Rate policy may diverge in Central Europe in near term

2016 ◽  
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Central Europe ◽  
The Czech Republic ◽  
Content Type ◽  
Low Interest Rates ◽  
National Bank ◽  
Rate Policy ◽  
Near Term ◽  
Fx Market

Subject Monetary policy divergence in Central Europe in 2016. Significance At its March meeting, Hungary's National Bank (MNB) cut its benchmark interest rate to a record low of 1.2%, from 1.35%. Hungary's first interest rate cut since July 2015 came days after the ECB announced significant monetary easing measures. Deflationary conditions in much of Central Europe (CE) are heightening the likelihood of more monetary easing. Impacts Whereas Hungary will embark on a monetary easing cycle, the Czech Republic and Poland will hold rates unchanged in the short term. CPI is not expected to return within target before late 2017 or early 2018, necessitating a prolonged period of ultra-low interest rates. The return to monetary normalisation (the CNB is expected to exit the FX market during 2017) will be slow and gradual.

Low interest rate environment: inventory management in Finland and Baltic states

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Olli-Pekka Hilmola ◽  
Weidong Li ◽  
Andres Tolli
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Customer Service ◽  
Inventory Management ◽  
Global Financial Crisis ◽  
Recent Decade ◽  
Baltic States ◽  
Content Type ◽  
Low Interest Rates ◽  
Rate Environment

PurposeFor decades, it was emphasized that manufacturing and trading companies should aim to be lean with very small inventories. However, in the recent decade, time-significant change has taken place as nearly all of the “old west” countries have now low interest rates. Holding inventories have been beneficial for the sake of customer service and for achieving savings in transportation and fixed ordering costs.Design/methodology/approachIn this study, inventory management change is examined in publicly traded manufacturing and trade companies of Finland and three Baltic states (Estonia, Latvia and Lithuania) during the years 2010–2018.FindingsInventory efficiency has been leveled off or falling in these countries and mostly declining development has concerned small- and medium-sized enterprises (SMEs). It is also found that inventory efficiency is in general lower in SMEs than in larger companies. Two companies sustaining in inventory efficiency are used as an example that lean has still significance, and higher inventories as well as lower inventory efficiency should not be the objective. Two companies show exemplary financial performance as well as shareholder value creation.Research limitations/implicationsWork concerns only four smaller countries, and this limits its generalization power. Research is one illustration what happens to private sector companies under low interest rate policies.Practical implicationsContinuous improvement of inventory efficiency becomes questionable in the light of current research and the low interest rate environment.Originality/valueThis is one of the seminal studies from inventory efficiency as the global financial crisis taken place in 2008–2009 and there is the implementation of low interest rates.

Implications of Central banks’ negative policy rates on financial stability

2018 ◽  
Vol 10 (2) ◽  
pp. 310-320
Author(s):  
Benjamin S. Kay
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Financial Stability ◽  
Global Economy ◽  
Content Type ◽  
Interest Rate Policy ◽  
Trade Offs ◽  
Negative Interest Rates ◽  
Rate Policy ◽  
Negative Interest Rate Policy

Purpose While central bankers have widely discussed the trade-offs of negative interest rates on monetary policy, the consequences of negative rates on financial stability are less well understood. The purpose of this paper is to examine the likely and possible financial stability consequences of a negative rates policy with particular focus on banks, short-term funding markets, foreign exchange markets, asset managers, pension funds and insurers. Design/methodology/approach It draws from international experience with negative interest rates to identify financial stability threats posed to any economy by negative interest rates, and it also highlights where the US experience is likely to differ. Findings In time, financial market threats and other logistical issues of a negative interest rate policy can be managed or overcome. Even cumulatively, these threats are likely to be small as long as the rates remain only modestly negative. However, if the rates remain negative for long periods or they become more sharply negative, the rewards of avoiding negative rates increase. Originality/value Does the negative interest rate policy directly or through these challenges of implementation present a substantial obstacle to achieving financial stability objectives? As policy rates go negative in a greater share of the global economy, the financial stability consequences remain poorly understood and under discussed.

scholarly journals Interest Rate Policy Of Selected Central Banks In Central And Eastern Europe

2015 ◽  
Vol 18 (1) ◽  
pp. 25-41
Author(s):  
Tomasz Grabia
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Eastern Europe ◽  
Central And Eastern Europe ◽  
Central Banks ◽  
Theoretical Description ◽  
Interest Rate Policy ◽  
National Bank ◽  
Rate Policy ◽  
Economic Growth Rates

The aim of this article is to present and evaluate interest rate policies of three selected central banks in Central and Eastern Europe (Poland, the Czech Republic, and Hungary) from 2001 to 2013. The study consists of an introduction (Section 1) and three main parts. The introduction contains a theoretical description of the role of interest rate policy, the dilemmas connected with it, as well as an analysis of the strategies and goals of monetary policies of the National Bank of Poland (NBP), the Czech National Bank (CzNB), and the National Bank of Hungary (NBH) in the context of existing legal and institutional conditions. In turn, the first empirical part (Section 2) examines how the analysed central banks responded to changes in inflation, unemployment, and economic growth rates. The tools of the analysis are the nominal and real interest rates of those banks. The subsequent research part (Section 3) attempts to evaluate the degree of the contractionary nature of interest rate policies in specific countries in the context of the Taylor rule. The text ends with a summary (Section 4) encompassing concise conclusions drawn from the earlier analyses.

