Operating framework
Asset managers becoming key drivers of policy transmission – BIS research
Asset managers in the eurodollar futures market play a role in helping, or hindering, the transmission of policy, and have begun to respond more to Fed announcements than the macroeconomy
Jackson Hole: ECB and NY Fed economists examine ideal operational frameworks for policy
Simon Potter praises paper by ECB’s Ulrich Bindseil for in-depth analysis, but also highlights a number of areas for further research
BoE deputy clashes with academics over use of leverage ratio
Shafik disagrees with paper that argues leverage ratio “harms” pass-through of monetary policy – leverage ratio is “here to stay” says deputy governor
Anticipation effects can make lower bound a self-fulfilling prophecy – BoJ paper
New Keynesian model implies an economy can be drawn on to the zero lower bound more quickly when people expect it; negative rates have only a small impact on duration
RBNZ’s Wheeler stands by inflation targeting
Despite a host of challenges for central banks, flexible inflation targeting remains the “most appropriate” framework for New Zealand’s monetary policy, governor says
Danish research examines how central banks can impact market liquidity
Price of liquidity tends to change on days when central bank is operating in markets, with aggregate liquidity and payments activity also important, PhD thesis finds
Chinese authorities should introduce inflation target – IMF staff
Report by IMF staff sets out ‘key elements’ of transition to more market-based monetary framework; encourages explicit inflation goal and new intermediate target for policy
BoE bond purchases run into difficulties
Central bank fails to meet quota of long-dated government bond purchases despite offering a high price, pointing to an unusual failure of its bond-buying mechanism
Reserve Bank of Australia governor backs 2–3% target in final address
Reserve Bank of Australia governor supports inflation-targeting regime in last public address; moving the target could open the door to further changes down the line, warns Stevens
Colombian central bank should examine transmission in greater detail – paper
Colombian banks with higher levels of solvency “less sensitive” to changes in policy rate authors say; central bank should go into “greater detail” when examining policy transmission
Nepal to introduce interest corridor in August
There will be an initial large ‘wedge’ between rates when first introduced, official says; policy rate and floor of corridors set in relation to interbank average
‘Still some flaws’ in transmission mechanism – Icelandic report
Monetary policy report says capital flow measures have not yet had as much of an impact as intended, with the yield curve stubbornly staying flat
Bank of Tokyo abandons JGB primary dealer role
Bank of Tokyo-Mitsubishi UFJ steps back from role citing “business optimisation”, in the latest sign the Bank of Japan’s policy is putting the squeeze on bank profits
RBNZ bulletin shines light on policy-making process
Article reveals details of how central bank reaches monetary policy decisions over a nine-day period, from information-gathering and modelling to deliberation and communication
Orphanides: governments should rein in ‘immense power’ of central banks
Central bank balance sheets give them power to dramatically affect the distribution of wealth, undermining democracy, former Central Bank of Cyprus governor argues
Balance sheet policy matters for credibility – Norges Bank paper
Researcher argues a central bank’s financial strength may affect its ability to meet its monetary policy mandate, based on evidence from the UK’s gold standard period
Rate delay could deprive Fed of tools in future, warns Mester
Cleveland Fed president says there is a “non-negligible chance” unconventional tools will be deemed as “ultimately ineffective” by the public if the Fed is too slow to normalise policy
Bhutan readies to sharpen ‘blunt’ policy instruments
Royal Monetary Authority of Bhutan considering improvements to policy transmission; could involve new lending and deposit windows, departure from current base rate practices
Reserve Bank of Malawi to improve monetary policy architecture
Bank moves towards fully fledged inflation targeting, embracing interest rate-based framework; IMF staff note importance of maintaining tight monetary policy
Rajan has left his mark but risk of fiscal dominance remains
Vishrut Kansal examines the legal framework Raghuram Rajan’s successor will face, arguing much of the outgoing RBI governor’s work will continue but more safeguards are needed
PBoC governor sets out challenges of pursuing multiple objectives
Zhou Xiaochuan discusses how the People’s Bank of China expresses its multiple objectives as a function that can be optimised, while noting challenges posed to modelling and communications
National Reserve Bank of Tonga considering short-term policy rate, IMF says
Fund staff encourage Tonga to reform its monetary policy framework; suggest introducing new policy rate and inflation target range more appropriate to historic and current levels
Jamaican authorities send mixed messages on adoption of inflation targeting
IMF tells central bank to focus on single mandate but Jamaican authorities say more time is needed to investigate whether path is suitable
IMF paper explores transmission of volatility along yield curve
Working paper finds differences in transmission between countries with established inflation-targeting frameworks and those in transition