Central banks: Federal Reserve to start tapering, possibly this year
The minutes of the most recent meeting in July showed some dissension among Federal Reserve members. According to the minutes, “most participants” favor starting the tapering of the bond purchase program (currently USD 120 billion per month) from the end of this year, while “several others” confirmed their preference for the beginning of 2022. The market interpreted this as a less accommodative stance than before, but this was again somewhat mitigated by comments from Fed Chairman Powell at the Jackson Hole symposium for central bankers. Nevertheless, the market expects the Fed to announce its tapering plans in September and to start tapering asset purchases in the fourth quarter.
The Norwegian central bank maintained its policy rate at 0% as expected, but confirmed that it would most likely raise the policy rate in September. It referred to the normalization of economic activity and the risks of leaving interest rates low for too long (financial imbalances).
The New Zealand central bank postponed the interest rate hike expected in August because of new lockdowns due to rising covid infections. It is now expected that there will be an interest rate increase in October.
Following the lowering of the required reserve ratio (RRR) in July, comments from the Chinese central bank continue to suggest that the loosening of monetary policy is possible soon, if not likely. The statement came after it emerged that lending in July grew at the slowest pace since February 2020.