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Tag Archives: Central Bank

Chart: Where Central Banks Have Issued Digital Currencies

Source : Statista

New Zealand’s Central Bank Lifts Benchmark Cash Rate to 2.5%

New Zealand’s central bank on Wednesday lifted its benchmark interest rate by half a percentage point to 2.5% as it attempts to curb inflation.

It was the third time this year that the Reserve Bank of New Zealand has lifted the cash rate by 50 basis points, following hikes in April and May. There was also a quarter percentage point rise in February.

The bank has forecast that the rate will peak at 4% late next year.

It said in a statement that it “remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and support maximum sustainable employment.”

New Zealand’s inflation is running at 6.9% and the unemployment rate is 3.2%.

The bank manipulates interest rates to try to contain inflation to a target band between 1% and 3%.

The bank will next consider raising the cash rate at its meeting on Aug. 17.

Source : AP

Chart: Canada Central Bank Raised Interest Rate by 1%

Largest Bank of Canada rate hike since 1998

The Bank of Canada joins more than 30 other central banks around the world that have raised interest rates by a full percentage or more this year.

Source : Bloomberg

Banking Body Urges Decisive Wave of Global Rate Hikes to Stem Inflation

Marc Jones wrote . . . . . . . . .

The world’s central bank umbrella body, the Bank for International Settlements (BIS), has called for interest rates to be raised “quickly and decisively” to prevent the surge in inflation turning into something even more problematic.

The Swiss-based BIS has held its annual meeting in recent days, where top central bankers met to discuss their current difficulties and one of the most turbulent starts to a year ever for global financial markets.

Surging energy and food prices mean inflation in many places is now its hottest in decades. But the usual remedy of ramping up interest rates is raising the spectre of recession, and even of the dreaded 1970s-style “stagflation”, where rising prices are coupled with low or negative economic growth.

“The key for central banks is to act quickly and decisively before inflation becomes entrenched,” Agustín Carstens, BIS general manager, said as part of the body’s post-meeting annual report published on Sunday.

Carstens, former head of Mexico’s central bank, said the emphasis was to act in “quarters to come”. The BIS thinks an economic soft landing – where rates rise without triggering recessions – is still possible, but accepts it is a difficult situation.

“A lot of it will depend on precisely on how permanent these (inflationary) shocks are,” Carstens said, adding that the response of financial markets would also be crucial.

“If this tightening generates massive losses, generates massive asset corrections, and that contaminates consumption, investment and employment – of course, that is a more difficult scenario.”

World markets are already suffering one of the biggest sell-offs in recent memory as heavyweight central banks like the U.S. Federal Reserve – and from next month the ECB – move away from record low rates and almost 15 years of back-to-back stimulus measures.

Global stocks are down 20% since January and some analysts calculate that U.S. Treasury bonds, the benchmark of world borrowing markets, could be having their biggest losing first half of a year since 1788.


Carstens said the BIS’s own recent warnings about frothy asset prices meant the current correction was “not necessarily a complete surprise”. That there hadn’t been “major market disruptions” so far was also reassuring, he added.

Part of the BIS report published already last week said that the recent implosions in the cryptocurrency markets were an indication that long-warned-about dangers of decentralised digital money were now materialising.

Those collapses aren’t expected to cause a systemic crisis in the way that bad loans triggered the global financial crash. But Carstens stressed losses would be sizeable and that the opaque nature of the crypto universe fed uncertainty.

Returning to the macro economic picture, he added that the BIS didn’t currently expect a period of widespread stagflation to take hold.

He also said that though many global central banks and the BIS itself had significantly underestimated how quick global inflation has spiralled over the last six to 12 months, they weren’t about to lose hard-earned credibility overnight.

“Yes, you can argue a little bit here about an error of timing of certain actions and the responses of the central banks. But by and large, I think that the central banks have responded forcefully in a very agile fashion,” Carstens said.

“My sense is that central banks will prevail at the end of the day, and that would be good for their credibility.”

Source : Reuters

Chart: Switzerland Bond Yield Surges As Central Bank Raised Rate

Source : Bloomberg

Eurozone Interest Rates Set to Rise for First Time in 11 Years

The European Central Bank (ECB) has said it intends to raise interest rates for the first time in more than 11 years next month as it tries to control soaring inflation in the eurozone.

The ECB said it would raise its key interest rates by 0.25% in July, with further increases planned for later in the year.

The bank also intends to end its bond-buying stimulus programme on 1 July.

The latest eurozone inflation estimate was 8.1%, well above the ECB’s target.

“High inflation is a major challenge for all of us. The [ECB] governing council will make sure that inflation returns to its 2% target over the medium term,” the ECB said in a statement.

“It is not just a step, it is a journey,” ECB President Christine Lagarde said of the moves.

The ECB’s main policy interest rate is currently at -0.50% and it could be back at zero or above by the end of September, the bank said. The last time it raised interest rates in the eurozone was in 2011.

