As widely expected, the Old Lady on Threadneedle Street left the monetary policy intact in November, keeping interest rates at ultra-low of 0.5% and the volume of asset purchases at 375 billion pounds. This week's Inflation Report should provide more details on the BoE's thinking, and the new streak of estimates on growth, labour market, and inflation should offer more insight into the future path of interest rate movements. So far strong dovish signals from the nine-member MPC have indicated recently that the BoE's monetary policy is set to remain highly accommodative until at least spring of 2015.
The RBA also kept its interest rates on hold at 2.5% amid slack in the job market, increasing house prices and concerns about China's growth. The cash rate has been at that level since August 2013, and the RBA is unlikely to raise it in the near future. However, the bank changed its language concerning the exchange rate, noting that recent weakness in the Aussie is due to the strengthening Greenback. Still, the local currency is "above most estimates of its fundamental value, particularly given the further declines in key commodity prices in recent months," the RBA said.
Meanwhile, uncertainties surrounding future global outlook, including geopolitical developments and market volatility, are hampering Canada's growth, BoC Governor Stephen Poloz said. Nevertheless, the Governor remained upbeat about the future and stressed that interest rates will remain low for the time being, as higher rates would hit automakers and construction and confidence in the broader economy. Poloz also reiterated that interest rates may not return to normal even after the economy returns to full output. Poloz said the BoC remains more worried about too-low inflation even despite the fact that it believes the upside and downside risks are balanced. On top of that, Poloz said that a decline in crude oil prices does not "derail" the central bank's outlook of an economic recovery. Canada still needs sustained increases in exports to boost business investment and return the economy to full capacity, which is when inflation would be able to sustain itself at the 2% target rate, he said, reiterating the process will take about two years.