Monetary Policy Week in Review – Jun 24-28, 2013: 8 banks hold rates, 1 cuts, markets adjust to coming Fed exit

  This week 10 central banks took policy decisions with only Hungary cutting rates while global financial markets continued to adjust to an earlier-than-expected exit from quantitative easing by the U.S. Federal Reserve.

   Eight central banks kept their policy rates on hold (Israel, Armenia, Taiwan, the Czech Republic, Fiji, Colombia, Angola and Trinidad and Tobago) as a measure of calm returned to markets after a frenetic month that witnessed a major shift of capital away from emerging markets and other assets perceived as risky.

  The National Bank of Hungary, which cut rates for the 11th time in a row, was the latest central bank to adjust its policy stance to the volatility in global markets from an expected tightening in U.S. monetary policy, saying it may have to slow down its pace of future easing due to the shift in “markets perception of risks.”

  Uruguay’s central bank offered further details of its decision from earlier this month to target money supply rather than interest rate to control above-target inflation. The Central Bank of Uruguay will target an 8.0 percent growth in money supply for the quarter ending in June 2015, a contraction from the current 12.5-13.0 percent expansion in the quarter ending September 2013.

  While Uruguay’s central bank maintained its inflation target of 6.0 percent, it widened the tolerance band to 3-7 percent from July 2014 from 4-6 percent.

  Through the first 26 weeks of this year, central bank policy rates have been cut 63 times, or 24.9 percent of the 253 policy decisions taken by the 90 central banks followed by Central Bank News, slightly down from 25.5 percent last week.

LAST WEEK’S (WEEK 26) MONETARY POLICY DECISIONS:

COUNTRY	MSCI	NEW RATE	OLD RATE	1 YEAR AGO
ISRAEL	DM	1.25%	1.25%	2.25%
ARMENIA		8.00%	8.00%	8.00%
HUNGARY	EM	4.25%	4.50%	7.00%
TAIWAN	EM	1.88%	1.88%	1.88%
CZECH REPUBLIC	EM	0.05%	0.05%	0.50%
FIJI		0.50%	0.50%	0.50%
COLOMBIA	EM	3.25%	3.25%	5.25%
URUGUAY		N/A	9.25%	9.25%
ANGOLA		10.00%	10.00%	10.25%
TRINIDAD & TOBAGO		2.75%	2.75%	3.00%

NEXT WEEK (week 27) features six scheduled central bank policy meetings, including Romania, Australia, Sweden, Poland, the United Kingdom and the euro area.

COUNTRY	MSCI	DATE	RATE	1 YEAR AGO
ROMANIA	FM	1-Jul	5.25%	5.25%
AUSTRALIA	DM	2-Jul	2.75%	3.50%
SWEDEN	DM	3-Jul	1.00%	1.50%
POLAND	EM	3-Jul	2.75%	4.75%
UNITED KINGDOM	DM	4-Jul	0.50%	0.50%
EURO AREA	DM	4-Jul	0.50%	1.00%

 
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