Federal Reserve
The Federal Reserve, officially known as the Federal Reserve System, is the central bank of the United States of America, tasked with overseeing and managing the country’s currency, the U.S. dollar (USD). Established by Congress in 1913, its official mandate is to maximize employment, stabilize prices, and moderate long-term interest rates in the U.S. economy. This dual mandate aims to foster economic conditions that achieve both stable prices and maximum sustainable employment, thereby promoting the health and stability of the U.S. economy. Through its monetary policy decisions, the Federal Reserve influences the availability and cost of money and credit to help promote these economic goals.
The New York Fed (Federal Reserve Bank of New York) is primarily responsible for executing monetary policy as directed by the Federal Open Market Committee (FOMC). It also acts as the fiscal agent for the U.S. government and is currently headed by John C. Williams, its President.
Fed Funds Rate: 5.5%
Next Meeting June 12
Bias now calls for a smaller magnitude in rate cuts with a later start to easing.
Last Update 6/09/2024
European Central Bank (ECB)
The European Central Bank (ECB) is the central bank for the euro and administers monetary policy within the Eurozone, which comprises 19 of the 27 European Union member states that have adopted the euro as their common currency and sole legal tender. Established by the Treaty of Amsterdam in 1998, its primary mandate is to maintain price stability within the Eurozone, aiming to keep inflation under but close to 2% over the medium term.
The ECB has a two-tier structure. At the first tier is the ECB Governing Council, which sets monetary policy for the Eurozone. The Governing Council consists of the ECB President, the Vice President, and the governors of the national central banks of each Eurozone member state. At the second tier are the National Central Banks (NCBs) of each member state. NCBs implement the monetary policy set by the Governing Council and conduct other central banking functions within their respective countries.
Main Refinancing Rate: 4.25%
Next Meeting July 18
Recent cut, June 06, may be a one and done deal with no pre-commitment on the next amidst persistent inflation and currency valuation concerns should rate differentials widen.
Last Update 6/09/2024
Bank of Japan (BoJ)
The Bank of Japan (BOJ) is the central bank of Japan, established under the Bank of Japan Act in 1882. Its primary mandate is to ensure price stability and financial system stability across Japan. This involves a comprehensive set of responsibilities, including the formulation and implementation of monetary policy, issuance and management of currency, providing settlement services and ensuring the stability of the financial system, and conducting treasury and government securities-related operations. The BOJ aims to achieve price stability, thereby contributing to the sound development of the national economy, through its control over monetary policy.
For over two decades, the BOJ has implemented a zero interest rate policy (ZIRP) to stimulate economic growth by keeping borrowing costs low. This policy has had mixed results. While it has helped to prevent deflation, it has also led to concerns about asset bubbles and limited effectiveness in achieving the 2% inflation target. The BOJ continues to debate the exit strategy from ZIRP, considering the potential impact on the fragile Japanese economy.
BoJ Policy Rate: <0.1%
Next Meeting June 14
The BoJ last adjusted rates up from ZIRP on, March 19, bias going forward is for rates to remain steady.
Last Update 6/09/2024
Bank of England (BoE)
The Bank of England, nicknamed the “Old Lady” of Threadneedle Street, is the central bank of the United Kingdom, responsible for issuing the Great British Pound (GBP) or Pound Sterling. Founded in 1694, it is one of the oldest central banks in the world. Its primary mandate involves setting the key interest rate to manage inflation, ensuring the stability of the UK’s financial system, issuing banknotes, and acting as the government’s banker and debt manager. Through these roles, the Bank of England aims to maintain public confidence in the currency, promote the economic well-being of the United Kingdom, and ensure financial stability both domestically and globally.
The Bank of England played a pivotal role in the event that led to George Soros becoming infamous—or famous, depending on perspective—in the financial world. On September 16, 1992, what is now called Black Wednesday, Soros’s through his Quantum Fund fund made a huge bet against GBP. While the BoE was defending the pound’s position within the European Exchange Rate Mechanism (ERM) raising interest rates and buying pounds. Ultimately the bank was forced to concede dropping its peg to the Deutsche Mark leading to its exiting the ERM. This event earned Soros the title of “the man who broke the Bank of England” profiting a $1 billion in a single trade.
Official Bank Rate: 5.25%
Next Meeting is on June 20
Market more likely to cut rates in August than June.
Last Update 6/09/2024
Swiss National Bank
The Swiss National Bank (SNB) is the central bank of Switzerland, tasked with the oversight of the Swiss Franc, denoted as CHF, which stands for “Confoederatio Helvetica Franc.” The CHF serves as the country’s official currency, reflecting Switzerland’s Latin name, Confoederatio Helvetica, to underscore the nation’s multilingual heritage. Established in 1907, the SNB’s primary mandate is to ensure price stability, while taking the country’s economic conditions into account. This involves the careful formulation and execution of Switzerland’s monetary policy, the management of its foreign exchange reserves, overseeing the smooth operation of payment systems, and the issuance of banknotes. The SNB’s goal is to maintain a level of inflation that is conducive to economic stability and growth, thereby supporting the overall prosperity of Switzerland.
For several years, the SNB maintained a minimum exchange rate peg of 1.20 CHF to the euro, instituted in September 2011 to combat the overvaluation of the Swiss franc and to stave off deflationary pressures. This strategic peg aimed to make Swiss exports more competitively priced on the international market and to protect the economy from the adverse effects of an overly strong currency. However, on January 15, 2015, the SNB made a sudden announcement to discontinue this peg, resulting in a significant appreciation of the Swiss franc against the euro and causing immediate volatility in global financial markets. The decision was driven by the changing dynamics in the European monetary landscape, particularly the monetary easing policies of the European Central Bank (ECB), which significantly increased pressure on the Swiss franc, leading the SNB to conclude that sustaining the peg was no longer tenable.
SNB Policy Rate: 1.50%
The SNB has surprised the market with its 25bps cut in March significantly weighing on the Swiss Franc since as it front runs the major central banks in policy easing. The next policy meeting is on June 20.
Last Update 4/12/2024
Reserve Bank of Australia
The Reserve Bank of Australia (RBA) is Australia’s central bank, tasked with issuing and managing the Australian dollar (AUD). Michele Bullock holds the position of Governor, and the RBA’s core mission is to promote sustainable economic growth for the country. This translates to maintaining price stability, aiming for an inflation rate between 2-3%, and fostering full employment.
The RBA faces a few key challenges in steering Australia’s economic course. Keeping inflation within the target range is a major focus, but it’s not the only factor. The Bank must carefully consider global economic conditions and the value of the Australian dollar when making monetary policy decisions. Additionally, Australia’s dependence on the resources sector makes its economy susceptible to swings in commodity prices. The RBA closely monitors these dynamics and adjusts its monetary policy settings to achieve its mandated goals of balanced and sustainable growth.
Cash Rate: 4.35%
Next Meeting June 18.
Rates likely to remain steady for a long while as housing markets remain tight.
Last Update 6/09/2024