Monetary Policy
Fed’s Tarullo looking for more evidence on inflation
Daniel Tarullo wants to see more convincing evidence that inflation is returning to target before tightening monetary policy; headline and core PCE inflation are still below target
Riksbank tweaks forward guidance, citing Brexit uncertainty
Swedish central bank says it will likely only raise the policy rate from the second half of 2017 onwards; highlights “considerable uncertainty” abroad
QE has mitigated trade shock to eurozone, ECB’s Praet says
ECB's easing has prevented trade shock from reducing eurozone growth rates, Peter Praet argues; "increasing evidence" that negative deposit rates improve QE’s pass-through
Rate delay could deprive Fed of tools in future, warns Mester
Cleveland Fed president says there is a “non-negligible chance” unconventional tools will be deemed as “ultimately ineffective” by the public if the Fed is too slow to normalise policy
Releases of monetary data aid market rate expectations – paper
Working paper published by ECB shows releases of monetary data is helpful to financial markets in forming rate expectations
Mexico hikes rates to stabilise peso depreciation
Bank of Mexico surprises markets with 50bp hike to stem currency depreciation; analysts see global risk factors contributing to exchange rate developments
Bhutan readies to sharpen ‘blunt’ policy instruments
Royal Monetary Authority of Bhutan considering improvements to policy transmission; could involve new lending and deposit windows, departure from current base rate practices
Monetary easing ‘likely’ required over summer, says Carney
Governor expects easing in wake of UK vote to leave the EU; announces additional weekly liquidity operations as part of response, but acknowledges limits to what BoE can achieve
Fed’s Powell sees potential for ‘new headwinds’ in Brexit
Governor says global risks to US outlook have increased in the wake of the UK’s vote to leave the EU
Effective lower bound has ‘tail risk’ influence on monetary policy, ECB paper argues
The ‘tail risk’ induced by the possibility of rates reaching their effective lower bound can cause serious undershooting of inflation targets, an ECB working paper argues
Draghi: Central bankers must align policies
ECB president calls for greater alignment and better communication of economic policy across national borders; calls for globally co-ordinated fiscal expansion on lines of 2008-09
Reserve Bank of Malawi to improve monetary policy architecture
Bank moves towards fully fledged inflation targeting, embracing interest rate-based framework; IMF staff note importance of maintaining tight monetary policy
Rajan has left his mark but risk of fiscal dominance remains
Vishrut Kansal examines the legal framework Raghuram Rajan’s successor will face, arguing much of the outgoing RBI governor’s work will continue but more safeguards are needed
Bank of Israel sees ‘Brexit’ increasing risks to outlook
Monetary committee warns it is too early to tell whether short-term effect on financial markets has run its course; Flug stresses both central bank and finance ministry “keeping close watch”
BoJ paper models impact of guidance on expectations
Announcing forward guidance before reaching the effective lower bound can help to “positively influence” inflation and output growth, the author finds
PBoC governor sets out challenges of pursuing multiple objectives
Zhou Xiaochuan discusses how the People’s Bank of China expresses its multiple objectives as a function that can be optimised, while noting challenges posed to modelling and communications
BoE seen shifting into easing mode
Many economists view Bank of England as likely to shift towards an easing bias, but the central bank may find itself with limited room for manoeuvre
Kiuchi says BoJ must communicate better
Board member concerned monetary policy is becoming less predictable as observers expect ever more easing; warns against use of negative rates
National Reserve Bank of Tonga considering short-term policy rate, IMF says
Fund staff encourage Tonga to reform its monetary policy framework; suggest introducing new policy rate and inflation target range more appropriate to historic and current levels
Governor: Philippines central bank to keep ‘steady hand’ on monetary policy
Philippines central bank to keep watchful eye on uncertainty surrounding advanced economies’ policy prospects; inflation environment remains ‘manageable’
Fed should prepare to communicate inflation overshoot – IMF
IMF urges Fed to continue on “very gradual” path in raising benchmark rate; central bank should tolerate inflation overshoot to stop expectations drifting down
Jamaican authorities send mixed messages on adoption of inflation targeting
IMF tells central bank to focus on single mandate but Jamaican authorities say more time is needed to investigate whether path is suitable
IMF paper explores transmission of volatility along yield curve
Working paper finds differences in transmission between countries with established inflation-targeting frameworks and those in transition
German Constitutional Court rules in favour of ECB programme
Germany’s Federal Constitutional Court rules ECB may undertake outright monetary transactions, but sets strict conditions to be monitored by the German government