FXstreet.com: Fundamental: Reports on Interest Rates

Japan: BoJ leaves interest rates unchanged

danskeresearch@danskebank.com (Danske Bank A/S) — Fri, 21 Nov 2008 10:13:35 GMT

The Bank of Japan (BoJ) as expected left its leading O/N target rate unchanged at 0.3% in a unanimous decision by its board members. In its statement the BoJ said that the economy has been increasingly sluggish. In addition it stressed the increasing downside risk due to both bleak outlook for he global economy and financial conditions in general. On the other hand, the BoJ believes that upside risk on prices has decreased.

EMU: Growth now, stability later...

research@ykb.com (Yapi Kredi Bank) — Thu, 20 Nov 2008 10:46:44 GMT

● The dramatic worsening of the growth outlook throughout the eurozone has strengthened the call for fiscal stimulus, particularly suited to support activity at a time in which monetary policy risks being less effective than usual. ● Next year, budget deficits in the area’s largest economies will increase significantly, due to the effect of both automatic stabilizers and discretionary fiscal measures. A generalized breach of Maastricht criteria is in the cards, but we don’t see this as a

Fed expects the economy to contract moderately in 2H08 and 1H09

e.economicos@bbva.bancomer.com (BBVA Bancomer) — Thu, 20 Nov 2008 15:00:28 GMT

FOMC Minutes October 28-29th 2008 Fed expects the economy to contract moderately in 2H08 and 1H09 and to overall grow at around zero in 2009 Some participants saw risks to the downside on inflation We expect an additional rate cut on December 16th, 2008 The staff reduced its forecast for economic activity in 2H08, 2009 and 2010. It expected GDP to contract in 4Q08. Moreover, it predicted “that real GDP would continue to contract somewhat in the first half of 2009 and then rise in the second

Turkey: Reckless and dangerous rate cut

danskeresearch@danskebank.com (Danske Bank A/S) — Thu, 20 Nov 2008 09:19:50 GMT

In a move which took everyone, ourselves included, by complete surprise, the Turkish central bank (TCMB) on Wednesday cut its key policy rate (the borrowing rate) by 50bp to 16.25%, and its less important lending rate by 100bp to 18.75%! We are very surprised by the bank's decision which we regard as a reckless and dangerous move likely to send the Turkish lira plummeting.

Bank of England Won't Stand in the Way of the British Pound

info@gftforex.com (GFT (Global Forex Trading)) — Wed, 19 Nov 2008 14:32:06 GMT

The British pound is on a tear even though the minutes from the most recent monetary policy meeting indicates that the BoE toyed with the idea of cutting interest rates by more than 150bp. The markets are ecstatic about the Bank of England's proactiveness even if it means that UK interest rates will probably drop below 2 percent. Given the tone of the BoE minutes, we expect another 100bp rate cut at the next central bank meeting. The BoE is on a roll right now and the market expects big moves.

Russia: Higher rates will have limited short-term effect

danskeresearch@danskebank.com (Danske Bank A/S) — Wed, 12 Nov 2008 10:12:50 GMT

Last night, the Russian central bank (CBR) decided to raise several key interest rates in a move directed towards reducing capital flight and lower inflation. Hence, the CBR raised the key tom-next rate to 5.75%, while the minimum rate for the all-important one-day repo operations was raised to 8% and the refinancing rate to 12% - all up by 100bp. Currency swap rates were increased by two percentage points to 12%. The increases take effect as of today.

Slovakia: NBS aligns rates with ECB - cuts by 50bp

danskeresearch@danskebank.com (Danske Bank A/S) — Tue, 11 Nov 2008 13:11:29 GMT

The Slovak central bank today announced that it has cut its key policy rate by 50bp to 3.25%. The rate decision was unscheduled, and brings Slovak interest rates into line with the ECB's key policy rate. While the timing of the cut is a bit surprising, it should be no surprise to the markets that the NBS would sooner or later have to align its key policy rate with the ECB rate given that Slovakia looks set to join the euro area on 1 January 2009.

