Central bank action will drive global equity markets

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Equity Markets ◽  
Economic Data ◽  
Equity Prices ◽  
Monetary Policies ◽  
Content Type ◽  
Market Sentiment ◽  
The Us ◽  
Us Monetary Policy

Significance This volatility is driven by expectations of further monetary stimulus in response to a slowing economy. Despite persistent concerns about the fallout from the anticipated tightening in US monetary policy and many country-specific risks, such as the standoff between Greece and its creditors, equity market sentiment remains supported by accommodative monetary policies worldwide and expectations of the US monetary policy tightening being gradual. Impacts Market volatility could increase further, as better-than-expected economic data in the euro-area vies with weaker-than-anticipated US data. Decoupling of surging equity prices and weak economic fundamentals threatens the rally's sustainability, increasing scope for volatility. This decoupling is most pronounced in China, where weak economic data prompt buying of equities in anticipation of stimulus measures. The greatest risk in equity markets is uncertainty surrounding US interest rates and their impact on emerging markets.

scholarly journals The Spillover Effects of the US Unconventional Monetary Policy: New Evidence from Asian Developing Countries

2020 ◽  
Vol 13 (8) ◽  
pp. 165
Author(s):  
Thi Tran ◽  
Hoang Pham
Keyword(s):  
Developing Countries ◽  
Monetary Policy ◽  
Interest Rates ◽  
Spillover Effects ◽  
Unconventional Monetary Policy ◽  
Equity Prices ◽  
Developing Markets ◽  
The Us ◽  
Asian Developing Countries

This paper aims to trace the monthly responses of equity prices, long-term interest rates, and exchange rates in Asian developing markets to the US unconventional monetary policy (UMP). The main research question is to explore whether UMP shocks exist in those markets. We also consider the differences in the mean responses of those asset prices between traditional and non-traditional monetary policy phases. To address such concerns, we employ a panel vector autoregression with exogenous variables (Panel VARX) model and estimate the model by the least-squares dummy variable (LSDV) estimator in three different periods spanning from 2004M2 to 2018M4. The first finding is that UMP shocks from the US are associated with a surge in equity prices, a decline in long-term interest rates, and an appreciation of currencies in Asian developing markets. In contrast, the conventional monetary policy shocks from the US seem to exert adverse effects on these recipient countries. These empirical results suggest that the policymakers in Asian developing countries should cautiously take into account the spillover effects from the US unconventional monetary policy once it is executed.

Further Mexico rate hikes likely in 2018

2017 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Federal Reserve ◽  
Content Type ◽  
The Us ◽  
Wage Increases

Subject Monetary policy moves. Significance The Bank of Mexico (Banxico) increased its target interest rate by 25 basis points, to 7.25%, on December 14, responding to a similar move by the US Federal Reserve (Fed) the previous day. The hike was the first to be taken under new Governor Alejandro Diaz de Leon and pushes the rate to its highest level since March 2009. Impacts Tighter monetary policy will weigh on growth in 2018 and may hit the PRI’s electoral prospects. More expensive credit will hit consumption moderately, as interest rates remain relatively low by historical standards. The possibility of wage increases edging up will feed inflationary expectations.

scholarly journals External effects of US monetary policy

2018 ◽  
Vol 11 (2) ◽  
pp. 82-99
Author(s):  
M. Yu. GOLOVNIN
Keyword(s):  
Monetary Policy ◽  
Emerging Markets ◽  
Interest Rates ◽  
Capital Flows ◽  
Treasury Bills ◽  
The Us ◽  
National Economies ◽  
The Impact ◽  
Us Monetary Policy

