Today the ECB kept its key lending rate at 1.00% as expected.
The committee noted that , “it has spent the past two years wrestling with the proven fact that although inflation appeared stuck well above the two percent target, the base weakness in the economy meant there were reasons to fret that inflation would become entrenched at ‘too low’ a level in the medium term”
On other actions the central bank is taking a wait and see attitude. The bank and its members have been under a lot of pressure due to the overall European debt crisis and the never ending Greek scenario, thus the banks actions today are understandable.
Moving from the Eurozone across to the United Kingdom, where the Bank of England, also held their key lending rate at 0.50%. This marks 3 years since the BoE drastically dropped rates to help economic recovery. The Bank is mimicking the US Federal Reserve, when one of the members stated, that they could foresee these low rates for up to 3 more years. The council also stated that they will maintain the current QE program but remained mute on any additional changes.
In his address later in the day, ECB President Mario Draghi, noted that the latest round of LTRO was successful in restoring market confidence but also emphasized that it “was a non standard temporary program”
In Australia yesterday, the Reserve Bank of Australia maintained their current rate of 4.25%, after surprising markets last month, when a .25% decrease was expected, this month’s move was forecast. Australian Banks have been increasing lending rates even though there has been no move by the central bank at increasing rates and in the last two meetings in 2011 reduced rates. Home Owners and Housing industry officials are up in arms as the increase by the banks is putting pressure on the markets.
The Reserve Bank of New Zealand also met today and announced that there would be no change in the bank’s current policy and stated that the New Zealand economy was on scheduled and recovering nicely.
Neighbouring South Korea’s central bank also met this week and maintained current interest rates. This is the ninth consecutive month that the bank has held rates. The current key lending rate is 3.25%
The Central Bank of Kenya, also maintained their current prime lending rate at 18%, stating that “Overall inflation continued to decline, dropping from 18.31 percent in January 2012 to 16.69 percent in February 2012.”
It seems that globally all central banks are sitting tight and holding current positions in the hopes of a recovery in the world wide economic situation. Greece is also a distraction with today being the final deadline in the PSI bond swap, which has effected financial institutions around the world.
Once Greece is behind, governments and policy makers can turn their attentions back to the global economic situation.