Baltic: Negative rating action from Moody's

danskeresearch@danskebank.com (Danske Bank A/S) — Fri, 07 Nov 2008 13:20:19 GMT

Rating agency Moody's has cut its credit rating for Latvia and reduced its outlooks for Lithuania and Estonia from stable to negative due to rising fears of an economic slump largely on the back of the global liquidity crisis. The negative Moody's action is obviously bad news, but is not a surprise, as all three Baltic economies have moved from double-digit growth to sharply declining growth due to the global financial crisis. Moody's stated that the negative impact on the economy would

Euroland: ECB is ready to cut rates in December

danskeresearch@danskebank.com (Danske Bank A/S) — Thu, 06 Nov 2008 17:43:43 GMT

Overview: As expected the ECB today lowered the policy rate rates by 50 bp to 3.25%. In the statement the tone was clearly softer on inflation. Also the tone on activity was soft. They did not reintroduce their key policy phrase "On the basis of our assessment, the current monetary policy stance will contribute to achieving our objective", and in the Q&A session Mr. Trichet said that the Council had considered cutting rates by 75 bp today. To us this signals that the ECB is prepared to cut

ECB and BoE: Thursday Morning Rate Cuts!

info@gftforex.com (GFT (Global Forex Trading)) — Thu, 06 Nov 2008 14:42:23 GMT

It is the morning for rate cuts with the European Central Bank, Bank of England and the Swiss National Bank all cutting interest rates. On a day when the Bank of England shocked the markets with a 150bp rate cut, the ECB and the SNB's half point cut seemed very small in comparison. Every major central bank is worried about growth but not as worried as the ECB. Unlike King who openly admitted that the economy is in a recession, when asked the same question, Trichet simply said "we will see." On

Czech Republic: Aggressive rate cut of 75bp

danskeresearch@danskebank.com (Danske Bank A/S) — Thu, 06 Nov 2008 14:04:31 GMT

The Czech central bank (CNB) has today cut its key policy rate by 75bp to 2.75%. We had expected a 25bp cut. This was also the consensus expectation. This is a very clear signal that the CNB is very worried about the slowdown in the Czech economy - and rightly so in our opinion. This is an aggressive move, but it is hard to be critical about it given the fact that Czech GDP is likely to drop sequentially in Q3 and Q4 and inflation in the coming months is likely to come down significantly.

UK: Bank of England cuts 150bp - more to come

danskeresearch@danskebank.com (Danske Bank A/S) — Thu, 06 Nov 2008 13:57:51 GMT

Overview: Bank of England (BoE) took an unprecedented step today by cutting the Bank Rate 150bp. This took the Bank Rate from 4.5% to 3.0%. Consensus (and our forecast) was an easing of 50bp. Hence BoE's move was a major surprise and indicates that central banks are ready to take extraordinary measures to fight the global slow down. We now expect BoE to cut further by 50bp in the following 3 months, taking the Bank Rate to 1.5% in Q1.

ECB: Preview of meeting on 6 November

danskeresearch@danskebank.com (Danske Bank A/S)

Overview : The ECB is facing several of its risk scenarios. The outlook for growth has deteriorated markedly and the inflation outlook is increasingly favourable. We expect it to respond with a 50 bp lowering of policy rates at the meeting on Thursday. The market is pricing a total of 125bp in cuts over the coming nine months, which is in line with our forecast. However, the market is more front loaded in its pricing, with close to 75bp priced for Thursday, and a total easing of 100bp priced

BoJ cuts by 20 bps and revises growth sharply down

danskeresearch@danskebank.com (Danske Bank A/S) — Fri, 31 Oct 2008 13:13:36 GMT

The Bank of Japan (BoJ) this morning cut its leading O/N target interest rate by 20 bps to 0.3% in a split 4-4 decision. Three dissenting board members voted for cutting the O/N target rate by 25 bps (most likely Suda, Nakamura and Kamezaki) and one member voted for leaving the leading interest rate unchanged at 0.5% (most likely Mizuno). The rest of the board, including board Governor Shirakawa and his two deputy governors, voted for a 20 bp cut. At the press briefing Shirakawa said that they

Japan: "Solidarity" cut from BoJ tomorrow

danskeresearch@danskebank.com (Danske Bank A/S) — Thu, 30 Oct 2008 14:14:17 GMT

For a change, the outcome of tomorrow's monetary meeting at the Bank of Japan (BoJ) will not be trivial. We now believe BoJ will cut interest rates by 25 bp tomorrow. This is despite comments from Deputy Governor Yamaguchi earlier this week that didn't indicate an imminent rate cut - instead, he stuck to the existing BoJ line that monetary policy is already "very accommodative".

