Monetary policy biases have been pushing forex pairs around recently so I’ve decided to give y’all a rundown of how this week’s central bank statements turned out. Here’s what the RBA, BOJ, and BOE had to say!
Reserve Bank of Australia (RBA)
As expected, RBA Governor Stevens and his men decided to keep interest rates on hold at 2.50% for the time being. Policymakers even hinted that it would take a long while before any policy changes are made, as the October RBA statement indicated that they planned on maintaining a period of stability in interest rates.
Just as in their previous rate statements, the RBA also reminded forex market participants that the Australian dollar is high by historical standards. Although they stopped short of announcing measures to keep their currency weak, RBA officials reiterated that Aussie depreciation might help the economy perform better.
Bank of Japan (BOJ)
Despite calls to boost their stimulus program, the Bank of Japan still decided to sit on its hands and keep monetary policy unchanged. Looks like the consecutive sets of bleak economic data from Japan ain’t enough to convince Kuroda to ease! After all, it appears that the BOJ isn’t feeling the pressure to add stimulus since the yen’s depreciation is pushing price levels higher and helping the economy move closer to achieving its inflation target.
What’s interesting to note though is that BOJ policymakers downgraded their growth outlook and admitted that industrial production has taken a huge hit after the April sales tax hike. With that, Kuroda still reminded that the BOJ has many policy easing options that can be implemented if necessary. In particular, he noted that the JGB (Japanese government bonds) market is huge and that there are several other financial assets that the central bank can purchase.
Bank of England (BOE)
BOE Governor Carney and his gang of policymakers also refrained from making any policy changes this time, keeping asset purchases at 375 billion GBP and interest rates at 0.50%. Bear in mind that a couple of hawkish MPC members, Weale and McCafferty, have been voting to hike rates for the past two BOE meetings yet it looks like they still weren’t able to get enough support from majority of the policymakers for now.
The BOE minutes due October 22 might provide more clues on how the discussions turned out and whether or not central bank officials are feeling more upbeat about economic prospects. Data from the U.K. has been steady so far, keeping the BOE on track to tighten monetary policy sometime next year.
Among these central banks, the BOE is still the most hawkish of the bunch while the BOJ is expected to turn even more dovish. Meanwhile, the RBA appears to be grappling with other issues such as a potential housing bubble and is unwilling to adjust monetary policy for now. Do you think these policy biases would continue to shape long-term forex trends?