Regional Analysis (December 29th, 2015)
At the December Meeting the Federal Reserve increased interest rates to 0.375% and expect them to be at 1.4% by the end of 2016. The members increased growth but reduced unemployment and inflation expectations.
At the December Meeting, the ECB lowered deposit interest rates to -0.3% extended full allotment fixed tender till the end of 2017, extended asset purchases till beyond March 2017 include euro regional and local government debt and reinvest principal payments. They slightly lowered inflation expectations.
Members of the Bank of Japan monetary policy by a reduced majority extended the maturity of Government Bond purchases to 7-12 years, they also noted that exports and investment in physical and human capital have been picking up, although business sentiment and inflation expectations have been slowing. Immigration controls need
to be drastically relaxed to aid growth so taxes can reduce Government borrowing.
The People’s Bank of China sees mass entrepreneurship and innovation and the supply of public goods and services forming the engine for economic growth, although downward pressures remained high. They continue to reduce loan and deposit rates and the reserve requirement ratio. The central parity of the currency against the dollar was reduced by 1.6%.
The Bank of England expects inflation to stay below 1% for at least the next six months but exceed the 2% target after two years with no further action. The Governments Autumn Statement means a lower pace of deficit reduction, but still impacting growth. Nominal pay growth appears to have flattened. The Monetary Policy Committee expects rates to rise gradually and to a lower level than in recent cycles.