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.

Central bank transparency, inflation targeting and monetary policy: a panel data approach

2018 ◽  
Vol 45 (6) ◽  
pp. 1159-1174 ◽  
Author(s):  
Gabriel Caldas Montes ◽  
Cristiane Gea
Keyword(s):  
Developing Countries ◽  
Monetary Policy ◽  
Panel Data ◽  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Inflation Targeting ◽  
Content Type ◽  
Central Bank Transparency ◽  
Policy Interest

Purpose The evidence concerning the effects of the inflation targeting (IT) regime as well as greater central bank transparency on monetary policy interest rates is not conclusive, and the following questions remain open. What is the effect of adopting IT on both the level and volatility of monetary policy interest rate? Does central bank transparency affect the level of the monetary policy interest rate and its volatility? Are these effects greater in developing countries? The purpose of this paper is to contribute to the literature by answering these questions. Hence, the paper analyzes the effects of IT and central bank transparency on monetary policy. Design/methodology/approach The analysis uses a sample of 48 countries (31 developing) comprising the period between 1998 and 2014. Based on panel data methodology, estimates are made for the full sample, and then for the sample of developing countries. Findings Countries that adopt the IT regime tend to have lower levels of monetary policy interest rates, as well as lower interest rate volatility. The effect of adopting IT on both the level and volatility of the basic interest rate is smaller in developing countries. Besides, countries with more transparent central banks have lower levels of monetary policy interest rates, as well as lower interest rate volatility. In turn, the effect of central bank transparency on both the level and volatility of the basic interest rate is greater in developing countries. Practical implications The study brings important practical implications regarding the influence of both the IT regime and central bank transparency on monetary policy. Originality/value Studies have sought to analyze whether IT and central bank transparency are effective to control inflation. However, few studies analyze the influence of IT and central bank transparency on interest rates. This study differs from the few existing studies since: the analysis is done not only for the effect of transparency on the level of the monetary policy interest rate, but also on its volatility; the central bank transparency index that is used has never been utilized in this sort of analysis; and the study uses panel data methodology, and compares the results between different samples.

Symmetric and asymmetric adjustment of bank deposit interest rates: empirical evidence from Kenya

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Moses Nzuki Nyangu ◽  
Freshia Wangari Waweru ◽  
Nyankomo Marwa
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Asymmetric Adjustment ◽  
Deposit Rate ◽  
Content Type ◽  
Long Run ◽  
Adjustment Speed ◽  
Short Run ◽  
Pass Through

PurposeThis paper examines the sluggish adjustment of deposit interest rate categories with response to policy rate changes in a developing economy.Design/methodology/approachSymmetric and asymmetric error correction models (ECMs) are employed to test the pass-through effect and adjustment speed of deposit rates when above or below their equilibrium levels.FindingsThe findings reveal an incomplete pass-through effect in both the short run and long run while mixed results of symmetric and asymmetric adjustment speed across the different deposit rate categories are observed. Collusive pricing arrangement behavior is supported by deposit rate categories that adjust more rigidly upwards than downwards, while negative customer reaction behavior is supported by deposit rate categories that adjust more rigidly downwards than upwards.Practical implicationsEven though the findings indicate an aspect of increased responsiveness over the period, the sluggish adjustment of deposit rates imply that monetary policy is still ineffective and not uniform across the different deposit rate categories.Originality/valueTo the best of the authors' knowledge, this is the first study to empirically examine both symmetric and asymmetric adjustment behavior of deposit interest rate categories in Kenya. The findings are key to policy makers as they provide insights on how long it takes to adjust different deposit rate categories to monetary policy decisions. In addition, the behavior of deposit rates partly explains why interest rates capping was imposed in Kenya in 2016.

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.

Monetary easing may quicken in Brazil this year

2017 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Economic Recession ◽  
Government Debt ◽  
Domestic Demand ◽  
Private Debt ◽  
Content Type ◽  
Positive Effects ◽  
The Government

Significance At its first meeting of 2017, on January 10-11, the COPOM reduced the benchmark Selic interest rate to 13%. The 75-basis-point (bp) rate cut decision, the largest in nearly five years, accelerated the monetary easing cycle that started in October 2016. Economic recession has been relieving inflationary pressures and opening room for more intense cuts in interest rates. Impacts Further reductions of interest rates may contribute to controlling government debt. Private debt renegotiations at lower interest rates may facilitate a recovery in domestic demand and output. Any positive effects of monetary policy on activity may help contain popular dissatisfaction with the government.

Indonesia will avoid economic crisis

2018 ◽  
Keyword(s):  
Monetary Policy ◽  
Federal Reserve ◽  
Presidential Election ◽  
Direct Investment ◽  
Current Account Deficit ◽  
Economic Nationalism ◽  
Content Type ◽  
Finance Minister ◽  
Global Trend ◽  
The Us

Subject Indonesia's economic headwinds. Significance Finance Minister Sri Mulyani Indrawati last week said the US Federal Reserve (Fed) should be careful about how its policies affect emerging markets. Tightening US monetary policy and a global trend of trade protectionism is straining Indonesia’s currency and current account deficit. President Joko ‘Jokowi’ Widodo will be eager to demonstrate that he can handle Indonesia’s economic challenges ahead of the presidential election in April 2019. Impacts Sri Mulyani’s message to the Fed is unlikely to have much traction in Washington. The force of economic nationalism will hinder Indonesia’s efforts to court more foreign direct investment. US trade reprisals on Indonesia would damage Washington-Jakarta diplomatic ties.

ECB QE and growth may obscure Polish political risk

2015 ◽  
Keyword(s):  
Financial Markets ◽  
Interest Rates ◽  
Federal Reserve ◽  
Economic Recovery ◽  
Coalition Government ◽  
Parliamentary Election ◽  
Quantitative Easing ◽  
Content Type ◽  
Inconclusive Result ◽  
The Us

Significance Having fallen against the resurgent dollar this year, the zloty has lately been strengthening, since the US Federal Reserve surprised financial markets by striking a more dovish stance than expected on both the timing and pace of the anticipated tightening in monetary policy. While the zloty and Polish stocks had suffered because of fears of a rise in US interest rates, local bonds have been underpinned by the ECB's quantitative easing (QE) programme. The effects of QE and a brisker economic recovery may temporarily offset the risk of an inconclusive result in the parliamentary election in October. Impacts Investors have yet to price in the risk of a hung parliament in Poland following October's election. The vote could lead to the formation of a weak and unstable coalition government. The risk of an unstable coalition is particularly high, given the strong likelihood that PO's share of the vote will decline sharply.

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.

Hungary’s rising prices may shift monetary policy

2019 ◽  
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Euro Area ◽  
Federal Reserve ◽  
Content Type ◽  
Core Inflation ◽  
The Us ◽  
Manufacturing Sectors ◽  
National Bank

Significance The sharp slide in the forint is fuelling inflationary pressures, testing the resolve of the National Bank (MNB -- the central bank) to continue providing stimulus to the economy. Despite a surge in core inflation in Hungary to 3.8%, the MNB is using this year’s dovish U-turns by the ECB and the US Federal Reserve (Fed) as cover to keep monetary policy ultra-loose. Impacts The dollar index is strengthening despite the dovish U-turn by the Fed and is putting an end to the sharp rally in EM currencies in January. Inflationary pressures will be muted across the euro-area, with core inflation falling to 0.8% in March, less than half the ECB’s target. PMIs show Czech and Polish manufacturing sectors continuing to contract and Hungarian growth at its weakest level since 2016.

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