EUROPEAN CENTRAL BANK The European Central Bank at its September 12th policy meeting reduced its deposit rate by 10 basis points to a record low negative 50 basis points and promised that interest rates would stay low for longer. Also, the central bank of the euro zone is restarting a quantitative easing program that it phased out last December by restarting bond purchases at a rate of 20 billion euros a month starting November 1st. The new quantitative easing program will “run for as long as necessary,” according to the ECB. Officials said the central bank will not hesitate to “consider” easing if the economy loses momentum towards hitting its price target.
The ECB indicated it intends to scale up its support of the euro zone’s economy in December with a package that could include new bond purchases as well as an interest rate cut and cheaper loans for banks.
BANK OF JAPAN
The Bank of Japan has a negative interest rate policy, and its interest rates may become even more negative. BoJ Governor Haruhiko Kuroda recently said it could “certainly” cut rates again, if needed. In addition, the BoJ deputy governor said the central bank must “patiently continue” its powerful monetary stimulus to maintain momentum toward achieving 2.0% inflation, as the downside risks from overseas economies mount.
RESERVE BANK OF AUSTRALIA
The Reserve Bank of Australia cut its official cash rate to near zero and announced a 100 billion Australian dollars, quantitative easing program as it attempts to bolster Australia’s economy. The RBA indicated it may roll out additional stimulus if needed, according to the minutes of its November policy meeting.
I am now fully on board with the rules of thumb of “Don’t fight the Fed,” and “Don’t fight the “Global Central Bank.” In fact, now is the time to fully embrace them.
Alan Bush E:
alan.bush@admis.com T: 001 312 242 7911
25 | ADMISI - The Ghost In The Machine | Q4 Edition
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