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South Korea leaves interest rate at record low
Previously, the bank raised its rates by 25 basis points in November and by 50 basis points each in August and June.
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“This will compress real rates and this is in line with MNB rhetoric that targeted measures are more relevant to the economy and seem to act a bit better than what outright cuts can do to the economy”, Hulea added.
“Though the likelihood of a tightening in policy by USA policymakers is widely expected, the market reaction to any decision by the Federal Reserve to increase interest rates remains hard to predict”, according to the minutes.
The effective or average fed funds rate has remained in the range of 0.10 per cent to 0.15 per cent thus far this year.
The Bank reiterated that it expected headline inflation to remain below 1 percent until the second half of 2016.
Further, the bank noted that an increase in projected borrowing as announced by the Chancellor in Autumn Statement will boost GDP by around 0.2 percent in 2016.
Currency traders’ verdict on the Bank of England’s latest policy meeting was that officials had failed to offer more insight into the path of interest rates and to shift the outlook for sterling. He had voted for a quarter-point rise at all of the previous four MPC meetings.
NZ Forex expects the central bank “could sit on its hands this week and do nothing for another month”, although any gain in the kiwi would be capped by the prospects of a Fed rate hike, he said. The core consumer price index (CPI) was higher given it takes out the more volatile products such as energy at 1.1 percent which is what gives credibility to the Bank of England’s rhetoric about higher rates and that the negative effects pressuring the United Kingdom economy being labelled transitory.
But the minutes also show that if oil prices, which touched below 40 U.S. dollars a barrel earlier this week for the first time in almost seven years, see another sustained decline, its inflation forecasts could be trimmed once again.
Returning inflation to target “depends on an increase in domestic cost growth sufficient to balance the drag on prices from very subdued global inflation and past increases in the value of sterling”, the December meeting minutes said.
None of the nine current members of the MPC has been on the committee when rates were raised or cut.
The New York Times reported that, following the release of the jobs report, Patrick Harker, president of the Federal Reserve Bank of Philadelphia, added his voice to the chorus of Fed officials who said it was time for the central bank to raise interest rates.
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Mr Saunders said: “There is not even a hint that any of the majority are close to joining Mr McCafferty in voting for a hike”.