Fed appears more concerned on economic growth

e.economicos@bbva.bancomer.com (BBVA Bancomer) — Thu, 30 Oct 2008 08:52:29 GMT

FOMC Meeting October 29th Fed appears more concerned on economic growth In contrast, the outlook for inflation has improved FOMC expects that the rate cut along with other measures, will help to alleviate the financial crisis However, members expect a slow recovery FOMC lowered its target for the federal funds rate 50 basis points to 1%. The move was widely expected by market participants. On the economic front, the statement remained pessimistic as it stressed that “the pace of economic

US: Fed cuts 50bp and more to come

danskeresearch@danskebank.com (Danske Bank A/S)

Yesterday night the Federal Open Market Committee (FOMC) decided to lower its policy rate by 50bp to 1.00% as we expected. The decision fell short of market expectations with fed funds futures discounting a fifty-fifty probability of a 50bp and 75bp cut. However, the statement was biased towards further easing which should moderate any short term disappointment.

FOMC October Meeting — 50 Basis Point Ease

sam.bullard@wachovia.com (Wachovia) — Thu, 30 Oct 2008 07:23:03 GMT

Recession, Lower Inflation, Financial Workout Drives Fed Policy Today the Federal Reserve lowered its target for the federal funds rate by 50 basis points to 1.00 percent, the lowest rate in more than four years. Monetary policy continues to adjust to an environment of economic recession, lower inflation expectations and the imbalance of asset valuations. While talk of recession and credit dislocations are not new, lower gas prices, along with the dip in broader consumer prices, opened the

Norway: Less frontloaded than expected

danskeresearch@danskebank.com (Danske Bank A/S) — Wed, 29 Oct 2008 16:13:08 GMT

As widely expected, Norges Bank slashed its policy rate at the monetary policy meeting today by 50bp to 4.75%. But we note that Norges Bank considered cutting rates by just 25bp. Norges Bank said that they expect the policy rate to be in the interval 45% in the period up to the publication of the next monetary policy report on March 2009 - unless the economy is exposed to more shocks. In other words they have taken the severity of the credit crisis into account. It indicates just one more rate

China: Another 27bp interest rate cut

danskeresearch@danskebank.com (Danske Bank A/S) — Wed, 29 Oct 2008 14:49:21 GMT

The Peoples Bank of China (PBoC) today cut the benchmark 1-year lending rate by 27bp to 6.66% and the benchmark 1-year deposit rate by 27bp to 3.60%. However, somewhat surprisingly, the reserve requirement ration was left unchanged. There is some speculation in the market that this is the first step in a series of coordinated international rate cuts coming this and next week. With the third interest rate cut in just six weeks PBoC is now easing aggressively. We expect another four 27bp

FOMC: Preview of policy meeting

danskeresearch@danskebank.com (Danske Bank A/S) — Tue, 28 Oct 2008 09:45:38 GMT

Tomorrow at 19:15 CET the Federal Open Market Committee (FOMC) is set to announce its policy rate decision. Sentiment in global equity markets continues to be very negative and the improvement in USD money market rates has slowed to a snail's pace since Thursday. In our view, the current backdrop will keep the Fed from disappointing market expectations, which would risk amplifying the downbeat sentiment. Consequently we have marked down our Fed forecast and now expect the Fed to cut rates by

FOMC Preview: Coordinated Rate Cut Needed

info@gftforex.com (GFT (Global Forex Trading))

The biggest event risk this week is undoubtedly the Federal Reserve’s monetary policy decision on Wednesday. Now more than ever, the Fed’s decision could turnaround the currency and equity markets. Since the last interest rate cut by the central bank on October 8th, the dollar has rallied more than 8 percent and the Dow Jones Industrial Average has fallen by more than 10 percent. The Fed’s half point rate cut at the time was a part of a coordinated effort with central banks from around the

Euroland: ECB to ease faster and more

danskeresearch@danskebank.com (Danske Bank A/S) — Fri, 24 Oct 2008 12:38:23 GMT

We have changed our interest rate projection for the ECB. We are now looking for it to lower the key lending rate by 50 bp in November 2008 and by a further 25 bp in each of January, March and June 2009. Previously we expected the ECB to lower rates by 25 bp in December 2008 and by a further 25 bp in both February and April 2009, and stated the risk of a further 25 bp rate cut by June. The precise timing of the rate changes is difficult to determine, and in these turbulent times timing is