Inflation in May “again rose significantly” as energy and food prices surged, it added.

But it said inflationary pressures had “broadened and intensified, with prices for many goods and services increasing strongly”.

As a result, the bank has upped its estimate for annual inflation this year to 6.8%, before slowing to 3.5% in 2023 and 2.1% in 2024.

The ECB also cut its growth forecast for the eurozone from 3.7% to 2.8% for 2022, and from 2.8% to 2.1% for 2023.

Several other central banks have already started raising interest rates as they try to slow inflation that has been accelerating amid surging energy costs.

In the US, the Federal Reserve has now raised rates twice this year, while a series of moves by the Bank of England has now lifted UK rates to 1% – the highest level for 13 years.

Speaking at a news conference after the ECB’s decision, the bank’s president, Christine Lagarde, said inflation would remain “undesirably elevated for some time”.

Energy prices are up nearly 40% from a year earlier, she said, while food prices rose 7.5% in May, partly due to the impact of the war in Ukraine on food supplies.

“Do we expect that the July interest rate hike will have an immediate impact on inflation? The answer is no,” she said.

Seema Shah, chief strategist at Principal Global Investors, said: “With this inflation outlook and the unavoidable path for higher rates, the ECB is facing stagflation threats full-frontal.

“The strangling hold of desperately high living costs means that euro area growth will slow through the second half of this year, with recession increasingly likely – particularly now with sharp policy tightening in the near-term horizon.”

Source : BBC

Chart: Australia Central Bank Hiked Rate by 50 Points

The expected rate hike is 25 points.

Source : Bloomberg

央行出手稳预期 人民币汇率长期有支撑

记者: 向家莹 张莫 . . . . . . . . .



汇率阶段承压 央行下调外汇存准率






不会持续单边回调 汇率长期有支撑






市场有韧性 跨境资金流动长期将合理均衡





Source : 新华网

Charts: Effects of U.S. Fed’s QE on the Stock Market

Fed’QE vs. S&P 500

See large image . . . . . .

Fed Funds vs. Margin Debt

See large image . . . . . .

Fed Balance Sheet vs. 10-year Treasury Yield

See large image . . . . . .

Source : Real Investment Advice

What’s Behind the PBOC’s 1 Trillion Yuan Transfer

Ye Xie wrote . . . . . . . . .

The People’s Bank of China disclosed that it will transfer more than 1 trillion yuan ($158 billion) in profits to the government to help fund fiscal spending. The move has created confusion and debate among investors. Is this the Chinese version of QE or Modern Monetary Theory? Is it equivalent to a cut in the reserve requirement ratio? If so, does it reduce the need for more easing?

The reality is that it is more technical than substantial in terms of its impact on monetary and fiscal policies.

The PBOC said Tuesday it will transfer profits from income accumulated on its $3.2 trillion foreign-exchange reserves to the Ministry of Finance. The money will be used mainly on tax rebates for companies and to bolster the finances of local governments.

First: It’s NOT a new initiative. By law, the PBOC is required to turn over its profits to the government. The PBOC just chose to publicly disclose this routine operation, which was interrupted by the pandemic since 2020. In fact, it’s a common practice internationally. Last year, the Federal Reserve sent almost all of its net income of $107 billion — primarily derived from interest income on securities acquired through open-market operations — to the U.S. Treasury. The Bank of Mexico has done the same.

It’s NOT additional fiscal stimulus. The transfer is likely already factored into the proposed 2022 fiscal budget unveiled at the People’s National Congress over the weekend, according to economists at Nomura and Goldman Sachs. The move simply addressed the question of where the money will come from to support spending the government has proposed.

It’s NOT monetizing government debt. Unlike QE, the transfer itself doesn’t involve printing new money. It’s moving from one account (retained profits) at the PBOC to another (government deposits), without changing the size of its balance sheet.

Is it equivalent to a RRR cut? Not exactly. As mentioned above, the transfer itself doesn’t affect liquidity. Only when the money is spent by the government will it leak into the financial system, a similar effect to when the PBOC releases funds via a RRR cut. But even then, the impact is much more muted because the profits likely will be spread out over a 12-month period, rather than be a one-off. The money-multiple effect is also likely to be different. In other words, this move doesn’t reduce the need for RRR cuts. Economists at Goldman and Citigroup both expect further RRR and rate cuts in the first half of the year.

Will it affect the exchange rate? Most likely not. Given the PBOC probably doesn’t want further yuan appreciation, the transfer likely doesn’t involve the exchange of currencies, according to Nomura. Instead of selling foreign reserves, the profit transfer may come from the proceeds of interest payments to the PBoC by various borrowers, especially commercial banks, wrote Nomura’s economist Lu Ting and his colleagues.

All told, it sounds more like inside baseball than a game changer.

Source: ZeroHedge