March has been quite an eventful month for global markets as it revealed a sense of optimism amid political shenanigans. I am talking about the better half of any national government, the Central Bank. The FED, Bank of Japan, ECB, Bank Of England and our own Reserve Bank Of India. Optimism among bankers, especially central bankers is just defined by two words these days, hawks and doves. It can be also less dovish or more hawkish whatever the analysts are more comfortable with to create a melodrama about one of the most boring jobs in the financial world, i.e controlling interest rates, reining in inflation and maintaining both sense & sensibility among participants of the financial world. If not for them world economic order would have become an illusory maze.
Early March, European Central Bank (ECB) started with being less dovish which meant no change made to their bond-buying program with rates being held constant. Optimism came from the rise in headline inflation which was 2% in February on the back of increasing fuel prices which the bankers had been praying for over the last two years. Lack of appropriate structural reforms have made these central bankers god fearing optimists. Bank Of England, led by Mr. Mark Carney followed the same rerun though the votes were split 8 to 1 for keeping the rates on hold with a base rate of 0.25% and Inflation being just below 2% in January 2017. Bank Of England was relatively even less dovish. In between these two divorcees, came Madam Yellen to increase FED rates which the markets digested immediately as she had been preparing the expected delicacy for over 3 months signifying FED’s hawkish stance. US Fed raised its overnight fund rate to 1% and has indicated three more hikes in the current year. US FED under Madam Yellen has almost erased the memories of taper tantrum making the mighty central bank more congenial and humble at the same time. Bank Of Japan policy almost coincides with BOE and was the easiest to comprehend though it sent confusing signals through lesser bond purchases in the month of February. BOJ held short-term interest rate target of minus 0.1 and kept bond purchases intact. The central bank expects inflation to touch 1% by the end of the year as exports & factory output seem to be coming back to life.
Done with G-4, Reserve Bank of India surprised Markets with 25 basis point hike in reverse repo rate taking it to 6% and repo rate being held at 6.25% as expected. Though analysts were predicting some vague standing deposit facility to suck out liquidity, RBI in one stroke has endeavored to remove distortion in the money market caused by demonetization and bring the money market rate in tandem with RBI policy rates. RBI has also allowed banks to invest in REITs and net owned funds of ARCs have been increased to Rs. 100 crore.
Though analysts and financial think tanks would call any of these monetary policy decisions as predictable or nudged by their respective government, just imagine the financial world without them. Or should we envision if these apex institutions would have got greater sphere for using their functioning armory, there would have been no Lehman, no pound manipulation, no Brexit and in Indian scenario PSU banks would have been in better shape. So let’s hail their credibility and wait for June monetary policy schedule.
DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation in writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.
The sustainable investment market is growing but still has a lot to catch up
Asset managers and banks only insufficiently comply with the self-declared sustainability claim. Companies often report on specific sustainability approaches and...
Grifols will supply the Catalan Institute of Health with 500,000 rapid tests for COVID-19
Grifols, a company that specializes in the production of plasma derivatives, will supply the Catalan Institute of Health (ICS) with...
Colombia emerges as an attractive country for new technologies
Colombia presents several fundamental factors to be the Latin American engine of new technologies. While other countries are fighting their...
Paraguayan Chamber of Fintech to boost regulation with new national study
The Paraguayan Chamber of Fintech has grown to 29 members who operate in payment methods, identification, loans, consulting, financial infrastructure...
The volatility on the commodities market continues
The removal of the lockdowns should improve demand in the short term. Harvest is now over for cocoa - the...
Business5 days ago
Why Inca One’s online bullion store is a game changer for resource investors
Featured4 days ago
Why the Fintech sector in Italy has to be further developed
Africa6 days ago
The popularity of cryptocurrencies is growing in Africa
Featured5 days ago
The fintech company Younited launches a credit platform in Germany