Top Central Banks stance…

This week was packed with significant fundamental events, as top central banks provided the public with their monetary policy stance and forward guidance on their respective economies…

  1. Bank of Japan (BOJ)

The BOJ on Tuesday highlighted that its 2% inflation target would take time to be attained. Hence, restructuring the flexibility of its stimulus program – that is, further buying of the Japanese Government Bond (JGB) so that current amount will increase at a pace of 80 trillion JPY annually.

The Japanese central bank also pledged to maintain the short term interest rate at -0.1% and to sustainably guide the 10-yr JGB yield around 0%. Nevertheless, the BOJ have signaled that long-term yield may be allowed to fluctuate upwards and downwards according to economic and price developments with higher bound target at 0.2% – a revision higher from the previous 0.1%.

  1. Federal Reserve (Fed)

On Wednesday, the Federal Open Market Committee Official voted unanimously to leave rate unchanged following their 2-day meeting. Rates are currently in the range of 1.75% to 2%. However, statements following this decision highlighted that the Fed is still on course to hike the short-term interest rate twice before the end of the year – September and December. The central bank have already hiked twice this year and have altered its forecast from a total of 3 annual hike to 4 on the back of stronger-than-expected economic growth in the US economy.

The President of the Federal Reserve, Jerome Powell mentioned in his statement that have the apex bank will continue to gradually hike the federal funds rates as economic conditions continues dictate.

  1. Bank of England (BOE)

The BOE on Thursday voted unanimously to hike interest rate by 25bps. Vote was split by 9-0 amongst voting members. Mark Carney, the BOE governor highlighted the Brexit uncertainty as significant risk that would have enormous impact if there was a “No Deal” scenario. The BOE also says interest rate would increase will be limited and gradual.

 

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