MARKET MOVER - BNP PARIBAS - Investment Services India

Central Bank Watch
Interest Rate
EUROZONE
Current
Rate (%)
Minimum Bid Rate 1.00
US
Fed Funds Rate 0 to 0.25
Discount Rate 0.75
JAPAN
Call Rate 0.10
Basic Loan Rate 0.30
UK
Bank Rate 0.5
DENMARK
Lending Rate 1.05
SWEDEN
Repo Rate 0.75
NORWAY
Sight Deposit Rate 2.00
SWITZERLAND
3 Mth LIBOR Target
Range
CANADA
0.0-0.75
Overnight Rate 1.00
Bank Rate 1.25
AUSTRALIA
Cash Rate 4.50
CHINA
1Y Bank Lending
Rate
BRAZIL
5.31%
Selic Overnight Rate 10.75
Date of Last
Change
-25bp
(7/5/09)
-75bp
(16/12/08)
+25bp
(18/2/10)
-20bp
(19/12/08)
-20bp
(19/12/08)
-50bp
(5/3/09)
-10bp
(14/1/10)
+25bp
(2/9/10)
+25bp
(5/5/09)
-25bp
(12/3/09)
+25bp
(8/9/10)
+25bp
(8/9/10)
+25bp
(5/5/10)
-27bp
(22/12/08)
+50bp
(21/7/10)
Next Change in
Coming 6 Months
No Change
No Change
No Change
No Change
No Change
No Change
No Change
+25bp
(26/10/10)
+25bp
(26/01/11)
No Change
+25bp
(20/10/10)
+25bp
(20/10/10)
+25bp
(2/11/10)
No Change
+50bp
(26/1/11)
Source: BNP Paribas
For the full EMK Central Bank Watch please see our Local Markets Mover
Comments
Doubts about the sustainability of the recovery and low inflation
pressures imply no rise in the refinancing rate for a considerable
period of time: we expect the first increase only in H2 2012.
The FOMC is expected to maintain the funds rate at 0 to 0.25%
for an extended period and is likely to initiate a second round of
quantitative easing in Q4 2010.
We expect the BoJ to maintain its super-low rate policy until
2012, but it may in the meantime further expand its liquidity
provision to cooperate with the government in countering
deflation and the yen’s appreciation.
We expect the MPC to reengage in asset purchases although
elevated inflation could delay this until February 2011. We do
not expect the BoE to start raising Bank Rate before H1 2012.
We expect the central bank to keep its policy rate on hold until
H2 2012, in line with our expectation for the ECB.
As economic growth remains strong and labour market
conditions improve further, we expect the Riksbank to deliver a
further hike at its October meeting.
Moderate growth since the start of the year and our
expectations of a slowdown in growth in Norway’s main trading
partners suggest further rate hikes will come gradually. We
expect the next hike in Q1 2011.
Rates are looking inappropriate given the strength of the
domestic economy. But the first hike is being delayed by
financial stress in the markets and the exceptional strength of
the CHF.
Depending on developments in global financial markets and the
US economic outlook in particular, we expect the BoC to deliver
an additional 25bp of tightening in October. The BoC is then
expected to pause at 1.25% to allow further progress in the
recovery.
The RBA noted in its June statement that policy was appropriate
for the “near term”. This appears to rule out any move in the
coming months, especially in the context of volatility in global
markets. However, likely strong Q2 growth should be enough to
prompt a hike late in the year.
The benchmark lending rate (12-month) should be left
unchanged this year. However, given that housing prices are
failing to correct, the government might hike the mortgage loan
rate in Q4 10. Accordingly, the deposit rate might also be raised
in order to keep the general interest spread unchanged.
The BCB has become much more dovish, sounding more
comfortable with the balance of risks for inflation on the heels of
recent data. However, the monetary authority is likely to resume
hiking rates in early 2011 to tame inflation expectations.
Change since our last weekly in bold and italics
Market Economics 23 September 2010
Market Mover
66
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