The Bank of Japan on Thursday kept the monetary policy steady defying market expectations.
On Wednesday, the Federal Reserve also left its key interest rate unchanged. All eyes would be on the Fed’s next meeting on whether it will go for a rate hike or not. Fed’s move is in contrasts with the approaches being taken by most other major central banks, which are headed in the opposite direction — to ease credit and to pledge further steps to encourage lending.
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Below are steps that other major central banks have taken recently:
RESERVE BANK OF INDIA
The Reserve Bank of India on April 5 slashed the key interest rate by 0.25 per cent and introduced a host of measures to smoothen liquidity supply so that banks can lend to the productive sectors and indicated accommodative stance going ahead.
Given weak private investment in the face of low capacity utilisation, a reduction in the policy rate by 0.25 per cent will help strengthen growth, RBI Governor Raghuram Rajan said in the first bi-monthly monetary policy review for the 2016-17 fiscal, which began on April 1.
He also said the inflation objectives are closer to being realised and price-rise will hover around the 5 per cent mark for the remainder of the fiscal, Rajan reaffirmed that the monetary policy will continue to remain accommodative to address the growth concerns.
BANK OF JAPAN
The Bank of Japan on Thursday held off from expanding monetary stimulus, defying market expectations for action even as soft global demand, an unwelcome yen rise and weak consumption threatened to derail a fragile economic recovery.
The yen soared and Japanese stocks slumped after the announcement caught off guard investors who had bet on additional stimulus measures.
US FEDERAL RESERVE
The Federal Reserve kept a key interest rate unchanged citing slowdown in US and global growth. In a statement after its latest policy meeting, the Fed noted that the United States is enjoying solid job gains but also that “economic activity appears to have slowed.”
The Fed repeated that it expects inflation to move toward its 2 per cent target from persistently low levels as temporary factors, like sharply lower energy prices, fade.
RESERVE BANK OF NEW ZEALAND
The Reserve Bank of New Zealand kept its benchmark interest rate unchanged at 2.25 percent, but reiterated further easing may be needed given weak inflation.
BRAZIL CENTRAL BANK
Brazil’s central bank also left interest rates unchanged late on Wednesday, leaving its benchmark Selic rate at 14.25 percent for the sixth straight meeting in its fight against high inflation in what could be the current board’s last decision ahead of that country’s likely change of government.
EUROPEAN CENTRAL BANK
Mario Draghi, head of the ECB, made clear last week that he’s ready to launch further stimulus if the eurozone economy should need it. He made his remarks after the ECB 25-member governing council left its stimulus programs unchanged after having expanded them at its March meeting.
The current level of inflation — zero — is regarded as unhealthy and remains far below the central bank’s goal of just under 2 percent annually.
The ECB is already buying 80 billion euros ($91 billion) in bonds from banks each month through at least March 2017. The purchases are made with newly created money, something the ECB can do as the euro’s legal issuer. The idea behind increasing the supply of money in the banking system and the economy is to increase inflation and growth.
BANK OF ENGLAND
Bank of England policymakers voted unanimously this month to keep interest rates on hold amid concerns about whether Britain will vote to leave the European Union.
The June 23 referendum on a British exit from the EU has added uncertainty to a weakening economic outlook, leading some economists to downgrade their growth forecasts. Members of the Monetary Policy Committee expressed concern in minutes released from their April 13 meeting.
The International Monetary Fund has warned that an exit from the EU could disrupt trade and damage the world economy. As a result, the IMF cut its forecast for UK economic growth this year to 1.9 percent from 2.2 percent.
PEOPLE’S BANK OF CHINA
In a step to shore up slowing growth, China in February freed up more money for lending by cutting the amount its banks are required to hold in reserve.
The move follows declarations by Chinese leaders that they have room to boost growth despite concerns in global markets about capital outflows and stock and currency turmoil.
The amount of deposits that commercial lenders will be required to leave with the central bank will be cut by 0.5 percentage point on March 1, the central bank announced. That would reduce reserve levels for the country’s major state-owned banks to 17 per cent of deposits — still by far the world’s highest level.
The reduction is the second in just over four months, after a similar 0.5 per cent point cut on Oct. 23.
In March, the central bank governor said that China could meet this year’s official growth target and that Beijing has no need to weaken its currency to boost sagging exports. Zhou Xiaochuan expressed confidence that the economy could hit its goal, which the ruling Communist Party lowered this year to 6.5 per cent to 7 per cent from last year’s “about 7 per cent.” Growth last year reached a 25-year low of 6.9 per cent, though that still was among the world’s highest.
With inputs from Associated Press
