By Central Bank News
The past week in monetary policy saw interest rate decisions by 7 central banks around the world, with all banks (India, Sri Lanka, Turkey, Japan, South Africa, Taiwan and Nigeria) keeping rates unchanged. Monetary policy, however, was still loosened as Japan raised its asset purchase program, India trimmed its cash reserve ratio and Turkey cut the top rate on its interest corridor. Both India and Turkey cited inflationary pressures that limited their ability to ease policy. All 7 central banks observed a weaker global economy with the Bank of Japan turning pessimistic after previously expecting a moderate recovery. Taiwan, in contrast, expects the economic outlook to improve slightly in the second half of the year. Another message from last week’s central bank statements was concern over the impact of the Federal Reserve’s launch of a new round of asset purchases, known as Quantitative Easing 3, along with a forecast of holding rates close to zero until mid-2015.
Taiwan and Nigeria expressed concern that the Fed’s latest move would lead to inflows of short-term money to emerging economies. The problem with so-called hot money is that it can be financially destabilizing by pushing up exchange rates and inflation of the destination country. Then, as soon as financial conditions change, the money evaporates, scouring the globe for the next opportunity. LAST WEEK’S MONETARY POLICY DECISIONS:
| COUNTRY | NEW RATE | PREVIOUS RATE | RATE 1 YEAR AGO |
| INDIA | 8.00% | 8.00% | 8.25% |
| SRI LANKA | 7.75% | 7.75% | 7.00% |
| TURKEY | 5.75% | 5.75% | 5.75% |
| JAPAN | 0.10% | 0.10% | 0.10% |
| SOUTH AFRICA | 5.00% | 5.50% | 5.50% |
| TAIWAN | 1.88% | 1.88% | 1.88% |
| NIGERIA | 12.00% | 12.00% | 9.25% |
NEXT WEEK:
The central bank calendar next week looks quiet, with 5 central banks meeting: Israel, Hungary, Georgia, Romania and Czech Republic.
Hungary may cut rates again while the Czech central bank may follow some of the other major central banks and embark on some form of quantitative easing given a shrinking economy and a policy rate of 0.5 percent.
Another event to keep en eye on is Mexico City, where Group of 20 deputy finance minsters and central bank governors meet Sunday and Monday, Sept. 23 and 24.
| COUNTRY | MEETING | CURRENT RATE | RATE 1 YEAR AGO |
| ISRAEL | 24-Sep | 2.25% | 3.00% |
| HUNGARY | 25-Sep | 6.75% | 6.00% |
| GEORGIA | 26-Sep | 5.75% | 7.50% |
| ROMANIA | 27-Sep | 5.25% | 6.35% |
| CZECH REPUBLIC | 27-Sep | 0.50% | 0.75% |