Monetary policy
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
Regulation may be fuelling covered interest parity breakdown – BoJ economists
Authors link puzzling breakdown of CIP to regulations including liquidity constraints, as well as divergent monetary policies
Rise of services in advanced economies weakens transmission of monetary policy, paper argues
The transmission of monetary policy in advanced economies is weakened by the greater prominence of services, a Bank of Spain working paper argues; researchers use data from US
Brexit a factor in BoJ’s decision to ease – deputy governor
Uncertainties from abroad, notably the UK’s vote to leave the EU, are weighing on the Japanese economy, and were a factor behind “enhanced” easing in July, Kikuo Iwata says
BoJ board members see hope in wages and oil prices – June minutes
Policy board members point to third year of wage rises and higher oil prices as hopeful indications of a turnaround in prices, though expectations are weak and consumer sentiment worsening
IMF urges Abenomics ‘reload’ as BoJ struggles
Fund tells Japanese authorities to be clearer and more systematic in setting policy, as government unveils new stimulus; working paper suggests alternative to helicopter money
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”
BoE seen as ‘boxed in’ ahead of MPC vote
Forward guidance from MPC members has laid the ground work for a rate cut or other form of easing; even if the effect of a cut is minimal, a hold decision would be worse, says former committee member
Larger changes in policy statements lead to more volatility – paper
Research considers how much similarity in central bank statements on monetary policy matters for their reception
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
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
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
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
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
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
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
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
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
Granular data aids policy transmission understanding, Draghi says
ECB president highlights “very rich information set” launched this week; involves reporting data on up to 35,000 daily transactions in the money market
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
Sarb deputy sees reasons for ‘cautious optimism’
‘Green shoots of recovery’ are starting to show, says Groepe; several and more fundamental patterns suggest the economy is on the mend
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
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