Hours after the US Federal Reserve hiked interest rates on Wednesday, China’s central bank followed suit while Bank of Japan and Bank of England maintained status quo on both the rates and quantitative easing.
The People’s Bank of China (PBOC) raised interest rates for the third time in as many months by 10 basis points on both medium-term lending facility (MLF) loans and its open market operation reverse repurchase agreements.
The PBOC move comes and a day after the end of the annual session of parliament where leaders warned that tackling debt risks would be a top policy priority this year.
The move brought the rate on MLF loans to 3.05 percent and 3.20 percent, respectively, the PBOC said in a statement.
The Bank of England’s Monetary Policy Committee (MPC) decided to maintain the key policy rate Bank Rate at 0.25%. “The Committee voted unanimously to continue with the programme of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, totalling up to £10 billion. The Committee also voted unanimously to maintain the stock of UK government bond purchases, financed by the issuance of central bank reserves, at £435 billion,” BoE said in a statement.
In Tokyo, the BoJ left the deposit rate unchanged at minus 0.1% for current accounts held by financial institutions at the Bank while the long term lending rate will continue to be targeted at 0%
“The Bank will purchase Japanese government bonds (JGBs) so that 10-year JGB yields will remain at around zero percent,” BoJ said.
BoJ will maintain the same pace of bond and asset purchases annually--80 trillion yen of JGBs, 6 trillion yen of exchange traded funds (ETFs), 90 billion yen of real estate investment trusts (J-REITs), 2.2 trillion yen of commercial papers and 3.2 trillion yen of corporate bonds.
With regard to the outlook, Japan’s economy is likely to turn to a moderate expansion,” BoJ said in a statement.
On the price front, the year-on-year rate of change in the consumer price index (CPI) has been about 0%. “Inflation expectations have remained in a weakening phase,” it said but added CPI is likely to become “slightly positive” on rising energy prices and further rise to 2%.
On Wednesday, the Federal Reserve has raised its benchmark interest rate by 25 bps for the second time in three months and signalled that any further hikes this year will be gradual.
The Fed’s key short-term rate is rising by a quarter-point to a still-low range of 0.75% to 1% as it perceives the economy no longer needs the support of ultra-low borrowing rates and is healthy enough to withstand steadily tighter credit.