Over the past week or so central banks held their last monetary policy meetings for 2020. We thought an overview of the actions taken will be helpful, especially considering that policy adjustments at the moment are essentially a response to the pandemic and a sign as to how the economy of the respective country will cope with the damage from it.
Last week it was the European Central Bank’s turn. The ECB chose to keep its interest rate unchanged but increased its emergency asset purchase program (PEEP) by 500 billion euro. Now the total number of the stimulus is 1.85 trillion euro. The program was extended until March 2022, which means the funds will be distributed at smaller monthly installments over a longer period of time.
Yesterday the Swiss National Bank also had its last policy meeting for the year. Switzerland already has a negative interest rate, and the SNB chose to keep it at -0.75%, despite recent improvements in the fundamental reports from the country.
The Bank of England met this week as well. It did not make any adjustment to its interest rate, keeping it at 0.1%. The BoE has previously hinted that it is not afraid to use negative rates if the economy requires it. But for now, it is likely that the Bank of England is waiting for the negotiations between the UK and the EU to end. It can decide on its future actions based on whether the UK manages to secure a free trade agreement with the EU or not.
In the United States, the Federal Reserve is gradually making its monetary policy looser and looser. This week Fed Chair Jerome Powell actually said the central bank is aiming for “max dovishness” because it expects that the US economy will have trouble with inflation.
The Federal Reserve’s updated projections for 2021 are better than expected earlier but Powell warned that the effects of the coronavirus will be felt for a long time, so the Federal Reserve needs to stay vigilant and proactive when it comes to supporting the economy.
Earlier today the Bank of Japan also held a monetary policy meeting. Unsurprisingly, it kept the interest rate at -0.1%. Recall that the BoJ’s policy was already dovish even before the pandemic began, due to the deflationary tendencies in the Japanese economy.
