According to central banks, the outlook for the global economy continues to be reasonable. However, policymakers still indicate that their decisions are affected by trade tensions, political disagreements and global economic slowdown.
The European Central Bank
On Thursday, September 12, the European Central Bank issued Monetary Policy Statement. The European policymakers revealed new stimulus measures to boost the Eurozone economy. However, during the press conference the ECB President Mario Draghi admitted that countries with positive fiscal balances ought to assist recovery by increasing government spending as well.
The main decision was the deposit rate cut from negative 0.40% to negative 0.50%. Also, the ECB decided to restart quantitative easing (QE), promising to purchase €20B of assets as from November 1. The Governing Council expects to run QE for as long as necessary to support the effect of rate cuts. The programme is expected to end shortly before the central bank starts to raise its key interest rates. Moreover, the ECB introduced a tiering system for deposits. The ones below a six-time multiple of required reserves would earn a 0% return. Deposits above would earn the negative interest rate – banks would have to pay money on their reserves.
The Federal Reserve
On Wednesday, September 19, the Federal Reserve released the FOMC Statement, where the US policymakers provided reasons for lowering the target range for the interest rate to 1.75% to 2%.
The Fed Chair Jerome Powell described the US economic outlook as "favourable", but said that the rate cut was required "to provide insurance against ongoing risks", such as weak global economic growth and renascent trade tensions.
Some analysts suggested that the Fed could cut the interest rate more or expand the balance sheet, where the central bank keeps the assets it purchases, like treasuries and mortgage-backed securities. However, the Federal Open Market Committee did not announce more aggressive actions to reduce possible risks.
Other Central Banks
On Thursday, September 19, the Bank of Japan released Monetary Policy Assessment, where the Japanese policymakers argued for maintaining monetary policy unchanged. At the same day, the Swiss National Bank issued its Monetary Policy Assessment. According to the release, the Swiss policymakers also decided to keep their monetary policy unchanged. Moreover, the Bank of England published its Monetary Policy Statement. The UK policymakers decided to keep the interest rate at the 0.75% level, as they continued to monitor Brexit development.