Political pressure is rising for Polish bank mergers

2015 ◽  
Keyword(s):  
Interest Rates ◽  
Bank Lending ◽  
Political Debate ◽  
Content Type ◽  
Debt Burden ◽  
Low Interest Rates ◽  
President Elect ◽  
Near Term ◽  
Law And Justice ◽  
Privately Owned

Significance State-controlled PZU Group, Poland's largest insurer, was already bidding for a 25% stake in Italian-controlled mid-tier lender Alior Bank, and now wants to acquire Austrian-owned Raiffeisen Polbank and US General Electric (GE) group's local unit BPH. As the sector struggles with the consequences for borrowers in foreign exchange (forex) of the Swiss central bank's decision to scrap its currency ceiling against the euro, consolidation and foreign ownership are returning to the forefront of political debate. In the presidential election, the president-elect from opposition Law and Justice, Andrzej Duda, announced his preference for greater domestic ownership in a sector that is otherwise mostly privately owned. Impacts The household loan/GDP ratio will continue growing, but an upturn in demand for corporate loans in 2016 will reshape bank lending dynamics. Profitability margins will remain under pressure in the short term, owing to the Swiss franc debt burden and low interest rates. Solid growth in deposit and equity levels will nevertheless underpin financial sector stability in the near term.

Monetary tightening will spread through Central Europe

2017 ◽  
Keyword(s):  
Interest Rates ◽  
Central Europe ◽  
Developing Economies ◽  
House Prices ◽  
Investor Sentiment ◽  
Political Crisis ◽  
Content Type ◽  
Equity Funds ◽  
National Bank ◽  
Economic Outlook

Subject Central banks’ divergent monetary policy stances in Central Europe. Significance The Czech National Bank (CNB) has raised interest rates twice in three months and plans further hikes in the coming months, as surging wages and house prices fuel inflationary pressures. The Hungarian National Bank (MNB) continues to ease policy as inflation remains below its 3% target. The National Bank of Romania (NBR) is preparing to raise rates as the economy overheats, but the National Bank of Poland (NBP) is in no hurry to tighten policy, owing to persistently low core inflation. Impacts Emerging markets are now suffering outflows, with investors withdrawing money from local currency debt and equity funds. Dearer Brent crude will fuel inflationary pressures and contribute to the more positive economic outlook for developing economies. Germany’s political crisis is having only a muted impact on investor sentiment towards Germany and the euro-area. This will help underpin favourable market conditions in both the single currency area and Central Europe.

Structured product investment behavior in low-interest rate environments

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hirotaka Fushiya ◽  
Tomoki Kitamura ◽  
Munenori Nakasato
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Investment Behavior ◽  
Underlying Asset ◽  
Content Type ◽  
Low Interest Rates ◽  
Relative Attractiveness ◽  
Investment Experience ◽  
The Interest Rate ◽  
The Impact

Purpose This study aims to investigate the impact of interest rates, the underlying asset and investment experience on the investment behavior of Japanese retail investors toward structured products (SPs). Design/methodology/approach Three treatments are constructed through internet-based survey experiments: interest rate, underlying asset framing and investment experience treatments. The interest rate treatment includes high- and low-interest rate environments. The underlying asset framing treatment includes equity and foreign exchange rates for the SP. The investment experience treatment includes experienced and inexperienced respondents for SPs. Findings The main finding of this study concerns the effect of the interaction between low-interest rates and investment experience. Specifically, SP-experienced investors tend to choose SPs in a low-interest rate environment and prefer equity-linked SPs, even though such SPs are overpriced. This finding is useful for financial regulators in formulating policies that protect retail SP investors in low-interest rate environments worldwide. Originality/value This study is the first to measure the sensitivities of investment behavior regarding the relative attractiveness of SPs to low-risk straight bonds, given interest rates, the underlying asset and investment experience. It provides evidence to support the development of SP regulations.

