{"id":52801,"date":"2014-06-15T19:58:59","date_gmt":"2014-06-15T23:58:59","guid":{"rendered":"http:\/\/countingpips.com\/?p=52801"},"modified":"2014-06-15T19:58:59","modified_gmt":"2014-06-15T23:58:59","slug":"monetary-policy-week-in-review-jun-9-13-2014-two-central-banks-see-lower-global-risks-from-ecb-easing","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/06\/monetary-policy-week-in-review-jun-9-13-2014-two-central-banks-see-lower-global-risks-from-ecb-easing\/","title":{"rendered":"Monetary Policy Week in Review \u2013 Jun 9-13, 2014: Two central banks see lower global risks from ECB easing"},"content":{"rendered":"
June 15, 2014<\/div>
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By CentralBankNews.info<\/u><\/a><\/p>\n

    The European Central Bank\u2019s (ECB) move to cut rates and add liquidity reverberated through global financial markets last week, pushing down the euro\u2019s exchange rate and spurring expectations that it will extend investors\u2019 current appetite for international risk.<\/span><\/div>\n
 <\/span>   <\/span>The ECB\u2019s easing comes at delicate time for global markets.<\/span><\/div>\n
     Fighting in Iraq is threatening the country\u2019s collapse and there are clear signs that U.K. rates will be raised sooner than expected. This has led to speculation that the Federal Reserve – which this week is expected to further reduce asset purchases – could also raise rates earlier than expected.<\/span><\/div>\n
    <\/span>Without a fresh dose of liquidity in global financial markets by the ECB, investors\u2019 nerves could be tested, with the Reserve Bank of New Zealand\u2019s rate rise last week serving as a timely reminder that the days of ultra-low interest rates ultimately will come to an end.<\/span><\/div>\n
    <\/span>But for now, the days of risk-on in global financial markets look to be extended, with the central banks of Serbia and Macedonia last week welcoming the ECB\u2019s move as helping reduce global risks.<\/span><\/div>\n
    <\/span>The Bank of Serbia, which cut its rate for the second time this year, said the ECB\u2019s easing \u201cshould have a positive impact on liquidity in the international capital markets.\u201d<\/span><\/div>\n
     <\/span>The National Bank of the Republic of Macedonia, which maintained its rate, said the ECB rate cut had increased the spread between its own currency and the euro, \u201craising the attractiveness of the domestic currency.\u201d<\/span><\/div>\n
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    <\/span>Through the first 25 weeks of this year<\/b>, central banks have now cut their policy rates 26 times, or 11.6 percent of this year\u2019s 225 decisions by the 90 central banks followed by Central Bank News.<\/span><\/div>\n
   <\/span> <\/span>This is essentially unchanged from 11.7 percent the previous week but up from 10.6 percent at the end of May and 9.6 percent at the end of April, showing how the global trend has shifted toward lower rather than higher interest rates as the global economy has performed weaker than expected.<\/span><\/div>\n
    <\/span>The ECB\u2019s rate cut, and notably the negative deposit rate and other accommodative measures, is the latest confirmation of how central banks can still find ways to boost liquidity and lower market rates despite policy rates at essentially zero.<\/span><\/div>\n
    <\/span> <\/span>But the ECB\u2019s easing, along with the Bank of Japan\u2019s (BOJ) continued quantitative easing, is merely postponing the inevitable tightening of global monetary policy.<\/span><\/div>\n
    <\/span> <\/span>The United States continues to whittle down its asset purchases as it slowly moves toward a rate rise and the timeline for a rate rise in the United Kingdom has now pulled forward following Bank of England Governor Mark Carney\u2019s warning on Thursday that the first rate hike \u201ccould happen sooner than markets currently expect.\u201d<\/span><\/div>\n
    <\/span>New Zealand\u2019s central bank last week raised its rate for the third time in a row and surprised markets by signaling it would continue to tighten despite expectations that it would pause due to a fall in commodity prices and the strong New Zealand dollar.<\/span><\/div>\n
    <\/span>With New Zealand\u2019s rate rise, central banks in advanced economies now account for 3 of this year\u2019s 20 rate rises, or 15 percent. Emerging market central banks have raised rates 10 times, frontier market central banks only once and central banks in other markets 6 times.<\/span><\/div>\n
    <\/span>Rate rises account for 8.9 percent of this year\u2019s 225 policy decisions, down from 9.2 percent end-May and 10.8 percent end-April.<\/span><\/div>\n
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LIST OF LAST WEEK\u2019S CENTRAL BANK DECISIONS<\/span><\/b>:<\/b><\/span><\/div>\n
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