Box: How global central banks are leaning as the Fed’s tapering discourse grows
While the US Federal Reserve has publicly pledged to keep interest rates near zero for a while, there is growing expectation that accelerating inflation may push the central bank to start serious discussions about withdrawing monetary stimulus.
At the same time, central banks in other parts of the world are already adjusting monetary parameters or preparing to cut stimulus measures in pandemic crisis mode. Read more
The Bank of Japan has maintained an ultra-accommodative monetary policy for years in a long battle to revive stagnant consumer prices.
Fed tapering is unlikely to change this outlook. The main concern of BOJ policymakers is the risk of market turmoil that could stimulate investor demand for the safe haven yen.
The Bank of Canada became the first of the Group of Seven countries to withdraw its stimulus measures during a pandemic and reported rates could start to rise in 2022. read more
China’s central bank is trying to slow credit growth to help contain debt risks, but is being cautious to avoid hurting the economic recovery which remains uneven as consumption lags.
A Chinese central bank official said signals from the Fed on future policy changes will have limited impact on Chinese financial markets. Read more
The Norwegian central bank plans to hike rates in the third or fourth quarter of 2021, possibly making it the first of its G10 peers to increase the cost of borrowing since the start of the pandemic.
Sweden’s central bank has announced plans to complete its 700 billion Swedish krona asset purchase program as planned by the end of 2021.
But the pace of asset purchases will decrease throughout the year. After that, the Riksbank said it would keep its balance sheet roughly unchanged, at least in 2021, replacing bonds that are coming due.
The Reserve Bank of New Zealand has kept rates at record highs, but hinted at a hike as early as September next year as the country quickly emerges from its pandemic slump.
The Bank of Korea signaled a possible tilt towards tightening to end its streak of lowest rates and revised its growth and inflation projections upward.
Double-digit inflation, persistent currency weakness and severely depleted reserves prompted Turkey’s central bank to start aggressive policy tightening in September of last year, well ahead of its emerging market peers. Its key rate is now one of the highest in the world at 19%.
The World Bank and others say that premature Fed tightening is Turkey’s biggest risk. The central bank is not expected to tighten any further, in part due to public pressure from President Tayyip Erdogan to maintain monetary stimulus.
Brazil’s central bank has raised its policy rate in its last two policy meetings and has indicated it will do so again with an expected rise in inflation. Read more
South Africa’s central bank kept rates low to support its economic recovery, but said risks of upside inflation were starting to emerge.
Its governor said the recent surge in consumer prices was temporary, but the bank would not hesitate to tighten its policy if it became permanent.
The governor of Indonesia’s central bank said in May he had to prepare for a possible Fed tightening next year, warning that such a move could impact local financial markets.
Bank Indonesia has cut rates by 150 basis points in total and injected more than $ 50 billion in cash since the start of the pandemic.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said the central bank was ready for any change in Fed policy, but didn’t think the US bank would “tip the boat” before the mid-election. – American mandate next year.
The BSP kept rates at record highs and vowed to maintain loose policy until it was sure the economy was on the road to recovery.
The Reserve Bank of India (RBI) has kept rates at record highs as its economy grapples with a devastating new wave of COVID-19 infections.
RBI Governor Shaktikanta Das said his growing foreign exchange reserves, which now exceed $ 600 billion, will help address “challenges resulting from the global fallout.” Read more
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