In a dramatic turn of events, the Bank of Japan aggressively eased monetary policy further by dropping the benchmark interest rate from 0.10% to -0.10% as the Central Bank tries to avoid the creeping influence of deflation. Although the Bank of Japan has already warned market participants that it will be unable to meet its inflation mandate, the latest move comes after the latest trade figures showed both exports and imports plunging in 2015 as major trade partners faced a slowdown. Across the Pacific, the United States Federal Reserve opted to leave the benchmark on hold at 0.50% while leaving the door open for another hike in March but nevertheless striking a dovish tone in the statement as macroeconomic conditions continue to deteriorate. The preliminary estimate of 4th quarter GDP at 0.70% showed growth experiencing a sharp pullback and when combined with weak durable goods spending, there is rising potential for a policy u-turn. The Reserve Bank of New Zealand also announced its latest policy decision, leaving interest rates on hold at 2.50% but warning that additional rate cuts remain in the pipeline should inflation remain weak amid the drag from energy prices.
Bank of Japan Enters Negative Rates
Weekly Report - 31/01/2016