Japan’s real GDP growth for the first quarter of 2019 was revised up marginally to 0.6 percent quarter to quarter. Photo: Privacy.

JAKARTA (TheInsiderStories) – Bank of Japan (BoJ) and Bank of England (BoE) kept its June’ monetary policy steady, joining the United States (US) and European central banks in dropping hints of additional easing as the escalating US – China trade war, Brexit, and geopolitics tension in the middle east adds pressure on the slowing global economy.

On Thursday, BoJ announced to maintained its short-term rate target at -0.1 percent and a pledge to guide 10-year government bond yields around zero percent. It also kept intact a loose pledge to keep buying government bonds so the balance of its holdings increases by roughly 80 trillion yen (US$738 billion) per year.

Policymakers also kept the target for the 10-year Japanese government bond yield at around zero percent but warned that downside risks regarding overseas economies were likely to be significant so that close attention should be paid to their impacts on firms’ and households’ sentiment.

With regard to the number of government bonds to be purchased, the bank will conduct purchases in a flexible manner so that their amount outstanding will increase at an annual pace of about 80 trillion yen.

The BoJ also determined by a unanimous vote to purchase exchange-traded funds and Japan real estate investment trusts (J-REITs) so that their amounts outstanding will increase at an annual pace of about 6 trillion yen and about 90 billion yen, respectively.

With a view to lowering risk premia of asset prices in an appropriate manner, the bank may increase or decrease the number of purchases depending on market conditions. As for commercial paper and corporate bonds, the bank will maintain its amounts outstanding at about 2.2 trillion yen and about 3.2 trillion yen, respectively.

Meanwhile, the British’ central bank maintained its interest rate and quantitative easing, as widely expected, but downgraded growth projection for the second quarter.

The nine-member Monetary Policy Committee, led by Governor Mark Carney, unanimously decided to hold the bank rate at 0.75 percent, the bank said in a statement on Thursday.

The previous change in the bank rate was a quarter-point hike in August 2018 and the rate is now at its highest level since 2009. The stock of corporate bond purchases was kept at GBP 10 billion and that of government bond purchases at GBP 435 billion.

The bank downgraded its growth outlook for the second quarter to zero from 0.2 percent as the factors that underpinned first-quarter growth faded. Underlying growth appeared to have weakened slightly in the first half of the year relative to 2018 to a rate a little below its potential, the bank noted.

In May, inflation eased to the central bank target. The bank forecast inflation to fall below the 2 percent target this year. The BoE said the monetary policy response to Brexit will not be automatic and could be in either direction. The MPC said it will always act to achieve the inflation target.

The third and five world largest economist joined central banks across the world that are shifting towards easing policy as the escalating US-China trade war, Brexit, and geopolitics tension in the middle east adds pressure on the slowing global economy.

The US Federal Reserve (Fed) kept rates steady in the target range of 2.25 to 2.5 percent on Wednesday but signaled it was ready to cut rates beginning as early as next month.

Others central banks around the globe also kept rates steady followed Fed monetary policy. Bank Indonesia held its benchmark 7-day reverse repo rate at 6 percent.

The policymakers said the decision is directed to ensure the availability of liquidity on the money market. The Committee added that will continue to monitor global financial market conditions and the external stability of the Indonesian economy in considering a reduction in policy rates.

While, the central bank of the Philippines left its key overnight reverse repurchase facility rate unchanged at 4.5 percent on its June meeting, while markets had expected it at 4.25 percent. Then the central bank of Taiwan held its key policy rate at 1.375 percent in June, as widely expected. Policymakers said that internal demand continued to be the driver of economic growth.

Furthermore, the Reserve Bank of Australia lowered the cash rate by 25 basis points to a new record low of 1.25 percent at its June meeting. It is the first cut in borrowing cost since August 2016, aiming to support employment growth and to achieve progress towards the inflation target range.

Interest Rate in Australia averaged 4.41 percent from 1990 until 2019, reaching an all-time high of 17.50 percent in January of 1990 and a record low of 1.25 percent in June of 2019.

Previously, India cut interest rates again by 25 bps, the third time since last February. The dovish step was taken after the latest data showed the country’s economy recorded the slowest growth in the last four years. Rusia, Egypt, Mexico and South Korean could also follow suit.

Then, the South African Reserve Bank could cut borrowing costs this summer to help counter an economic contraction there. The bank has been criticized for not slashing rates more aggressively as South Africa battles with high unemployment.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com