Archive for March, 2008
Hungary: MNB worried about global environment
At the monetary council meeting today, the Hungarian central bank (MNB) decided to hike its leading interest rate by 50bp to 8.00%. We had only expected a 25bp hike and the consensus expectation was split between a 25bp and a 50bp hike. The MNB had discussed both of the latter possibilities, as well as unchanged rates.
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Hungary: MNB worried about global environment
At the monetary council meeting today, the Hungarian central bank (MNB) decided to hike its leading interest rate by 50bp to 8.00%. We had only expected a 25bp hike and the consensus expectation was split between a 25bp and a 50bp hike. The MNB had discussed both of the latter possibilities, as well as unchanged rates.
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Poland: NBP maintains its hawkish credentials
Today the Polish central bank (NBP) in line with the consensus expectation decided to hike its key policy rate by a further 25bp to 5.75%, but contrary to our expectation of unchanged rates. This is the third consecutive hike in as many months, and further demonstrates that the NBP remains committed to fighting inflation. The hike undoubtedly has to be seen in light of the fact that inflation remains above the NBP’s inflation target of 2½% +/- 1%-point, and we believe is likely to remain
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Czech Republic: Strong CZK keeps CNB on hold
As expected the Czech central bank (CNB) today decided to keep its key policy rate unchanged at 3.75% despite the significant rise in inflation in recent months. There is no doubt that the continued strengthening of the Czech koruna frustrates the majority of the CNB board members, which is most likely the main reason why the CNB today decided to keep interest rates on hold despite the fact that inflation now running at 7.5% y/y (February) is well above the CNBÂ’s inflation target of 3%
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Romania: NBR delivers another hike
This morning the Romanian central bank (NBR) delivered another rate hike as it lifted its key policy rate by 50bp to 9.50%, thereby showing its willingness to tame inflation. The hike was in line with expectations. In the statement that followed the rate decision NBR reiterated that inflation risks and the general sentiment require a tighter monetary policy, thereby indicating that further hikes are on the cards. At 9.50%, the key policy rate in Romania can hardly be said to be very high
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GBP: Updated BoE call and MPC Minutes
The minutes from MPC's January meeting were released today. We, and the markets, were surprised by the hawkish tone to the minutes. As a reflection of the more hawkish outlook for UK monetary policy, only one MPC member (Blanchflower) voted for a reduction of the policy rate at the January 10 MPC meeting. This is a surprising; we had expected a more balanced voting result. The background to this surprise is that the MPC is more worried about inflation than the markets. It sees substantial
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FOMC Meeting, March 18th
• The Fed lowered its target rate by 75 basis points to 2.25%. The statement continued to stress the downside risks to growth, acknowledging higher uncertainty on the inflation side • The outlook remains fraught with danger, recognizing the deterioration of credit conditions and the overall economy since their last scheduled meeting in January 30th • FOMC was more pessimistic regarding inflation. It recognized that inflation expectations have risen, adding more uncertainty to the inflation
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Interest Rates: Growth, Inflation and Real Liquidity
Over the next six months, we expect the pattern of interest rates to reflect market expectations of growth, inflation and the provision of liquidity. So what is the outlook for these factors? And is the growth of liquidity less than some perceive? Is Liquidity Really Growing in the Marketplace? Perhaps this is just being “old school” but the perception of helicopter money and liquidity does not appear consistent with the data nor with the actual record of Fed operations. First, the
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Fed’s Three Part Attack: Liquidity Ahead?
On Sunday the Fed announced, first, a cut in the discount rate of 25 basis points to 3.25 percent. This allowed the Fed the flexibility to cut the funds rate 75 basis points at its regularly scheduled meeting tomorrow and still be proactive today. Second, the Fed authorized the Federal Reserve Bank of New York to create a lending facility to improve the ability of primary dealers (note this is more than the traditional bank access) to provide financing to market participants. This
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FOMC Cuts the Funds/Discount Rates: Growth the Goal
Going for Growth—or at least some positive momentum is the goal. Today, the FOMC cut the funds rate by 75 basis points. Our view is that the economy is currently working through the recession. Yet inflation remains above the Fed’s perceived inflation range—note the dissents! Credit issues remain a critical drag on the economic outlook.
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