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 0.50
JAPAN
Call Rate 0.10
Basic Loan Rate 0.30
UK
Bank Rate 0.5
DENMARK
Lending Rate 1.05
SWEDEN
Repo Rate 0.25
NORWAY
Sight Deposit Rate 1.75
SWITZERLAND
3 Mth LIBOR Target
Range
CANADA
0.0-0.75
Overnight Rate 0.25
Bank Rate 0.50
AUSTRALIA
Cash Rate 3.75
CHINA
1Y Bank Lending
Rate
BRAZIL
5.31%
Selic Overnight Rate 8.75%
Source: BNP Paribas
Date of Last
Change
-25bp
(7/5/09)
-75bp
(16/12/08)
-75bp
(16/12/08)
-20bp
(19/12/08)
-20bp
(19/12/08)
-50bp
(5/3/09)
-10bp
(14/1/10)
-25bp
(2/7/09)
+25bp
(16/12/09)
-25bp
(12/3/09)
-25bp
(21/4/09)
-25bp
(21/4/09)
+25bp
(1/12/09)
-27bp
(22/12/08)
-50bp
(22/7/09)
Next Change in
Coming 6 Months
No Change
No Change
+25bp
(Mar/May)
No Change
No Change
No Change
-5bp
(Feb/Mar)
+25bp
(1/7/10)
+25bp
(24/3/10)
No Change
No Change
No Change
+25bp
(6/4/10)
+27bp
(Q3)
No Change
Comments
In early March, the ECB will announce the details of its exit
strategy from unconventional measures for Q2. We do not expect
any conventional tightening, i.e. rises in the refi rate, in 2010.
The FOMC will end its purchases of mortgage-backed securities
and agency debt by 31 March. It will maintain the funds rate at 0
to 0.25% for an extended period while the ending of extreme
liquidity initiatives in the next few weeks will foreshadow a
probable rise in the discount rate.
With the BoJ forecasting negative CPI inflation through H1 of FY
2011, we expect its ultra-low interest rate policy to remain in
place for some time.
The latest Inflation Report highlighted that the first interest rate
hike is a very long way off and there is a greater risk of more
quantitative easing.
We expect the lending rate to fall further. The timing will depend
on foreign exchange reserve developments.
Given a further improvement in the economy, the Riksbank now
intends to deliver its first hike in the summer or early autumn.
We expect it in July. However, if the stress in financial markets
intensifies, the Riksbank is likely to wait until September.
The Norges Bank is now more cautious and uncertain about
external developments ahead. Economic conditions warrant
further rate hikes, but an increase in March will be postponed if
stress in financial markets intensifies and uncertainty increases.
By relaxing its commitment to prevent currency appreciation the
SNB is de facto tightening policy and has kept the ball rolling
towards an eventual increase in rates. The strong franc remains
the biggest hurdle to the first hike.
The BoC committed to keep rates unchanged until mid-2010,
conditional on the outlook for inflation. While domestic conditions
are stronger than in the US, the BoC is unlikely to begin raising
interest rates well ahead of the Fed.
The RBA surprised by leaving rates unchanged in February and
signalled that it wants to assess the impact of previous
tightening. This favours waiting until April before hiking again.
The latest 50bp RRR hike is likely to mark the beginning of a
series of measures to tighten policy. The first hike in key policy
rates is expected in Q3 when the CPI rate is forecast to exceed
3%. However, given the authorities' rising caution about excess
credit, an earlier move cannot be ruled out.
The BCB frontloaded monetary easing by cutting rates by
500bp. Given signs of a stabilisation of the Brazilian economy
and an improvement in global conditions, we expect the BCB to
remain on hold for a long period.
Change since our last weekly in bold and italics
For the full EMK Central Bank Watch please see our Local Markets Mover
Market Economics 12 February 2010
Market Mover
60
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