Turkey: TCMB leaves rate unchanged

danskeresearch@danskebank.com (Danske Bank A/S) — Thu, 23 Oct 2008 08:43:31 GMT

The Turkish central bank (TCMB) has decided to leave its borrowing rate unchanged at 16.75%, in line with most observers' expectations. TCMB also announced that it has cut its lending rate by 100bp to 19.25%, to limit volatility in short term rates. The decision follows a day in which the lira fell sharply against the dollar, as equity markets plummeted and bond yields rose to a two-year high amid declining appetite for risk in Emerging Markets. The lira extended its losses after the rate

Hungary: Emergency hike of 300bp

danskeresearch@danskebank.com (Danske Bank A/S) — Wed, 22 Oct 2008 10:23:50 GMT

The Hungarian central bank (MNB) has just hiked its key policy rate by 300bp to 11.50%. The hike is an emergency measure. While the forint has strengthened by more than 1½% on the back of the hike, this is not that much taking into account the size of the hike. The hike has to be seen in the light of the serious pressure on the forint in recent weeks.

Hungary: central bank hiked the base rate by 300bp to 11.50%

Rainer.Singer@erstebank.at (Erste Bank der oesterreichischen Sparkassen AG)

Today, the Central bank hiked the base rate by 300bp to 11.50% The forint has started to strengthen after the announcement.

Will the Fed Follow in Canada's Footsteps?

info@gftforex.com (GFT (Global Forex Trading))

The Bank of Canada cut interest rates by 25bp to 2.25%. This move was smaller than the market expected but still represents 75bp of easing since the beginning of the month. With the Federal Reserve set to reduce interest rates next week, Canada's explanation for the smaller could shed some light on what the Fed may be thinking. According to the BoC statement, Canada opted for only a 25bp rate cut for 3 reasons: 1. They have already cut interest rates aggressively this month 2. Even though they

FOMC Policy Action October 8

e.economicos@bbva.bancomer.com (BBVA Bancomer) — Thu, 09 Oct 2008 10:14:40 GMT

• FOMC lowered its target interest rate by 50bp to 1.5% • The move is part of a global joint effort to alleviate financial stress around the world • Fed movement was widely expected by market participants • Fed recent communication and today’s action confirm that downside risks to growth have increased dramatically • Further rate cuts cannot be ruled out if conditions worsen Press Release FOMC Policy Action October 8, 2008 The Federal Open Market Committee has decided to lower its target for

FOMC Minutes October 7

e.economicos@bbva.bancomer.com (BBVA Bancomer) — Wed, 08 Oct 2008 08:03:09 GMT

• Downside risks to growth have intensified • Members considered to lower rates if conditions worsen • Thus, we expect further rate cuts According to the Minutes, economic indicators reviewed at the meeting showed further deterioration in labor markets. In addition, consumer spending weakened noticeably and residential investment continued to decline. Core inflation eased somewhat in August. The staff revised down its 2009 GDP growth forecast as “the earlier run-up in oil prices, weakened

Introducing persistence in EMU inflation analysis

research@ykb.com (Yapi Kredi Bank) — Thu, 25 Sep 2008 12:04:53 GMT

● We add a new tool to our inflation-watch instruments for the euro area: a persistence-weighted (PW) measure of core inflation. ● Contrary to standard measures of core inflation that strip out the most erratic and volatile components, PW core inflation gives more weight to the items of the HICP basket displaying a higher degree of persistence. ● This methodology delivers a core measure that allows capturing the more lasting component of price increases. Therefore, the PW core

PBC has started to ease monetary policy to boost the economy

e.economicos@bbva.bancomer.com (BBVA Bancomer)

The People’s Bank of China (PBC) announced today that it would cut the one-year benchmark lending rate by 27 basis points from Tuesday (September 16th), while leaving the benchmark deposit interest rate unchanged. In addition, the required reserve ratio (RRR) for small- and medium-sized banks was lowered by 1 percentage point effective on September 25. The RRR will be reduced by 2 percentage points for the same sized banks in areas badly hit by the Sichuan earthquake. However, the RRR for 6

FOMC Instant Insight: Fed Holds Onto Its Ammunition

info@gftforex.com (GFT (Global Forex Trading))

To the surprise of the financial markets, the Federal Reserve left interest rates unchanged at 2 percent. Going into the meeting, everyone thought that the Fed was backed into a corner and would have no choice but to cut interest rates by 25 and possibly even 50bp. Although the tone of the FOMC statement was relatively cautious, the action or more specifically, the lack of action by the Federal Reserve indicates that they are not going to bend to the market's pressure. One of 2 things probably

