It appears that central banks around the globe decided to follow the existing monetary policies to support the economies during the coronavirus crisis.
The Reserve Bank of Australia issued its Rate Statement twice – on July 7 and August 4. The Australian policymakers decided to follow the existing monitory policy and kept the cash rate, as well as the yield on the three-year Australian Government bonds of 25 basis point. Additionally, authorised deposit-taking institutions were continuing to draw on the Term Funding Facility, with total drawings of date of around $29B.
The Board of the Bank announced it would not increase the cash rate target until progress was being made towards full employment and it was confident that inflation would not be sustainable within the 2%-3% target band.
On Wednesday, July 15, Bank of Japan released its Outlook Report and Monetary Policy Statement. The Policy Board of the Bank voted to maintain the interest rate at -0.10%.
Moreover, the Bank stated it would purchase necessary amount of the Japanese government bonds (JGBs) without setting an upper limit, so that the 10-year JGB yields would remain at around 0%. Also, the Bank would continue to purchase exchange-traded funds (ETFS), Japan real estate investment trusts (J-REITs), as well as CP and corporate bonds.
Additionally, the Japanese central bank stated that it would continue with "Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control", aiming to achieve the price stability target of 2%.
Initial reaction on the market:
On Wednesday, July 15, the Bank of Canada released its Monetary Policy Report and Rate Statement.
According to the official release: "The Bank of Canada today maintained its target for the overnight rate at the effective lower bound of ¼ percent. The Bank Rate is correspondingly ½ percent and the deposit rate is ¼ percent. The Bank is also continuing its quantitative easing (QE) program, with large-scale asset purchases of at least $5 billion per week of Government of Canada bonds. The Bank's short-term liquidity programs announced since March to improve market functioning are having their intended effect and, with reduced market strains, their use has declined. The provincial and corporate bond purchase programs will continue as announced. The Bank stands ready to adjust its programs if market conditions warrant."
The European Union
On Thursday, July 16, the European Central Bank published the ECB Monetary Policy Statement. The Governing Council voted to keep the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility unchanged at 0.00%, 0.25% and -0.50% respectively.
The Bank announced that it would continue purchases under the pandemic emergency purchase programme (PEPP) with a total envelope of €1,350B. It is expected that the ECB will conduct net asset purchases under the PEPP until at least the end of June 2021.
Moreover, the Council said that net purchases under the asset programme (APP) would continue at a monthly pace of €20B, together with the purchases under the additional €120B temporary envelope until the end of the year.
Also, the Bank would continue to provide ample liquidity through its refinancing operations.
On Wednesday, July 29, the Federal Reserve issued the FOMC Statement. The US policymakers voted to maintain the target range for the federal funds rate at 0 to 0.25 percent.
According to the official release: "To support the flow of credit to households and businesses, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will closely monitor developments and is prepared to adjust its plans as appropriate."
On Thursday, August 6, the Bank of England published its Monetary Policy Report. The Monetary Policy Committee decided to keep the Official Bank Rate at 0.10%.
Moreover, the Committee voted for the Bank to continue with its existing programmes of the UK government bond and Sterling non-financial investment-grade corporate bond purchase, financed by the issuance of central bank reserves, maintaining the target for the total stock of these purchases at £745B.
On Wednesday, August 12, the Reserve Bank of New Zealand released its Monetary Policy Statement. The Monetary Policy Committee voted to maintain the Official Cash Rate at 0.25%.
According to the official release: "The Monetary Policy Committee agreed to expand the Large Scale Asset Purchase (LSAP) programme up to $100 billion so as to further lower retail interest rates in order to achieve its remit."
Initial reaction on the market: