South Korea’s central bank kept its benchmark interest rate steady Thursday for the sixth month in a row, extending its wait-and-see mode ahead of a looming US rate hike.
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Those risks have been flagged by Hungarian central bankers who also said that targeted unconventional measures would be much more efficient to counter economic slowdown than further rate cuts or a weakening of the forint currency.
The Bank reiterated that it expected headline inflation to remain below 1 percent until the second half of 2016.
Scott Bowman, a United Kingdom economist at Capital Economics, said the market has gone too far in pushing back the first rate hike to early 2017.
“The ongoing reluctance to tighten policy contrasts with the more hawkish stance of USA policymakers”, said Chris Williamson, chief economist at Markit. For the United Kingdom, the MPC again sought to rebuff a market view that it would look to the US Fed for direction.
“The jobs data is pretty important but I can’t see any data next week being enough to convince the market from their current thinking, i.e. that they’re not going to raise rates until the end of next year at the earliest”, he said.
Last month, the central bank noted that falling commodity prices and an increase in the pound were damping prospects for inflation. Just 35 percent of Britons polled in the days after it released a relatively dovish set of economic forecasts last month expected a rate rise in the next 12 months, down from a four-year high of 50 percent in August.
The Federal Reserve is widely expected to raise USA interest rates for the first time since 2007 next week, giving the Bank a chance to see how the global economy and markets react before it has to make up its mind on when to follow suit. The world’s largest economy is forecast to expand at a steady 2.4-2.5 percent annualized pace in each quarter over the coming year, little changed from previous polls.
Governor Mark Carney and other Monetary Policy Committee members said the “material news” in the month since they previously met was that the price of oil had “fallen markedly again”, which raised the likelihood of inflation staying subdued. The 10-year gilt yield fell one basis point, or 0.01 percentage point, to 1.87 per cent, after sliding to 1.82 per cent. The 2 per cent security due in September 2025 rose 0.09, or 90 pence per £1000 face amount, to 101.19.
Gold prices sank 0.4%, with bullion last trading at $1,072.40.
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Based on now available information the Board considers that the trend of economic recovery in the United States has been sustained, and that the modest improvements in the euro area have continued.