The article focuses on the changes in US monetary policy since the  beginning of the 21st century and reveals the impact of this policy  on the national economies of other countries, especially emerging markets. The US monetary policy influenced the emerging  markets both through the real and financial channels. Through the  latter, the main impact was on the Treasury bills rates and on the  exchange rates. At the same time, the influence on different  countries varied in different periods. For example, interest rates in  Thailand, Mexico and Pakistan before the global economic and  financial crisis in general followed the cycle of US monetary policy.  The “quantitative easing” policy, the statements and the follow-up  actions to abolish it, have influenced cross-border capital flows to  emerging markets. A number of countries, including Russia,  experienced the impact of US monetary policy through the dynamics  of oil prices. Emerging markets face restrictions on their monetary  policy from the US monetary policy, but in practice they seek to  circumvent them through exchange rate regulation, restrictions on  crossborder capital flows and the pursuit of an independent monetary policy, not following the  cycles of interest rate changes in the US.

Yen surge to question global monetary easing's effects

2016 ◽  
Keyword(s):  
Interest Rates ◽  
Central Banks ◽  
Recent Improvement ◽  
German Government ◽  
Monetary Policies ◽  
Government Bonds ◽  
Content Type ◽  
Negative Interest Rates ◽  
The Us ◽  
Fiscal Support

Significance Despite aggressive easing by both the Bank of Japan (BoJ) and the ECB, including negative interest rates, the lowering of expectations over the scale and pace of rate hikes by the US Federal Reserve (Fed) has negated their attempts to weaken their currencies and thus boost export-driven growth. This is heightening concern that ultra-loose monetary policies have passed the point where they can revive growth and inflation. Impacts Despite the recent improvement due to the oil price rebound since mid-February, sentiment towards EM currencies will remain fragile. The still strong demand for 'safe-haven' assets, such as German government bonds and gold, implies investors will remain cautious. Negative deposit rates will further undermine banks' earnings, amid persistent concerns about capital levels. Central banks will reach the limits of their capacity to promote growth without fiscal support from governments.

Fed move boosts tight Latin American monetary policy

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Latin American ◽  
Commodity Prices ◽  
Content Type ◽  
The Us ◽  
Capital Outflows ◽  
Government Bond Markets ◽  
The Impact ◽  
First Time

Subject The impact of US monetary policy tightening. Significance Following the US Federal Reserve's (Fed) historic decision to raise rates for the first time since 2006, the start of the Fed's monetary tightening cycle is accentuating the hawkish stance of Latin America's main central banks. This comes amid a dramatic sell-off in commodity markets, persistent concerns about China's economy and a severe deterioration in economic conditions across the region. Impacts EM asset prices have remained relatively resilient to the rise in US interest rates, in stark contrast to the 'taper tantrum' in 2013. Hitherto-resilient regional local currency government bond markets will face foreign capital outflows due to falling commodity prices. The Brazilian real is 2015's worst-performing major EM currency, but due largely to political and economic difficulties at home.

Turkey’s new economic team acts to restore credibility

2020 ◽  
Keyword(s):  
Monetary Policy ◽  
Stock Market ◽  
Interest Rates ◽  
Late Stage ◽  
Emerging Market ◽  
Content Type ◽  
Finance Minister ◽  
The Us ◽  
Multiple Interest ◽  
The Eu

Significance In one of the most significant changes in direction in a major emerging market (EM) in recent years, newly appointed TCMB Governor Naci Agbal has tightened monetary policy dramatically while abandoning a convoluted system of multiple interest rates. With another technocrat, Lufti Elvan, appointed finance minister, monetary policy could be returning to normality. Impacts A Biden administration is expected to prove unaccommodating towards Turkey, especially given its purchase of a Russian air defence system. This may be leading Erdogan to extend feelers to the EU, recently promising reforms and insisting Turkey is an “inseparable” part of Europe. Anti-coronavirus vaccines’ late-stage trial results are encouraging market optimism, with the US stock market hitting a record this month.

