After the G20 finance ministers pledged to sustain credit and fiscal efforts to boost growth worldwide, four central banks today have effectively pledged to do the same.
Reserve Bank of New Zealand:As expected, the RBNZ left interest rates (OCR) unchanged at 2.5%. They said that further rate cuts are possible and that the high NZ dollar threatens economic recovery. Also, the NZ dollar rise ag Australian dollar is at odds with fundamentals. They expect to keep OCR at current level until latter part of 2010. The 1yr NZD OIS swap is 2.771%.
Bank of Korea:As expected, the BOK left interest rates unchanged at 2.0% for the 7th straight month. Growth in the FE and in South Korea has raised expectations that this country will be one of the first to raise rates in Q4 2009. However, the central bank gave no indication that today that they would act soon. 1 yr NDIRS Swaps are at 3.415%.
On CNBC.com now:
- Slideshow: Biggest Holders of US Gov't Debt
- Slideshow: America’s Biggest Trading Partners
- Slideshow: World's Biggest Debtor Nations
Bank of England: As expected, the BOE left interest rates unchanged at 0.5% and kept its programme of asset purchases at GBP 175 billion. The programme should take another two months to complete similar to the Fed QE Tsy purchase program. There had been some chatter about cutting the rate paid on reserves or increasing the QE, but this didn’t materialize. The 1yr UK Sonia OIS swap is .63%
Bank of Canada:As expected, the BOC left interest rates unchanged at 0.25% and has no QE/asset purchase program in place. The BOC Governor Carney had mentioned the use of QE to arrest the strong Canadian dollar, but this didn’t materialize. They pledged to keep interest rates unchanged until the end of Q2 2010. The 1yr Cad OIS swap is 0.45%.
The theme for the second half of 2009 is continued easing, but a focus on who might try to exit first. Leading candidates remain Australia, India, and China. With the cut back in loan growth, you can argue that China is already cutting back on stimulus.
The takeaway is that the Far East is going to move first.