MARKET MOVER - BNP PARIBAS - Investment Services India

Central Bank Watch
Interest Rate
EUROZONE
Current
Rate (%)
Minimum Bid Rate 0.75
US
Fed Funds Rate 0 to 0.25
Discount Rate 0.75
JAPAN
Call Rate 0 to 0.10
Basic Loan Rate 0.30
UK
Bank Rate 0.5
DENMARK
Lending Rate 0.20
SWEDEN
Repo Rate 1.25
NORWAY
Sight Deposit Rate 1.50
SWITZERLAND
3 Mth LIBOR Target
Range
CANADA
0 to 0.25
Overnight Rate 1.00
Bank Rate 1.25
AUSTRALIA
Cash Rate 3.50
CHINA
1Y Bank Lending
Rate
BRAZIL
6.00
Selic Overnight Rate 7.50
Date of
Last
Change
-25bp
(5/7/12)
-75bp
(16/12/08)
+25bp
(18/2/10)
-10bp
(5/10/10)
-20bp
(19/12/08)
-50bp
(5/3/09)
-25bp
(5/7/12)
-25bp
(6/9/12)
-25bp
(14/3/12)
-50bp
(3/8/11)
+25bp
(8/9/10)
+25bp
(8/9/10)
-25bp
(6/5/12)
-31bp
(5/7/12)
-50bp
(29/8/12)
Next Change in
Coming 6 Months
-25bp
(6/12/12)
No Change
No Change
No Change
No Change
-25bp
(702/13)
-15bp
(6/12/12)
-25bp
(18/12/12)
No Change
No Change
No Change
No Change
-25bp
(2/10/2012)
-25bp
(Q3 2012)
No Change
Source: BNP Paribas
For the full Emerging Market Central Bank Watch, please see our Local Markets Mover.
Comments
Because of the economic outlook, the door is still open for the ECB
to cut policy rates further. We see December as the most likely
timing, in tandem with the staff projections, which will include 2014
for the first time. Downward surprises on the economy and/or a
return to more turbulent markets could prompt an earlier move.
The FOMC announced an aggressive open-ended programme of
quantitative easing at its September meeting. We think the Fed will
end up expanding its balance sheet by an additional USD 1-1.5trn.
It also pushed the forward guidance for the first rate hike into mid-
2015.
Under its de facto flexible inflation-targeting regime, the BoJ will
probably undertake additional easing (increase in JGB
purchases under its asset purchase programme) at a gradual
tempo until the goal of 1% inflation is in sight.
QE was increased by GBP 75bn in October 2011, GBP 50bn in
February 2012 and GBP 50bn in July 2012. We expect another
GBP 50bn in QE in November and again in February 2013. We
also expect a 25bp cut in the Bank Rate in February.
We expect a 15bp cut of the policy rate in December, a smaller
cut than the ECB, to keep the policy rate above zero.
The Riksbank is likely to deliver one more rate cut this year, in
Q4, as economic activity slows and inflation remains low.
Domestic economic conditions continue to strengthen. But, due to
uncertainty stemming from the eurozone, we do not expect a
change in the policy rate this year.
The SNB maintains a minimum exchange rate of 1.20 to the
euro. We do not expect a shift in the policy stance, but emphasis
on rising imbalances in the real estate market is likely to
increase in upcoming statements.
Inflation has fallen sharply, as wage pressures remain subdued and
growth has disappointed. Despite this, the BoC has maintained a
hiking bias, as high household debt and risks in the domestic
housing market remain key vulnerabilities. We expect the BoC to
keep its policy rate on hold until mid-2013.
Downside risks emanating from Europe and, increasingly,
China, argue for some further modest policy easing later in the
year.
Although the economy has yet to show signs of recovery,
borrowing costs have risen. Hence, another rate cut is still
needed near term. We also expect one more RRR cut this year.
BCB has cut rates by 500bp since mid-2011. A final 25bp cut in
October remains a possibility, but the most likely outcome is that
rates are now kept on hold.
Change since our last weekly in bold and italics
Market Economics 20 September 2012
Market Mover
57
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