Interest rates
HKMA researchers dig into persistent covered interest parity deviation
Authors posit forex swap dealers filter out counterparty risk from money market rates when setting swap prices; risk adjustment continues even in non-stressed periods
Capping interest rates could affect credit, says Kenyan president
Kenyan President approves new banking law despite acknowledging future “difficulties”; government to monitor possible emergence of “unregulated” and “informal” lending mechanisms
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
Bullard backs new approach to forecasting
Idea of economy converging to a single steady state has “likely outlived its usefulness”, St Louis Fed president says; instead reserve bank will now focus on regime-based forecasts
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
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%
Bank of Thailand's Veerathai on the Thai economy, governance and payment reform
Bank of Thailand's governor speaks to Christopher Jeffery about the resilience of the Thai economy, governance and payments infrastructure reforms, plus why he does not agree with the IMF
Money market interactions can explain behaviour of interest rate spreads, researchers argue
Paper analyses the interplay of unsecured and collateralised money markets; information obtained “can explain behaviour of interest rate spreads”, authors say
Rajan hopes new MPC will make next RBI policy statement
Reserve Bank of India keeps rates on hold in Rajan’s last decision before stepping down; he hopes the monetary policy committee will be up and running by next decision in October
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
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
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”
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"
Kenyan central bank concerned by proposed interest rate caps
The central bank warns of “adverse consequences” from a proposed cap on bank rates, including problems for monetary policy transmission; the measure is part of a bill awaiting presidential assent
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
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
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
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