 

In other European data, Dutch wholesale turnover posted a smaller 1.7% on-year decline in October.  The Swedish jobless rate edged 0.1 percentage point higher to 8.0% last month.  Britain’s index of leading economic indicators rose 0.4% in October, only a quarter as much as in September, while the index of coincident economic indicators climbed all of 0.1%.

Food prices in New Zealand dipped 0.2% in November and were 1.4% above a year earlier.  New Zealand home prices sank 6.6% in the year to November. 

Brazilian retail sales recorded a 5.3% on-year increase in October, not as much as forecast but greater than the rise over the 12 months to September.

Chile will be the sixth central bank of the day to announce its latest central bank decision.  Canada releases quarterly capacity usage.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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