“Policymakers in the USA… faced with an economy growing at a similar rate to the United Kingdom, as well as a similar level of unemployment and inflation and even lower wage growth, are sending a clear message that now’s the time to start the process of normalising policy”.
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The lowest core PCE forecasts also fell over the same period, particularly for the third and fourth quarters of next year, to 0.9 percent and 1.0 percent, respectively, from 1.4 percent in earlier polls.
A state-run think tank said on Wednesday the central bank should maintain its current accommodative stance and barely revised down its growth forecast for next year.
The US bank’s benchmark federal funds rate has been locked near zero for almost seven years. But a top BoE official later warned investors against reading too much into the Bank’s projections when it came to assessing the outlook for rates.
“With inflation not expected to start edging up until next year, or reach target until well into 2017, there is simply no need for the Bank to consider changing tack”. This just goes to show how bearish both of these still are at the moment following OPEC’s decision to continue pumping at the same rate or higher regardless of the huge oversupply and low prices.
The BOK said in a statement that the domestic demand kept, and will keep, a recovery trend though uncertainties are running high in the growth path to the South Korean economy.
Managing Director Barnabas Virag, who is not a rate-setter, told Reuters there was significant room for long-term interest rates to sink lower.
However, with decent economic data in the United Kingdom, including some modest growth in wages, some are cautiously predicting a rate hike by mid-2016. It cut interest rates by a cumulative 350 basis points through October to stoke inflation that has remained below its target range since February 2014.
The Bank of Korea’s monetary policy committee held its base rate steady at 1.50 per cent, a media official said without elaborating. What has not risen at all are expectations for inflation next year. “There is certainly talk in the market that the bank could take a more hawkish tone”, said Tobias Davis, currency hedging manager with Western Union in London.
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In this respect, credit growth is considered to be at a sustainable level, posing no threat to financial stability. “In this process it will closely monitor external risk factors such as any changes in the US Federal Reserve’s monetary policy or in economic conditions in emerging market countries including China, the movements of capital flows, and the trend of increase in household debt”.
