Monetary Policy
BoE’s Forbes dissents as inflation looms
MPC member votes for 25bp hike as inflation looks set to exceed target until “at least” 2020; other members sitting on the fence, for now
Fed delivers 25bp hike
Fed makes rate hike that many FOMC members have been hinting at for weeks; committee gives bullish signals on the outlook
Daily open market operations paying off – National Bank of Denmark
Introduction of daily open market operations has smoothed liquidity management, stabilising the money market reference rate
IMF research uncovers ‘puzzling’ effect of QE on the current account
Authors see QE having significant impact only when capital mobility is low; findings suggest “unexplained variation” between QE and capital mobility
‘Substantial’ accommodation must continue – Draghi
ECB president says underlying eurozone inflation remains “subdued”, despite rise in headline rate; he sounds the alarm over the possibility of a “competitive devaluation” by advanced economies
Tanzanian central bank slashes discount rate
Central bank cuts discount rate for the first time since 2013, from 16% to 12%; increase in NPLs has discouraged commercial banks from lending
Ending speculation on the Czech forex cap: quo vadis, CNB?
David Vavra suggests a method the Czech National Bank could use to free itself from the mounting pressure on its exchange rate peg, avoiding a “Swiss-style” exit
ECB announcements in QE era shifted inflation expectations, Austrian paper finds
Researchers use daily data on bond yields and inflation-linked swaps
Federal Reserve publishes its first fan chart
Fed unveils new communication method as Janet Yellen makes clearest statement yet that a March hike is on the table
Politics now driving markets more than central banks – BIS review
“Precipitous decline” in correlations implies markets no longer in thrall to central bank policy; US dollar credit still on the rise despite MMF reform; tensions in Chinese markets
Finnish paper analyses Chinese central bank’s ‘window guidance’
PBoC may have to move away from using lending quotas, researchers argue
CBRT under pressure as inflation breaches 10%
Consumer prices rising at their fastest rate since 2012, leaving the central bank in a difficult position
Pace of Brazil's monetary easing could increase, minutes show
Copom says evolution of economic performance and the level of the structural interest rate will dictate pace of easing cycle; fiscal policy could reduce structural interest rate
Iran needs to overhaul monetary operating framework – IMF
Absence of policy rate and emergency lending facilities is creating instability, fund warns; central bank council “dominated” by representatives from other government agencies
RBNZ’s Wheeler: policy now has ‘neutral bias’
Risks to future rate movements “equally weighted”, governor says, though plenty of domestic and global risks could knock the outlook off course
FOMC’s Brainard: Fed may need to raise rates in near future
“Drag” on US economy from foreign and domestic factors decreasing, FOMC member says; Brainard also calls for shrinking Fed’s balance sheet as rates rise
Interest rate effects weaker at low levels – Borio and Gambacorta
Supply of loans becomes less responsive to policy rate movements when interest rates are already very low, likely due to impact on bank profits, authors say
Fed could shrink balance sheet to end “twist” on yield curve – Bullard
Allowing some bonds to run off the balance sheet could permit a more natural yield curve, St Louis Fed president says; San Francisco Fed’s Williams says a March rate hike expectation is “on the table”
Kazakhstan’s long path to inflation targeting
After a slow start, the National Bank of Kazakhstan’s implementation of inflation forecast targeting is beginning to mature. By Warren Coats
Fed needs quarterly monetary policy report, Bullard says
St Louis president argues for better Fed communication when it comes to monetary policy decisions; a quarterly report would align the US with international best practice
Bank of Italy paper looks at impact of monetary policy shocks
The impacts of eurozone and US shocks have diverged since the onset of the financial crisis, the working paper says
Shafik calls for candidness on uncertainty in her final speech
Outgoing Bank of England deputy says central banks must do more than just increase transparency if they are to restore trust
Fed could raise rates ‘fairly soon’ – minutes
Minutes show committee members will be watching labour and inflation data very closely; raising rates would offer “flexibility” in responding to economic changes
Basel III LCR affects RBI monetary operations – paper
Liquidity coverage ratio affects the central bank’s operational target via its impact on the unsecured overnight money market