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FX Blog- GVI Forex Month Ahead Interest Rate Outlook for February 9, 2009
Central Bank Policy Outlook -- Key Interest Rates
Global Interest Rates
February 9, 2009
Monetary Policy Forecasts for Major Economies
Upcoming Decisions Bank of Japan- Thursday February 22, 2009
BOJ target rate (0.10%) already virtually at zero. No further rate cuts are possible.
Japan is at the mercy of overseas demand.
Quantitative Easing surfaced first in Japan in the late 90ï¿½s.
Deflation a potential issue for Japan again.
The Global-View.com Monetary Policy Outlook is prepared weekly by the trading professionals at GVI Forex. For information on the GVI Forex Service Click Here
Most major central banks have embarked on a policy of quantitative easing (QE). QE means that instead of targeting an interest or inflation rate that the bank force-feeds reserves into the banking system. The goal of QE is to inject reserves in the system sufficient to make credit available to all potential borrowers.
GVI BOJ Policy Meeting Preview
- Decision: January 22, 2009
- Current Overnight Target Rate: 0.10%
- Expected decision: unch
- Japanese interest rates virtually hit their theoretical 0% floor (0.10%). The central bank surprised many on December 22 by taking a page from the Fed's playbook and throwing everything but the kitchen sink at its weakening economy and an overvalued currency.
BANK OF JAPAN Policy Objective: The Bank of Japan Law states that the Bank's monetary policy should be "aimed at, through the pursuit of price stability, contributing to the sound development of the national economy."
The chart above shows year/year core nationwide CPI and the reported BOJ goal of between 0% and 2% for this price index.
The chart above shows the current three month libor rate, the current BOJ overnight rate target and where the futures markets are currently trading three month rates for the specified periods in the future. The chart also includes comparisons of where these futures rates were trading most recently, a week ago and four weeks ago. The chart provides a view on where the markets feel Japanese interest rates are headed.
The chart above shows the Japanese overnight rate target, three month libor, and two- and ten-year bond yields over the past twelve months.
John M. Bland is a co-founder and partner of Global-View.com. Prior to Global-View.com, he was a Vice-President and senior dealer in a forex inter-bank and futures trading arm of a subsidiary (ContiCurrency) of the Continental Grain Company in NYC. Previous to that, he was one of the early members of the Chemical Bank corporate advisory service in NYC, and also worked in international liability management for that bank. John holds an MBA from the Hass School at the University of California at Berkeley and a bachelors degree in International Economics from Berkeley.
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