Several Central Banks Hold Scheduled Policy Meetings

January 19, 2017

Central banks in Euroland, Indonesia, Malaysia and Chile hold their first interest rate policy meetings of 2017.

  • The ECB retained a zero percent refinancing rate, flanked by a 0.25% interest on its marginal lending facility and a negative 0.40% deposit rate. Bond buying of EUR 80 billion per month will continue this quarter, followed by a drop to EUR 60 billion per month until at least the end of the year or beyond if needed. Interest rates at current or lower levels will be maintained beyond the period of quantitative stimulus. ECB President Draghi’s press conference begins shortly.
  • Bank Indonesia’s 7-day reverse repo was kept at 4.75%, its level since the last of six 25-bp cuts in 2016, which was done in October.
  • Bank Negara Malaysia maintained a 3.0% policy interest rate. The last change, a reduction of 25 basis points, was done six months ago.
  • Chile’s decision hasn’t been announced yet.

In markets on this last full day of the eight-year Obama presidency, the dollar shed 0.6% against the Australian and New Zealand dollars, 0.5% versus sterling, 0.3% relative to the euro, and 0.1% against the Swiss franc. The dollar has risen 0.3% against the peso, 0.2% versus the yuan and 0.1% vis-a-vis the yen and loonie.

Japan’s Nikkei is 0.9% stronger, but stocks fell 0.4% in China, 0.3% in Taiwan, and 0.2% in Hong Kong. Equities have also retreated 0.7% in Greece, 0.5% in the U.K. and Switzerland, 0.3% in Spain and 0.1% in Germany and France.

A bigger market story is the rise in sovereign debt yields. 10-year yields rose five basis points in Britain, four bps in Germany and two bps in Japan. Futures point to an uptick in the 10-year Treasury yield, too.

West Texas Intermediate crude oil rose 1.1% to $51.66 per barrel, while comex gold is 0.8% lower at $1,202.60 per troy once.

Tension continues to overshadow tomorrows inauguration of America’s 45th president and not merely because of the radical and uncertain nature of his policy pronouncements. What Russia did to influence the election and what the Trump campaign may have known about such continues to raise questions about the legitimacy of the power transition. Trump’s approval ratings are in the low 40% range, in contrast to approval of at least 60% at the start of other presidential eras.

Euroland’s seasonally adjusted current account surplus spiked to a record EUR 36.1 billion in November even though the trade surplus was only at a 2-month high.

Italy’s current account surplus during the twelve months through November equaled 2.7% of GDP. Spain posted a EUR 1.25 billion trade shortfall in November, down from a deficit of EUR 1.85 billion a year earlier and a gap of EUR 1.80 billion in October.

Australian labor statistics in December were mixed. Labor market participation rose a tenth of a percentage point to 64.7%, while unemployment also increased that same increment to 5.8%. There was positive jobs growth of 13.5K, but that was much less than November’s rise of 37.1K.

Housing consents during November in New Zealand advanced 5.0% on year to the highest level since March 2005 but slumped in seasonally adjusted terms by 9.2% from the level in October. New Zealand’s manufacturing purchasing managers index printed in December at 54.5, the same score as in November and down from 55.2 in October and 57.7 in September. Finally, New Zealand consumer confidence rebounded 3.4% this month after dropping 2.1% in December.

Consumer confidence in The Netherlands rose a full point in December to its best level since the start of the U.S. and then global financial crisis in August 2007. Dutch consumer consumer spending in November was 2.8% greater than a year earlier, the biggest such rise in over two years. Dutch unemployment fell to 5.4% in December from 6.6% a year earlier.

Housing prices in Euroland rose 1.3% in the third quarter of 2016 after a 1.5% rise in 2Q. Such prices surpassed their 3Q15 level by 3.4%.

The Swiss index of producer and import prices rose 0.2% on month and was unchanged on year in December.

Between end-2015 and end-2016, producer prices increased 1.7% in Portugal and 1.8% in South Korea. Consumer prices were unchanged in Ireland and fell 0.1% in Iceland.

The British Royal Institute of Chartered Surveyors house price index slipped back to a reading of 24% in December from 29% in November. Analysts anticipated a marginal improvement instead.

U.S. data releases today will included the Philly Fed manufacturing index, housing starts, building permits, and weekly jobless insurance claims. Canada’s monthly survey of manufacturing sales, orders and inventories arrives, too.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without expressed permission.

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