Central banks seem to be shifting towards stable policy - NAB

Research Team at NAB, suggests that the big advanced economy central banks seem to be shifting towards stable policy with the prospect next year of less asset buying by the European Central Bank (ECB).

Key Quotes

“The Bank of England, which looked set to cut UK interest rates at its September meeting, appears to have changed its mind as the post-Brexit vote depreciation in Sterling looks set to lift UK inflation through the target rate. Nevertheless, the central bank is not signalling rate increases or winding back its very big programme of government bond purchases.

The ECB’s main policy interest rate is in negative territory and it is buying €80 billion in assets monthly at least until next March to help keep long term interest rates low. Although markets are already focusing on when the ECB will start to wind back the volume of assets it is buying, the central bank has said that it has not yet discussed such a move, it plans to keep interest rates low well past next March and it is unlikely to move abruptly to stop buying assets. We may get a clearer idea of timing after the ECB releases new economic forecasts in December.

The Bank of Japan still thinks it can get inflation up to around its 2% target but it has postponed the timing again and is sticking to its policy of asset buying and very low interest rates (-1% for short term deposits and zero for 10 year government bonds) to boost activity and inflation.”