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Central banks ready and willing

Stock markets are broadly flat on Thursday as numerous central banks held their first policy meetings of the year and earnings season continued.

So much focus has been on the transition in Washington and Joe Biden’s inauguration but today we’ve had multiple major monetary policy meetings, albeit no action from the ECB, BoJ or CBRT. All stand ready to act if needed though, albeit in very different ways.

ECB committed to hitting inflation target

The ECB reaffirmed its commitment to supporting the economy through the Covid crisis, acknowledging the downside risks posed by new strains and lockdowns. There was nothing surprising to come from the release of President Lagarde’s comments shortly after. Everything very much fell in line with what you’d expect from the central bank after last month’s meeting.

The euro gained in the run-up to, and after, the release against the dollar but has since given up these to trade around where it was earlier this morning. So many central banks announced further measures at the end of last year that any further action is unlikely from most unless the situation deteriorates drastically.

CBRT committed to lowering inflation

The CBRT has a very different challenge to contend with. Having regained the confidence of the markets, it’s now tasked with retaining it and avoiding another sharp depreciation in the currency. The central bank was keen to stress its commitment to this after the meeting but opted against raising rates at this time.  That will come if needed though and it will maintain tight conditions until there’s a permanent fall in inflation. A very different message to what we were getting last year.

BoJ announces no changes ahead of March review

There was no change from the Bank of Japan either ahead of its policy review in March. There has been talk about what it will do, with Governor Haruhiko Kuroda stressing it’s not just about focusing on negative side-effects but also making it more effective and agile. It’s not yet clear what this means but a lot of attention is falling on its management of yield curve control. It would be a strange time to loosen its grip on this unless it plans to replace it with something more effective, it’s just not clear what that would be. The 10-year yield was down for a third session.

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/ [1]

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Craig Erlam

Craig Erlam [5]

Senior Market Analyst, UK & EMEA at OANDA [6]
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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