Monetary Policy
Central Bank of Iceland changes course with 50bp cut
Reversal of tightening cycle reflects concern inflation is not rising as expected, in part because of the strength of the króna; growth still forecast to continue above trend
Tightening policy during slowdown is not ideal, but necessary – Sarb governor
More fiscal or monetary stimulus will not generate growth in South Africa, says Kganyago, who instead stresses inflation outcomes need to be lowered
Mervyn King on Brexit, crisis supervision, economic rebalancing and reforming the IMF
The former Bank of England governor discusses Brexit, radical regulatory reform, the difficulties rebalancing the European and global economies and an overhaul of the International Monetary Fund
RBNZ’s Wheeler stands by inflation targeting
Despite a host of challenges for central banks, flexible inflation targeting remains the “most appropriate” framework for New Zealand’s monetary policy, governor says
Explicit communication from Sarb helped agents predict rate hikes – paper
Authors compare forecasts from 2013 and 2014 to identify whether specific terminology affected forecasting; “rising cycle” talk shaped expectations, paper shows
Federal Reserve Board seeks comms boost with Facebook page
Fed adopts its fifth form of social media in an effort to reach a greater audience, joining many other central banks expanding their communications in a similar direction
FOMC minutes show divisions on monetary policy
Kansas Fed president Esther George voted for an immediate rate rise at the FOMC meeting in July; other members were also hawkish but some preferred to keep monetary policy loose, minutes show
Mongolia’s central bank raises rates 450bp in bid to stop currency slide
Rate hike was prompted by fall in currency’s value since late June; central bank says it continues to see encouraging trends in currency flows
Japanese researchers model success and failure of international cooperation
Various factors can lead to cheating on global monetary policy cooperation, paper published by the BoJ finds – but careful design can help the agreement hold up
Atlanta Fed president ‘not prepared to rule out’ further rate rise this year
Despite “troubling” headline GDP growth figures, “final real sales” figures point to US economy maintaining momentum and heading for third-quarter growth, Dennis Lockhart says
Low inflation and tighter credit gave room for cut, RBA minutes show
Inflation looks likely to remain low for some time, board members note, while tighter lending standards make adverse effects of a cut less likely
San Francisco Fed chief calls for policy target re-think
John Williams calls for central banks to consider raising their inflation targets or replacing them with nominal GDP targets; lower natural interest rates seem “poised to stay”, he argues
Unconventional monetary policy does not rob the poor, Italian researchers argue
Studying the effects of the ECB’s quantitative easing programme on the wealth and incomes of 8,000 Italian households shows that the policies benefit the poorest, Bank of Italy paper argues
Danish research examines how central banks can impact market liquidity
Price of liquidity tends to change on days when central bank is operating in markets, with aggregate liquidity and payments activity also important, PhD thesis finds
Chinese authorities should introduce inflation target – IMF staff
Report by IMF staff sets out ‘key elements’ of transition to more market-based monetary framework; encourages explicit inflation goal and new intermediate target for policy
Chilean central bank changes guidance and keeps policy on hold
Central Bank of Chile removes reference to continued normalisation as inflation returns to target range; holds benchmark rate at 3.5%
RBNZ cuts rates and expects inflation to weaken further in short term
New Zealand central bank expresses concern over falling inflation in economy generally and rapidly rising prices in housing sector
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