From the tiny archipelago of Seychelles in the Indian Ocean to Europe and the United States, monetary policy was loosened further in the third quarter of 2019 as 46 central banks slashed interest rates 67 times in response to muted inflation and a synchronized global economic slowdown.
Monetary policy worldwide pivoted at the start of the year from tightening to easing, and the pace of rate cuts has accelerated during the year as the U.S. administration’s efforts to reshape the global trading system threatens economic growth by disrupting cross-border supply chains and undermining business confidence and investment.
In contrast to 2018, when central banks raised interest rates and continued to wean financial markets of some $12 trillion of extra money that was pumped into the global system through asset purchases, 2019 has been characterized by a rapid pace of pre-emptive rate cuts in response to the prospect that global growth will slow to the weakest level since the global financial crises.
In the third quarter, benchmark interest rates were cut 67 times and by a total of 28 percentage points, up from 26 cuts in the second quarter by 15.75 percentage points, and 19 cuts in the first quarter by 925 basis points.
In September alone, policy rates were cut by a total of 1,050 basis points, up from cuts of 800 points in August and 950 points in July.
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In addition to rate cuts, central banks have also turned to other tools to stimulate credit and economic activity as the threat of inflation, the main focus of central banks, evaporates across the world as waning demand undermines energy and commodity prices.
Including cuts in reserve requirements, new low-cost loans and restarting asset purchases, central banks worldwide have taken 130 steps toward easier policy, including 117 rate cuts, out of 414 policy decisions followed by Central Bank News as of Sept. 30.
In contrast only 15 central banks have tightened their policy this year, including raising rates 19 times, which means 84.4 percent of all decisions about monetary policy have favored easing, up from 74 percent at the end of the second quarter.
As an illustration of the speed with which central banks loosened their policy in the third quarter, 18 central banks, including the U.S., Brazil and Russia, cut rates twice while two central banks, Indonesia and Paraguay, cut rates three times.
For a detailed list of countries that changed their monetary policy stance in 2019, please click on “Easier or Tighter,” for a country-by-country overview of changes to monetary policy by the 96 central banks followed by Central Bank News.
EARLIER YEARS
2018: 43 central banks tightened monetary policy and 32 eased, global net tightening of 11
2017: 28 central banks tightened monetary policy and 34 eased, global net easing of 6
2016: 29 central banks tightened monetary policy and 46 eased, global net easing of 17
2015: 48 central banks tightened monetary policy and 34 eased, global net tightening of 14