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FX Blog- GVI Forex Month Ahead Interest Rate Outlook for June 14, 2009
Central Bank Policy Outlook -- Key Interest Rates
Global Interest Rates
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
14 June 2009
Upcoming Central Bank Meetings -- Monetary Profiles
Bank of Japan- Tuesday June 16, 2009
BOJ target rate (0.10%) already virtually at zero. No rate cut is possible.
Japan invented Quantitative Easing.
BOJ has been starting to upgrade its economic assessment.
Swiss National Bank- Thursday June 18, 2009
Market expects no cut in the 0.25% target for three month CHF LIBOR.
Swiss National Bank headed for an effective zero interest rate policy (ZIRP).
SNB would like to weaken the CHF vs. the EUR.
Inflation not issue; economy slow.
U.S. Federal Reserve- Wednesday June 24, 2009
Market expects no further cuts in the 0 to 0.25% target range for the Fed funds rate.
The Federal Reserve effectively has embarked on a quantitative easing policy.
Inflation not an issue; economy slow.
Focus now turning to Fed pronouncements on the health of the economy.
GVI BOJ Policy Meeting Preview
- Decision: June 16, 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.
GVI Swiss National Bank Policy Meeting Preview
- Decision: June 18, 2009 at 13:00 GMT.
- SNB 3mo Swiss libor target: 0.25%
- Expected Decision: unchanged
- The SNB cut rates by another -25bps in March. A move something like a ZIRP (Zero Interest Rate Policy) is probable.
SWISS NATIONAL BANK Policy Objective: The National Bank equates price stability with a rise in the national consumer price index (CPI) of less than 2% per annum. In so doing, it takes account of the fact that not every price movement is necessarily inflationary. Furthermore, it believes that inflation cannot be measured accurately. Measurement problems arise, for example, when the quality of goods and services improves. Such changes are not properly accounted for in the CPI; as a result, inflation, as measured by the CPI, will be slightly overstated.
The chart above shows year/year CPI and the Swiss goal of less than 2% for this price index.
The chart above shows the current three month libor rate, the current three-month Euro-Swiss 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 Swiss interest rates are headed.
The chart above shows the Swiss three-month Euro-swiss rate target, three month libor, and two- and ten-year bond yields over the past twelve months.
GVI U.S. Feberal Reserve Bank Policy Meeting Preview
- Decision: June 24 at 18:15 GMT.
- Fed Funds rate: 0 to 25%
- Expected Decision: no change
- The Fed cut rates virtually to zero on December 16. It also threw in the kitchen sink with easing measures. A ZIRP (Zero Interest Rate Policy) and quantitative ease (QE) has arrived.
FEDERAL RESERVE Policy Objective: The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.
The chart above shows year/year core PCE for the U.S. relative to its its reported "comfort zone for this key price index. Headline and Core CPI figures are also shown.
The above monthly U.S. employment chart is included because its the most closely followed data release each month, and because one of the objectives of the Fed is to maximize employment.
The chart above shows the current three month libor rate, the current Fed funds 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 U.S. interest rates are headed.
The chart above shows the U.S. Fed Funds rate target, three month libor, and two- and ten-year bond yields over the past twelve months.
John M. Bland is an author and 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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John M. Bland, MBA
co-founding Partner, Global-View.com
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