Easy Does It Across Global Central Banks in 2019’s Busiest Week

By BLOOMBERG

The world’s central banks spent the week embracing easier monetary policy, paving the way to interest rate cuts perhaps as soon as next month.

They did so as President Donald Trump said he will use next week’s Group of 20 summit in Japan to hold an “extended meeting” with Chinese counterpart Xi Jinping, prompting investors to hope the trade war may thaw a little. Meantime, economic data continued to sour with German investor confidence, a New York factory gauge, and Japanese exports among the worst performers.

Here’s a roundup of what all the central banks are doing:

The Federal Reserve
While the Fed held its benchmark interest rate as expected, Chairman Jerome Powell took it as close to a rate cut as possible without executing one. He and colleagues removed a previous pledge to be “patient” in their statement and bemoaned a fog of uncertainty highlighted by the U.S.-China trade war.

Investors immediately priced in a cut for July although Bloomberg Economics warned it wasn’t yet a done deal. As the Fed met, fresh blows were raining down on it from the White House with Bloomberg reporting President Donald Trump believes he has the authority to demote Powell. Powell said he plans on sticking around.

The European Central Bank
President Mario Draghi is set to leave his post in October, yet looks likely to do so having injected fresh stimulus into the euro-area economy. Not only did he hint at rate cuts and maybe even another round of bond buying, he also said the ECB shouldn’t be hemmed in by rules that seem to restrict its room for maneuver. Bloomberg reported reducing rates is viewed as the most likely first salvo.

Draghi also found himself a Twitter target of Trump, who accused him of driving down the euro in a sign the president may be set to wage a currency war. Meantime, Bundesbank President Jens Weidmann sought to make himself a more viable candidate to succeed Draghi by acknowledging the ECB’s crisis-fighting tool is legal and valid.

The Bank of Japan
Governor Haruhiko Kuroda signaled he’s fine with Japanese bond yields being pulled lower by the global selloff. While the BOJ kept its benchmark at -0.1%, investors and economists say it may need to do even more to boost growth and inflation. Kuroda reiterated that the BOJ stands ready to add stimulus if momentum toward its 2% inflation goal is threatened. The bank does have several levers it can pull if necessary.

Norges Bank
Not every central bank is loosening policy. Norway’s hiked rates for the third time since September and signaled more tightening to come. The Scandinavian economy, which is backed by the world’s biggest sovereign wealth fund, is starting to show signs of overheating after a surge in oil investments.

The Rest
The Bank of England acknowledge rising concerns over the U.K. leaving the European Union without a deal as it kept rates on hold and cut its near-term estimate of growth to zero. Governor Mark Carney, said they still see the need for interest-rate hikes in coming years if their forecasts bear out. Brazil held rates at a record low and repeated it will only cut once the government advances an austerity measure. The Philippines surprised most economists by keeping its key rate unchanged after inflation quickened last month. Indonesia also held fire while leaving the door open to ease policy at some point. Australian policy makers said another cut there is “more likely than not,” while economists see Brazil slashing interest rates through year-end amid sour growth. Uganda kept its benchmark at a two year high as it sees inflation creeping higher. — Bloomberg