Monetary Policy Week in Review – Sept 8, 2012: ECB matures, Canada bullish, Sweden cuts, Mexico eyes inflation

By Central Bank News
    The past week in monetary policy saw interest rate decisions by 17 central banks, with 3 banks cutting rates (Sweden, Uganda and Kenya), while the remaining 14 (ECB, Australia, Canada, Poland, Thailand, UK, Malaysia, Peru, Serbia, Mexico, Zambia, Fiji, Egypt and West African States) kept rates unchanged.
     The common theme from central banks was of slower global growth, but solid domestic demand in some countries is helping compensate for lower exports. This includes Canada, Peru, Malaysia, Thailand, Fiji and Mexico, which even raised the prospect of higher rates if inflation continues to rise.
    Sweden surprised most economists by cutting its rate to prevent inflation falling further below the central bank’s target as exports and growth take a hit from Europe’s recession.
     But the main event of last week was the European Central Bank’s ambitious plan to buy an unlimited amount of bonds from any euro zone member state that finds itself in serious financial trouble. 
    Like an adolescent that takes time to grow up, the ECB is gradually maturing into a fully-fledged central bank that will draw on all its resources to protect its family, the 17-nation euro zone.