Monetary policy will remain loose in Central Europe

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Central Europe ◽  
Emerging Market ◽  
Central Banks ◽  
Currency Markets ◽  
Bond Yields ◽  
Content Type ◽  
Inflation Rates ◽  
National Bank

Subject Factors keeping monetary policy loose, despite stronger growth. Significance The Hungarian National Bank (MNB), one of the most dovish emerging market (EM) central banks, has cut its benchmark interest rate to a record low and called an end to its three-year-long monetary easing cycle. Hungary's inflation rate has only just turned positive after a period of deflation. The Czech National Bank (CNB) has been forced to intervene in the currency markets for the first time since 2013 in order to stem appreciation of the koruna, which is being buoyed by a stronger-than-expected growth pick-up. However, the prospect of subdued inflation should allow central banks in Central Europe (CE) to keep interest rates at current levels for a considerable period of time. Impacts The renewed decline in oil prices will exert downward pressure on inflation rates in many advanced and emerging economies. Exceptionally low CE local government bond yields could spark a sell-off if fallout from higher US interest rates is sharper than expected. The ECB's sovereign QE programme, to run at least until September 2016, should help mitigate any Fed-driven deterioration in CE sentiment.

Interest in alternative investment classes is growing

2016 ◽  
Keyword(s):  
Interest Rates ◽  
Asset Allocation ◽  
The United States ◽  
Content Type ◽  
Alternative Investments ◽  
Low Interest Rates ◽  
Near Term ◽  
Investment Portfolios ◽  
Standard Risk ◽  
Alternative Investment

Subject The increasing popularity of alternative investment asset classes in the global search for yield. Significance The prolonged period of low interest rates has negatively affected insurers, making it harder for them to meet the guarantees that are attached to life products. The challenges faced by insurers have increased attention on alternative investments. Led by the United States, global investment in infrastructure is expected to increase next year. Against this backdrop, it is useful to examine alternative investment classes and the role national regulatory regimes are likely to play in the allocation of assets to alternative investments. Impacts Increased asset allocation towards alternative investments will gradually lead to more efficient investment portfolios. Under standard risk models, capital charges for alternative investments may remain prohibitive in the near term. There is likely to be an increasing role for institutional investors such as insurers and pension funds in infrastructure investment.

Australia budget keeps defence spending commitments

2021 ◽  
Keyword(s):  
South China Sea ◽  
Interest Rates ◽  
Fiscal Year ◽  
National Politics ◽  
Content Type ◽  
Defence Spending ◽  
Low Interest Rates ◽  
Defence Expenditure ◽  
Conducive Environment ◽  
Made In

Significance With an election due soon, the governing Liberal-National Coalition’s pledge to ring-fence the defence spending commitments made in 2016 was under some pressure. However, defence spending in fiscal year 2021/22 will grow by over 4% in real terms and stay above the symbolic level of 2% of GDP. Impacts Growing popular and bipartisan concern with Chinese aggression is a conducive environment for increased defence spending. Low interest rates and a stronger Australian dollar are also supporting sustained levels of defence expenditure. Washington may increase pressure on Australia to conduct freedom of navigation exercises in the South China Sea. Major business groups are concerned that increased criticism of China in national politics will produce yet more punitive backlash.

Volatility integration of gold and crude oil prices with the interest rates in India

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Shailesh Rastogi ◽  
Adesh Doifode ◽  
Jagjeevan Kanoujiya ◽  
Satyendra Pratap Singh
Keyword(s):  
Interest Rate ◽  
Crude Oil ◽  
Interest Rates ◽  
Global Economy ◽  
Spillover Effect ◽  
Price Volatility ◽  
Volatility Spillover ◽  
Content Type ◽  
Crude Oil Prices ◽  
The Impact

PurposeCrude oil, gold and interest rates are some of the key indicators of the health of domestic as well as global economy. The purpose of the study is to find the shock volatility and price volatility effects of gold and crude oil market on interest rates in India.Design/methodology/approachThis study finds the mutual and directional association of the volatility of gold, crude oil and interest rates in India. The bi-variate GARCH models (Diagonal VEC GARCH and BEKK GARCH) are applied on the sample data of gold price, crude oil price and yield (interest rate) gathered from November 30, 2015 to November 16, 2020 (weekly basis) to investigate the volatility association including the volatility spillover effect in the three markets.FindingsThe main findings of the study focus on having a long-term conditional correlation between gold and interest rates, but there is no evidence of volatility spillover from gold and crude oil on the interest rates. The findings of the study are of great importance especially to the policymakers, as they state that the fluctuations in prices of gold and crude oil do not adversely impact the interest rates in India. Therefore, the fluctuations in prices of gold and crude may generally impact the economy, but it has nothing to do with interest rate in particular. This implies that domestic and foreign investments in the country will not be affected by gold and crude oil that are largely driven by interest rates in the country.Practical implicationsGold and crude oil are two very important commodities that have their importance not only for domestic affairs but also for international business. They veritably influence the economy including forex exchange for any nation. In addition to this, the researchers believe the findings will provide insights to policymakers, stakeholders and investors.Originality/valueGold and crude oil undoubtedly influence the exchange rates but their impact on the interest rates in an economy is not definite and remains ambiguous owing to the mixed findings of the studies. The lack of studies related to the impact of gold and crude oil on the interest rates, despite them being essentials for the health of any economy is the main motivation of this study. This study is novel as it investigates the volatility impact of crude oil and gold on interest rates and contributes to the existing literature with its findings.

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