Monetary Policy
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
Njoroge cites need to anchor expectations as Central Bank of Kenya holds
Monetary policy committee keeps policy rate at 10.5%; increase in fuel tax expected to put temporary pressure on prices, but not to push inflation outside target range
Turkish central bank to meet with investors under new comms practices
Central Bank of the Republic of Turkey announces string of new communication practices that will see it meet with wider range of stakeholders
Inflation expectations are part of QE transmission mechanism – BoE paper
Firms’ inflation expectations increase in response to QE, research finds; interventions played ‘modest’ role in stabilising inflation expectations in recent years
Sarb hiking cycle is paused, not stopped, governor stresses
South African Reserve bank delays further tightening in wake of more favourable inflation outlook; governor insists it is a ‘pause’ and should expectations change the MPC would act appropriately
RBNZ signals action ‘likely’ amid New Zealand dollar strength
Stronger than anticipated NZ dollar threatens ability to hit inflation target, RBNZ says; announcement triggers drop in currency
Monetary policy in Sweden needs to remain expansionary, Riksbank board says
Bank’s inflation forecasts are "sensitive" to international factors; executive board notes strengthening of economic activity
Growth risks push Mauritius MPC to cut by 40bp
Central bank cuts interest rates to 4%, amid risks arising from Brexit and potential volatility from US elections; reducing rate will support investment and encourage growth, says bank
Money illusion may not be irrational – BIS paper
Claudio Borio and Anna Zabai suggest people’s attachment to a unit of account is not simply a failure to think in real terms, with implications for the effectiveness of negative rates
Temporary price changes affecting inflation more – BoJ paper
Working paper explores how frequent micro-level price changes can be reconciled with macro-price stickiness; temporary price changes happening more, and increasingly in one direction, authors say
BoE’s Weale sees demand weakening more than supply
Martin Weale thinks short-term impact of UK vote more likely to drag on inflation than boost it; will also weigh impact of exchange rate movements and earnings developments in August meeting
Atlanta Fed president wants to ‘let the picture clarify’
Dennis Lockhart likens the UK’s vote to leave the EU to a storm that has “clouded the economic waters”; the Fed must be patient in the aftermath, he says
Shirai urges BoJ to change course
Former policy board member says the Bank of Japan’s current policies are not sustainable, recommending a rethink of policy mix and communication strategy
‘Still some flaws’ in transmission mechanism – Icelandic report
Monetary policy report says capital flow measures have not yet had as much of an impact as intended, with the yield curve stubbornly staying flat
BoE holds but MPC expects August easing
Pound appreciates as monetary policy committee votes 8:1 to leave rates at 0.5%; "most" committee members expect monetary stimulus in August
Bank of Tokyo abandons JGB primary dealer role
Bank of Tokyo-Mitsubishi UFJ steps back from role citing “business optimisation”, in the latest sign the Bank of Japan’s policy is putting the squeeze on bank profits
Dombret sees no need for ECB response to UK vote
Deutsche Bundesbank’s Andreas Dombret says it is not clear to what extent further easing would boost economy; warns against deeper European integration at any cost