FOMC: Preview of policy meeting

danskeresearch@danskebank.com (Danske Bank A/S)

Overview : Tonight at 20:15 CET the Federal Open Market Committee (FOMC) is set to announce its policy rate decision. Following this weekend's events the market is discounting a 68% probability of a 25bp cut in the Fed funds rate or alternatively a 34% probability of a 50bp rate cut at tonight's meeting. While we attach a positive probability to a rate cut our base scenario remains that the FOMC will leave the Fed funds rate unchanged at 2%. However, the case for an emergency rate cut could

FOMC September Meeting — Workout Continues

sam.bullard@wachovia.com (Wachovia)

We Expect the Fed to Leave the Fed Funds Rate Alone We do not expect the Fed to lower the federal funds rate at tomorrow’s Federal Open Market Committee meeting. At this time the Fed appears more willing to address the current credit and economic difficulties through an expanded discount window and credit facilities rather than a cut in interest rates. In October the Fed may cut the funds rate, but for now we expect the Fed to stay on hold. Financial markets continue to adjust to an

FOMC Minutes of August 5th

e.economicos@bbva.bancomer.com (BBVA Bancomer) — Thu, 28 Aug 2008 07:36:53 GMT

* Base scenario includes a slowdown throughout 2008 and relatively high (although temporary) inflation rates * Members gave equal weight to growing growth and inflation risks * The minutes explicitly mentioned that the Board expects the next interest rate move to be a rate hike. But did not commit to such move anytime soon The minutes for August’ FOMC meeting reinforced the views we expressed in our last Fed Watch. The Fed has purposely stirred from its July’s message, time when it expressed

Eurozone Insight

research@ykb.com (Yapi Kredi Bank) — Tue, 05 Aug 2008 14:40:05 GMT

● The last two ECB meetings have resulted in the largest bond sell-off (June 5) and the largest bond rally (July 3) ever occurred on the day of a regular Governing Council meeting. ● This has brought the issue of communication back to the fore, ending the two-year long honeymoon between the ECB and the markets and bringing back visions of the bad old times when a disconnect between the central bank and market players seemed to be the rule. ● The analysis developed in this paper casts

FOMC Minutes of June 24-25

e.economicos@bbva.bancomer.com (BBVA Bancomer) — Thu, 17 Jul 2008 08:40:04 GMT

• Members recognized that risks to growth persisted and that risks to inflation had risen • Less consensus on risk assessments. All members saw rising risks, but some viewed the balance of risks tilted towards inflation. • The Board is managing growing uncertainty about the outlook, thus justifying a “wait and see” policy. One day after Bernanke's testimony in Congress, The Fed released the minutes for last month's FOMC meeting. As it was expected after the hawkish statement that accompanied

Semiannual Monetary Policy Report to the Congress

e.economicos@bbva.bancomer.com (BBVA Bancomer) — Wed, 16 Jul 2008 08:21:00 GMT

• Fed assistance to Fannie and Freddie is temporary, while Congress decides how to proceed • Bernanke indirectly supported Congress proposal to help households facing foreclosure • Rising uncertainty for both future growth and inflation. FOMC will assess incoming information as it becomes available Bernanke testified before Congress amid growing concerns about the financial condition of the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac. Bernanke assured Congress that the

First Line of Defense: Hawkish Wording

e.economicos@bbva.bancomer.com (BBVA Bancomer) — Thu, 26 Jun 2008 07:40:49 GMT

• The Fed maintained its target rate at 2%. But the statement was hawkish in tone, in line with recent speeches of Board members • FOMC is now more concern with risks to inflation than with risks to the growth outlook • While we expect a pause in its next meeting August 5th, the Fed will not hesitate to act if inflationary pressures increase further or if inflation expectations continue to deteriorate Inflationary Risks continue to rise, while growth drags. The Federal Open Market Committee

Making Sense of Increased Hawkishness

e.economicos@bbva.bancomer.com (BBVA Bancomer) — Tue, 24 Jun 2008 08:31:03 GMT

• Pressures to both growth and inflation persist • Lower marginal benefits of further rate cuts and higher inflation risk point to a prolonged pause • Fed will keep its options open In its next meeting the FOMC will probably maintain rates at 2%. After pursuing aggressive rate cuts for the last 10 months, we expect this to be the first meeting where the FOMC keeps rates constant, thus suggesting a floor in the current interest rate cycle. The expected pause should not be interpreted as the end