Swiss National Bank keeps its expansionary monetary policy

Jun 24, 2021
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Federal Reserve Chair Jerome Powell said on Monday that inflation has risen but is still t...

Federal Reserve Chair Jerome Powell said on Monday that inflation has risen but is still transitory and will be back to its 2% target as soon as supply imbalances resolve. During the last week meeting, more than half of officials predicted two hikes of interest rate by the end of 2023. It had immediate impact raising the 2 year Treasury to 0.2% first time since March 2020.

US central bankers expect the personal consumption expenditures price index to rise 3.4% this year and then decline to 2.1% level during the next 2 years. At the same time market is focusing on the consumer price index, which is now at 5%, hence, it creates a distinction between market and Central Bank inflation estimates opinions. On Monday, some Fed officials expressed their idea that Central bank might start monetary policy tightening earlier than expected but no schedule was determined yet.

Following US Monday’s inflation news and increasing demand due to economic recovery, oil has reached its highest level since October 2018 with Brent at 75.43 USD and Crude 73.6 USD. Meanwhile Russia is considering proposing an OPEC to increase oil output during the next week meeting.

Yesterday Federal Reserve Chair Mr. Powell provided investors with evidence that Inflation is under control and Fed will not be rushing interest rates hikes. Following these updates Dow Jones retook its position since last week and now back to its 33’932 level.  Nasdaq is up to 0.79% effected by Amazon, Microsoft and other tech stock rise. US 10-year Treasury rebounded after last week decrease, now at 1.48%.

European Central Bank President Christine Lagarde said on Monday that US inflation rise would have only limited impact in the Eurozone. Even with increased price change of US imported good the overall effect anticipated to be moderate. Lagarde said that the overall economy outlook is getting better with improving pandemic situation with May Consumer Price Index is 2.1% and 10 year German Bund at -0.16%.

Yesterday Hungary as the first European country tightened its monetary policy with an interest rate increase to 0.9% (first jump since 2011) in attempt to control inflation.

Swiss National Bank keeps its expansionary monetary policy and Interest rate unchanged at -0.75%. It stays prepared to intervene in exchange rates if needed. BNS is expecting that GDP 2021 growth will be 3.6% compared to previous prediction of 3%. It shows that in line with other European countries, Switzerland is picking up faster than previously expected.

Turkish Central Bank kept its interest rate at 19% level, following its high level of inflation expectations and unchanged tight monetary policy.

Increase in commodity prices and a worsening draught are pushing prices up in Brazil. Last week Brazilian Central Bank increased its interest rate to 4.25% and is anticipating another possible hike in future.

China banned its financial institutions and payment company Alipay from providing any cryptocurrencies transactions. It costed Bitcoin a drop of nearly 10% from 35’800 to 33’900 now. As a matter of case Bitcoin price was 64’800 in April this year.