Monetary Policy
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
Argentine central bank holds rate on its bonds with eye on inflation
Reference rate held at 30.25% ahead of second inflation figure release; second monthly statistic from Indec due today, no official annual figure yet
A year of progress for Chinese reforms, but there is much still to do
Pan Gongsheng, deputy governor of the People’s Bank of China, writes about China’s growth prospects, RMB exchange rate reform and the past years’ stock market fluctuations
RBNZ bulletin shines light on policy-making process
Article reveals details of how central bank reaches monetary policy decisions over a nine-day period, from information-gathering and modelling to deliberation and communication
Mexican deputy calls for reinforced ‘global financial safety net’
Javier Guzmán Calafell sees IMF as key player in maintaining global financial stability, but says it needs more resources, tools and legitimacy
Orphanides: governments should rein in ‘immense power’ of central banks
Central bank balance sheets give them power to dramatically affect the distribution of wealth, undermining democracy, former Central Bank of Cyprus governor argues
IMF staff suggest using tiers if CNB cuts rates below zero
Fund encourages Czech National Bank to prepare for ‘eventual exit’ from exchange rate commitment; suggests negative rates are viable tool but could damage bank profitability
Balance sheet policy matters for credibility – Norges Bank paper
Researcher argues a central bank’s financial strength may affect its ability to meet its monetary policy mandate, based on evidence from the UK’s gold standard period
Technical issue affects Fed minutes release
Error in Federal Reserve equipment results in early release in some cases and late in others; minutes show Fed officials grappling with uncertainty amid slowing job growth and UK referendum fallout
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