Sun | Jul 22, 2018

What major central banks are up to, at a glance

Published:Friday | April 29, 2016 | 12:00 AM

When the Federal Reserve left its key interest rate steady on Wednesday, it offered no clues to when it might act again, yet made clear that it's edging towards raising rates again eventually.

That policy contrasts with the approaches being taken by most other major central banks, which are headed in the opposite direction - to ease credit and to pledge further steps to encourage lending.

The European Central Bank (ECB) and the Bank of Japan (BOJ), for example, have loosened their interest-rate policies in recent months to try to stimulate growth.

On Thursday, Japan's central bank stunned financial markets with a decision not to splash out still more monetary stimulus for the ailing economy - apart from zero-interest loans for an earthquake zone.

Here are steps that other major central banks have taken recently.


Mario Draghi, head of the ECB, made clear last week that he's ready to launch further stimulus if the Eurozone economy should need it. He made his remarks after the ECB 25-member governing council left its stimulus programmes unchanged after having expanded them at its March meeting.

The current level of inflation - zero - is regarded as unhealthy and remains far below the central bank's goal of just under two per cent annually.

The ECB is already buying €80 billion (US$91 billion) in bonds from banks each month through at least March 2017. The purchases are made with newly created money, something the ECB can do as the euro's legal issuer. The idea behind increasing the supply of money in the banking system and the economy is to increase inflation and growth.

Among the other steps the ECB announced in March, the central bank:

- Cut its main benchmark rate to zero from 0.05 per cent.

- Lowered the rate on deposits from commercial banks at the central bank to minus 0.40 per cent from minus 0.30 per cent, a move aimed at prodding banks to lend rather than hoard cash.

- Added corporate bonds to the assets it can buy, expanding the potential scope of the stimulus programme.

- Announced long-term loans at zero or negative interest of up to four years to help support banks.


Japan's central bank did not add to its stimulus programme on Thursday.

In March, it chose to keep its monetary policy mostly unchanged, but noted a raft of risks for an economy that is making scant headway towards a sustained recovery. Japan's economy contracted in the last quarter of 2015, buffeted by the slowdown in China and other emerging economies. Recent data suggest that it might shrink again during this quarter.

The continued weakness prompted the Bank of Japan to announce in January a negative interest-rate policy, which requires banks to pay a 0.1 per cent fee on excess reserves kept at the central bank. That move, which followed similar moves in Europe, is unpopular with financial circles and the public, who are seeing rates paid on their own savings deposits shrink ever closer to zero.

Japan's interest rates have remained near zero for years. Under BOJ Governor Haruhiko Kuroda, it's been buying roughly •80 trillion (US$700 billion) of government bonds and other assets annually. The injections of cash into the economy are meant to drive up prices, prompting businesses and consumers to spend more. But demand has remained tepid, having fallen 1.2 per cent in the October-December quarter from a year earlier.


Bank of England policymakers voted unanimously this month to keep interest rates on hold amid concerns about whether Britain will vote to leave the European Union (EU).

The June 23 referendum on a British exit from the EU has added uncertainty to a weakening economic outlook, leading some economists to downgrade their growth forecasts. Members of the Monetary Policy Committee expressed concern in minutes released from their April 13 meeting.

The International Monetary Fund (IMF) has warned that an exit from the EU could disrupt trade and damage the world economy. As a result, the IMF cut its forecast for United Kingdom economic growth this year to 1.9 per cent from 2.2 per cent.


In a step to shore up slowing growth, China, in February, freed up more money for lending by cutting the amount its banks are required to hold in reserve.

The move follows declarations by Chinese leaders that they have room to boost growth, despite concerns in global markets about capital outflows and stock and currency turmoil.

The amount of deposits that commercial lenders will be required to leave with the central bank was cut by 0.5 percentage point on March 1, the central bank announced. That would reduce reserve levels for the country's major state-owned banks to 17 per cent of deposits - still by far the world's highest level.

The reduction is the second in just over four months, after a similar 0.5 per cent point cut on October 23.

In March, the central bank governor said that China could meet this year's official growth target and that Beijing has no need to weaken its currency to boost sagging exports. Zhou Xiaochuan expressed confidence that the economy could hit its goal, which the ruling Communist Party lowered this year to 6.5 to seven per cent from last year's "about seven per cent".

Growth last year reached a 25-year low of 6.9 per cent, though that still was among the world's highest.

- AP