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25 Sep 2015
Global central banks, generating ambiguous signals - BBH
FXStreet (Delhi) – Research Team at BBH, suggest that between expectations, actions, and guidance, there are a lot of moving parts on the global board game of central banks.
Key Quotes
“On one side of the spectrum, Latin American central banks stand out as cluster of hawkishness, and at the margin, the ECB and the BOJ have recently been relatively less dovish compared with what some had expected.”
“Draghi didn’t sound too sanguine on extending the ECB’s QE program, and neither did Nowotny. In Japan, many observers have been frustrated by the lack of signal for further easing. In LatAm, implied rates are pricing in a series of hikes in Brazil (though much is risk premium), Mexico could follow the Fed higher whenever it moves, Chile signalled a tightening bias, Peru could eventually follow up with more tightening, and Colombia’s central bank meets today and some expect hike.”
“On the other side of spectrum, we have seen a dovish resolution to the dilemmas of many other central banks. The Fed refrained from an early hike, though a move this year still seems likely. Norway cut rates to a record low of 0.75% and Taiwan cut rates to 1.750%, both surprising the majority forecasters.”
“Israel’s central bank kept rates on hold but said it’s open to unconventional measures. India seems likely to cut this month. Hungary’s central bank stated that it will keep rates low for longer than previously expected. Nigeria cut reserve requirements by 600 bp.”
“In addition, there is still risk of more easing in a host of countries, including Sweden, Switzerland, Australia, New Zealand, and South Korea, while expectations for a BOE hike has been pushed to mid-2016.”
Key Quotes
“On one side of the spectrum, Latin American central banks stand out as cluster of hawkishness, and at the margin, the ECB and the BOJ have recently been relatively less dovish compared with what some had expected.”
“Draghi didn’t sound too sanguine on extending the ECB’s QE program, and neither did Nowotny. In Japan, many observers have been frustrated by the lack of signal for further easing. In LatAm, implied rates are pricing in a series of hikes in Brazil (though much is risk premium), Mexico could follow the Fed higher whenever it moves, Chile signalled a tightening bias, Peru could eventually follow up with more tightening, and Colombia’s central bank meets today and some expect hike.”
“On the other side of spectrum, we have seen a dovish resolution to the dilemmas of many other central banks. The Fed refrained from an early hike, though a move this year still seems likely. Norway cut rates to a record low of 0.75% and Taiwan cut rates to 1.750%, both surprising the majority forecasters.”
“Israel’s central bank kept rates on hold but said it’s open to unconventional measures. India seems likely to cut this month. Hungary’s central bank stated that it will keep rates low for longer than previously expected. Nigeria cut reserve requirements by 600 bp.”
“In addition, there is still risk of more easing in a host of countries, including Sweden, Switzerland, Australia, New Zealand, and South Korea, while expectations for a BOE hike has been pushed to mid-2016.”