Spillover effects of the US monetary policy on the Indian trilemma

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Harpreet Singh Grewal ◽  
Pushpa Trivedi
Keyword(s):  
Monetary Policy ◽  
Event Study ◽  
Spillover Effects ◽  
Subject Area ◽  
Open Market ◽  
Content Type ◽  
Study Approach ◽  
The Us ◽  
The Impact ◽  
Us Monetary Policy

PurposeThe purpose of this paper is to investigate the impact of the US unconventional monetary policy surprises on the management of trilemma in India.Design/methodology/approachThis paper uses the event study approach along with OLS and MANOVA to examine the impact.FindingsThe results validate the existence of trilemma in India for the period from October 2008 to December 2017. The results also show that monetary policy independence still exists in India in the wake of greater spillover effects during the Federal Open Market Committee announcement days. The spillover effects on USD-INR exchange rates and capital flows are found to be statistically significant. The MANOVA results show that the trilemma in India is influenced by around 20% by the changes in the US monetary policy.Originality/valueThe above approach of event study combined with MANOVA in this subject area has not been used before to the best of the authors’ knowledge. Further, there are only a few studies that exist on the spillover effects of the US monetary policy actions on the management of trilemma in India.

ECB may spark rate rises in Central-Eastern Europe

2017 ◽  
Keyword(s):  
Interest Rates ◽  
Eastern Europe ◽  
Emerging Market ◽  
Commodity Prices ◽  
Content Type ◽  
Market Sentiment ◽  
Central Eastern Europe ◽  
The Us ◽  
Equity Funds ◽  
Central Eastern

Significance Inflation rates are rising sharply across Central-Eastern Europe (CEE), mainly thanks to a recovery in commodity prices. A flurry of stronger-than-expected economic data is fuelling speculation in financial markets about the timing of increases in interest rates across the CEE region. Forward markets are already pricing in rate hikes in Romania and Poland within the next twelve months. Impacts Traders are now expecting the US Federal Reserve to achieve its goal of hiking interest rates three times this year. Emerging-market bond and equity funds are enjoying a surge in inflows, market sentiment having improved sharply after the US election. Mounting uncertainty regarding France’s presidential election next month is having a negligible impact on euro-area government bond markets.

Negative rates hold few positives for stock investors

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
Interest Rates ◽  
Business Models ◽  
Banking Sector ◽  
Equity Markets ◽  
Central Banks ◽  
Treasury Bonds ◽  
Content Type ◽  
Negative Interest Rates

Subject Financial markets turmoil and negative interest rates. Significance Global stocks are down 11.7% year-to-date in dollar terms and the yield on benchmark ten-year US Treasury bonds has hit a low of 1.66%. The turmoil in financial markets since the beginning of this year is partly attributable to investors' waning confidence in the effectiveness of central bank policy, and, in particular, that negative interest rate policies are exacerbating weaknesses in the banking sector. This is reducing the scope for a rally in equity markets, which have been overly reliant on the flow of cheap money from central banks. Impacts The strong yen will pose a severe challenge to the Japanese government's reflationary programme. While stock markets will remain sensitive to monetary policy, investors will perceive central banks as sources of volatility. The European financials sell-off stems from concerns about their earnings and business models, as opposed to a full-blown liquidity crisis.

Hungarian forint is increasingly vulnerable to attack

2020 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
External Environment ◽  
Central Banks ◽  
Content Type ◽  
China Trade ◽  
Bond Yield ◽  
The Us ◽  
National Bank ◽  
Global Growth

Subject Central banks’ policy dilemmas. Significance The National Bank of Hungary (MNB) remains extremely reluctant to raise interest rates despite increasing pressure on the forint. While growth in the euro-area is likely to remain weak this year, strengthening the case for rates to remain on hold, a more supportive external environment, underpinned by an easing of US-China trade tensions, would accentuate the policy dilemmas confronting Central Europe’s central banks, especially given rises in inflation. Impacts Germany’s still-negative ten-year bond yield has risen from record lows in September as markets become less pessimistic about global growth. Markets expect Hungarian monetary policy to remain very dovish, as the domestic twelve-month bond-yield’s end-October turn negative shows. The US S&P 500 index surged by nearly 30% last year and if US-China trade tensions ease slightly this should help it to maintain momentum.

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