THE CENTRAL BANK MEETING AND WHAT IT MEANS
The global equity markets are continuing with their cautious start to this week beginning on Monday, March 14th,2016. The week started with a somewhat pessimistic tone to the overall market environment spurred by a less dovish Bank of Japan comments. While the Central Bank did keep policy ‘unchanged’ as I expected. It removed previous language surrounding the ability to lower interest rates further into negative territory if deemed necessary. The BoJ did cite that recent downgrading of inflation expectations would likely mean no change in policy at yesterday’s meeting which was the case.
The Bank of Japan, (BoJ), cannot be ruled out from providing additional stimulus measures in the coming months though. In my opinion, further monetary policy accommodation from the BoJ would be increased by a further deterioration in the domestic situation, especially in regard to inflation expectations. It may also be prompted by a lack of encouraging progression towards the BoJ’s elusive price target.
The BOJ left the 80 trillion-yen monetary base and 0.1% negative interest rate. They will closely monitor the impact of negative rates and the only meaningful announcement is the exemption of Money Reserve Funds (MRFs) from the negative rates.
The Bank of Japan has learned from the European Central Bank; taking its time with action and also downplaying expectations. They announced they are examining the impact of negative rates.
I believe the BOJ, like the ECB, fears it is reaching the limit of monetary policy.
Today, the FED will make an announcement that there is ‘NO CHANGE’ in the short term interest rates They must continue to “kick this can” down the road even further. They want to support the recent stock market rallies and continue to mask the overall economic weakness that plagues the United States.
I talk about the interest rates along with the stock market, gold and oil in this interview:
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Chris Vermeulen
