Three Central Banks Cut; Colombia and Phillipines Raise Rates

Monetary Policy Week in Review, 28 July to 01 August 2014

by Peter Nielsen, Central Bank News

Last week in global monetary policy three central banks (Israel, Angola and Azerbaijan) cut their policy rates while the Philippines joined Colombia as the latest emerging market central bank to raise rates in recent months to stem inflationary pressures and prepare for any jitters in global financial markets from the coming tightening of U.S. monetary policy.

Through the first 31 weeks of this year, the 90 central banks followed by Central Bank News have raised their policy rates a total of 32 times, or 11 percent of this year’s 292 policy decisions, up from 9.3 percent at the end of June and 8.7 percent at the end of March.

Central banks in emerging markets have accounted for 16, or half, of those rate increases. Central banks in developed economies have raised their rates 4 times, or 12.5 percent of the worldwide rate rises while central banks in frontier markets have raised rates 3 times and central banks in other markets by 8 times.

Last week’s three rate cuts pushed up the number of global rate cuts so far this year to 40, or 13.7 percent of all policy decisions, up from 12 percent at the end of the first half of the year but unchanged from 12 percent at the end of the first quarter.

Emerging market central banks account for 17, or 42.5 percent of those cuts, central banks in advanced economies for 4 of those cuts, frontier market central banks for 7 and central banks in other markets for 12.

The month of July was characterized by more than usual activity in global monetary policy with 20 central banks changing rates, around twice the monthly average.

Of this, 11 central banks cut their rates by a total of 602 basis points while 9 central banks raised their rates by a total 675 points.

But the Global Monetary Policy Rate (GMPR), the average nominal rate of 90 central banks, ended the month at 5.53 percent, unchanged from the end of June and the first quarter, but up from 5.41 percent at the end of last year. LIST OF LAST WEEK’S CENTRAL BANK DECISIONS:

• Israel cuts rate 25 bps on low inflation, high FX rate, Gaza
• Angola cuts rate 50 bps, inflation seen declining further
• Azerbaijan cuts repo rate 75 bps, reserve requirement
• Fed trims QE by another $10 bln, repeats rate to stay low
• Albania maintains rate, may cut rates further
• Philppines raises rate 25 bps to curb inflation pressures
• Czech holds rates, delays exit from using FX until 2016
• Colombia hikes rate for 4th time, raises growth forecast
• Fiji holds rate on stable outlook for inflation, FX reserves

TABLE WITH LAST WEEK’S MONETARY POLICY DECISIONS:

This week (Week 32) 10 central banks will decide on monetary policy, comprising the countries and jurisdictions of Romania, Australia, India, Thailand, United Kingdom, the euro area, Serbia, Peru, Zambia and Japan.

TABLE WITH THIS WEEK’S MONETARY POLICY DECISIONS:

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