Monetary Policy Week in Review – Dec 9-13, 2013
by Peter Nielsen, Central Bank News
Last week Botswana’s central bank cut rates while 12 banks maintained their rates, waiting with bated breath for the U.S. Federal Reserve to decide when it will start to taper its asset purchases.
The main takeaway from central banks last week was that inflationary pressures are never from bubbling to the surface despite weak global demand that is keeping a lid of inflation worldwide.
The Reserve Bank of New Zealand ratcheted up its warning about inflation and is now primed to raise rates in the first half of next year, the Bank of Russia is defying skeptics and proving that it is fully committed to pushing down inflationary expectations while Iceland tightened its previous warnings about rate rises in light of the government’s plan to reduce household debt, a move it said would boost demand and thus inflation.
But countries that are facing inflationary pressures are exceptions. The global trend is sluggish growth and low inflation, illustrated this week by Botswana, South Korea, Switzerland, Chile and Peru.
Low inflation is making it possible for central banks to continue to cut their policy rates and through the first 50 weeks of this year, rates have been cut 112 times, 23.0 percent, of the 486 policy decisions taken by the 90 central banks followed by Central Bank News.
This percentage is slightly lower than the previous week despite Botswana’s rate cut and down from 25.3 percent after the first six months of the year, reflecting rate rises by major emerging market central banks, such as Brazil and Indonesia.
In contrast, central banks worldwide have only raised their policy rates 26 times this year, or 5.4 percent of this year’s policy decisions, up from 4.7 percent after the first half of the year.