Monetary Policy
Riksbank paper looks to medieval Europe for ZLB solution
Idea of a “Gesell tax” on holdings of cash could help central bankers overcome the zero lower bound – an idea already tested by kings in medieval Europe
BoE bond purchases run into difficulties
Central bank fails to meet quota of long-dated government bond purchases despite offering a high price, pointing to an unusual failure of its bond-buying mechanism
Reserve Bank of Australia governor backs 2–3% target in final address
Reserve Bank of Australia governor supports inflation-targeting regime in last public address; moving the target could open the door to further changes down the line, warns Stevens
US unconventional monetary policy most effective in financial crisis, paper argues
Conventional and unconventional monetary policies in the United States work through distinct channels, with different levels of effectiveness in crisis conditions, researchers argue
Monetary expansion: Is the sky the limit?
Unconventional monetary policies in advanced countries have resulted in benefits and costs for the global economy and financial markets. Manuel Sánchez assesses if the benefits are worth the risks.
BoJ board split ahead of ‘comprehensive assessment’
Opinions from last meeting show members divided on how to hit 2% by fiscal 2017, and if it is even possible; “comprehensive assessment” may include measures to support squeezed banks
BIS paper digs into complex spillovers from US rates
Authors find short-run US rates have little impact on long-term rates elsewhere, but transmission at longer maturities and via bond markets is high
Rise of services in advanced economies weakens transmission of monetary policy, paper argues
The transmission of monetary policy in advanced economies is weakened by the greater prominence of services, a Bank of Spain working paper argues; researchers use data from US
Colombian central bank should examine transmission in greater detail – paper
Colombian banks with higher levels of solvency “less sensitive” to changes in policy rate authors say; central bank should go into “greater detail” when examining policy transmission
Brexit a factor in BoJ’s decision to ease – deputy governor
Uncertainties from abroad, notably the UK’s vote to leave the EU, are weighing on the Japanese economy, and were a factor behind “enhanced” easing in July, Kikuo Iwata says
BoE launches broad Brexit response
Central bank wields all its main tools and some new ones as the effects of Brexit begin to appear; aims to support transmission mechanism amid extraordinary measures
BoJ board members see hope in wages and oil prices – June minutes
Policy board members point to third year of wage rises and higher oil prices as hopeful indications of a turnaround in prices, though expectations are weak and consumer sentiment worsening
RBNZ stands by decision to end embargoed lock-ups
RBNZ commissions review into different options for providing key releases to journalists ahead of time; decides costs outweigh benefits, and reaffirms decision to scrap the practice
Chilean minutes show widespread support for holding policy
Board unanimously votes to hold rates; one member sees tightening cycle ending, while another says lowering rates is “beyond reason”
BoE seen as ‘boxed in’ ahead of MPC vote
Forward guidance from MPC members has laid the ground work for a rate cut or other form of easing; even if the effect of a cut is minimal, a hold decision would be worse, says former committee member
Larger changes in policy statements lead to more volatility – paper
Research considers how much similarity in central bank statements on monetary policy matters for their reception
RBA cuts as housing risks posed by lower rates ‘diminish’
Reserve Bank of Australia cuts by a further 25bp to 1.5%, after annual CPI inflation drops to 1% in June; growth in lending for housing has "slowed a little"
Dudley: market expectations may be ‘too complacent’
Federal Reserve Bank of New York president says the Fed will probably need to hike more than once before the end of 2017 if the economy evolves as expected; warns of "insufficient weight” on upside
Cœuré: central bankers must be mindful of possible ‘economic lower bound’
Negative interest rates in the eurozone have not reached an “economic lower bound”, Benoît Cœuré says; support from governments’ policies and commercial banks’ business models is needed
BoJ boosts ETF purchases in face of global uncertainty
The Bank of Japan nearly doubles pace of ETF purchases to ¥6 trillion per year, and introduces measures to smooth funding in foreign currencies; stock market and exchange rate rise on the announcement
Fed holds as near-term risks ‘diminish’
FOMC says near-term risks to US outlook have diminished, while economic activity is expanding at a “moderate pace”; keeps policy unchanged, but statement sees increasing odds of a hike this year
Helicopters bearing gifts
As QE and negative rates run out of room, helicopter money could be a last resort for overstretched central banks. But its detractors say the cost of its use could be very high
Turkish governor says monetary policy will be simplified at ‘reasonable’ time
Turkish governor emphasises need to address “structural” causes of inflation and says effects of recent coup attempt should prove “short-lived"
Nepal to introduce interest corridor in August
There will be an initial large ‘wedge’ between rates when first introduced, official says; policy rate and floor of corridors set in relation to interbank average