Central Bank Views
FOMC Minutes Sent Dovish Message about Recovery, Preparing to Adjust QE and Forward Guidance
The FOMC minutes for the April meeting revealed that the members were very much concerned about the job market and inflation outlook as a result of the coronavirus pandemic. While leaving the Fed funds rate unchanged at 0-0.25%, the members also maintained QE. The minutes revealed that “several” members...
RBNZ to Maintain Dovish Tone in May, Preparing for QE Expansion
We expect RBNZ to leave its OCR at 0.25% at the May meeting. However, given the prospect of very gradual economic recovery, policymakers would maintain a dovish tone and suggest that further stimulus measures are likely. QE expansion is a likely move. The question is whether it will be...
RBA Forecasts Double-Digit Contraction and Unemployment in First Half of the Year
As revealed in the latest Statement of Monetary Policy (SMP), RBA sharply cut economic forecasts for this year. GDP is projected to record double-digit contraction in the first half of the year before recovery in 2021. The unemployment rate could peak at 10%, while inflation could fall the negative...
BOE to Keep Stimulus Measures Unchanged in May. Could Announce QE Extension in Coming Two Months
We expect BOE to leave both the policy rate and other liquidity expansion measures unchanged this week. Despite government’s plan to ease lockdown measures amidst stabilization of coronavirus cases, the process will be gradual. Meanwhile, social distancing measures will remain for an extended period of time. These suggest that...
RBA to Stay on Hold in May. Economic Forecasts to be Downgraded
RBA is widely expected to leave the cash rate unchanged at 0.25% on the May 5 meeting. It will also keep other stimulus measures, including targeting 3-year bond yield, term funding facility operation and QE, announced in March the same. The members will, however, markedly revise lower economic projections.
In...
Fed Markedly Downgraded Economic Assessments on Sharp Decline in Activities and Surge in Unemployment
While maintaining all monetary policy measures unchanged in April, FOMC sent a more negative message about the economy. The members noted the sharp deterioration in economic activities and a jump in unemployment, cautioning that the negative impacts could prolong in the medium term. The Fed pledged to maintain the...
ECB to Send a Dovish Tone and Pledge to Take Further Actions if Needed. Rate Cut Appears Less Relevant than QE
We expect ECB to keep its powder dry at this week’s meeting, after launching several stimulus measures last month. The central bank should maintain a dovish tone, indicating disappointing economic data and pledging the take further actions if needed. As EU has so far failed to agree on substantial...
BOJ’s QE Expansion Likely Ineffective Despite Pledge of Unlimited Purchases
BOJ announced to expand QE today. It will increase support on corporate financing and remove the annual purchase limit for JGBs, from 80 trillion yen previously. Meanwhile, the central bank left the overnight rate unchanged at -0.1%, and the yield curve control (YCC) program in order to keep the...
FOMC to Highlight Weakness in Economy and Reinforce Dovish Stance in April Meeting
Following unprecedented measures announced in March, we expect the Fed to leave the policies unchanged at the April meeting. The focus will be on the economic assessment and the forward guidance. We expect the members to acknowledge the rapid deterioration in employment, demand, and confidence since the coronavirus outbreak....
BOC Extends QE to Provincial and Corporate Bonds, while Leaving Rate at Lower Bound
After three cuts, 150 bps in total, in March, BOC left the policy rate unchanged at 0.25% at the April meeting. With the policy rate standing at the lower effective bound, the central bank added further monetary easing by extending the QE program. Unlike previous meetings, BOC did not...
BOC to Stand on Sideline this Week. Unscheduled Policy Announcement Possible in Near Future
Having cut the policy three times and announced QE program in March, BOC will likely keep the powder at the April meeting. Policymakers will explain the rationale of the stimulus measures, reinforcing that the policies are essential to containing the sharp slowdown in the first quarter. Recent economic data...
FOMC Minutes Revealed Rationale for Emergency Cuts and QE Inifinity
As noted in the FOMC minutes for the March emergency meeting, the members agreed that economic situation has "deteriorated sharply" in light of the coronavirus pandemic. They were also in "strong support" of the measures to facilitate the flow of credit to households and businesses. Despite the consensus that...
Aussie Gained as RBA Hinted the Possibility of Easing the Pace of QE
As widely anticipated, RBA left the cash rate unchanged at 0.25% in April. This is following two emergency rate cuts (50 bps in total) a month ago. The central bank pledged to maintain the stimulus measures announced last month for combating the coronavirus pandemic. Aussie gained after the announcement...
Manufacturing PMI and Inflation in the Eurozone Reveal that Eurozone is Approaching Recession
Latest indicators for virus-haunted Eurozone’s economic developments suggest that the region is very close to recession. While accelerating QE, ECB refrained from lowering the policy rate March. We expect it would be obliged to do so in April. Meanwhile, coordinated fiscal action by the European Commission might be needed...
Global Central Banks Rushed to Stimulus Amidst Limited Monetary Policy Tools
As the coronavirus pandemic could very likely lead the world to recession, global central banks have rushed to inject liquidity through rate cuts another other unconventional measures. However, interest rates have already stayed at very low levels before the crisis. The room for further rate cuts is limited. Some...
RBNZ Announced QE to Tame Tightening Market Conditions
RBNZ announced QE on Monday, following an aggressive emergency rate cut, by -75 bps, to 0.25% last week. The surprising move aims at soothing the credit conditions which have tightened significantly over the past weeks. Besides QE, the central bank last week introduced a Term Auction Facility, FX swap...
RBA Announced Emergency Rate Cut, Initiated QE
RBA announced an emergency rate cut of -25 bps, sending the cash rate to 0.25%, today. The central bank also announced a QE-style yield curve control plan. It attempts to target the yield for 3-year government bond at 0.25% through bond purchases. The move is not too surprising, following...
Fed and RBNZ Announce Emergency Cuts, BOJ to Follow?
In a very surprising move, FOMC has implemented another emergency cut, the second time in two weeks, to combat the negative impacts of the coronavirus outbreak. Originating in China, the virus has officially evolved into a pandemic affecting almost 100 countries and territories in the world.
FOMC board members voted...
ECB Expected to Announce Stimulus Package Including Deposit Rate Cut
Coronavirus originated from Wuhan, China has become an pandemic affecting about 90 countries and territories in the world. In the Eurozone, the top 3 economies have reported totally 11,800 cases so far, with Italy alone taking up over 9,000 cases. The rapid transmission of the virus is expected hurt...
Fed’s Emergency Cut Reveals the Lack of Tools to Deal with Corona-Crisis
The Fed implemented an emergency rate cut of -50 bps on Tuesday, just two weeks ahead of the FOMC meeting scheduled on March 18. The Fed funds rate range now stands at 1-1.5%. While the move is not entirely surprising, given Chair Jerome Powell’s statement last Friday and Goldman...