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Global Interest Rate Movements - October 2012: Almost half of central banks worldwide cut rates in first 10 months

November 6, 2012 Central Bank News

    Almost half of the world’s central banks followed by Central Bank News (CBN) cut policy interest rates in the first 10 months of 2012, with banks becoming increasingly aggressive in easing as the global economic slowdown worsened.
    By the end of October this year, 47 percent of the 88 central banks followed by CBN cut interest rates, up from 34 percent at the end of the first half and 27 percent at the end of the first quarter.
    Demonstrating central banks’ determination to stimulate growth amid low inflationary pressure, rates were cut more times in the first 10 months than held held unchanged. In contrast, the most common decisions by central banks in the first six months of the year was to keep rates steady.
    In the first 10 months, 41 central banks cut rates compared with 37 banks that held rates unchanged. After the first six months of this year, 29 central banks cut rates while 48 kept rates unchanged.
    Monetary policy has in fact been loosened even more than reflected in these figures as they don’t capture the quantitative easing that has been adopted by the three major central banks that have already cut rates to effectively zero: the U.S. Federal Reserve, the Bank of Japan and the Bank of England.
    In the month of October, 13 central banks, or 15 percent, cut rates while 73 banks, or 83 percent, kept rates unchanged.  Only two central banks, those in Serbia and Zambia, raised rates.
    Uganda has been the global leader in cutting rates this year, chopping its key rate by 200 basis points in October, boosting its cumulative rate reduction for the first 10 months to 1,000 basis points, reflecting a sharp drop in inflation.   

    Other major rate cutters this year include frontier market Vietnam, with 500 basis points cut in 10 months, Mozambique with 450 basis points and Moldova with 400 points.
    Brazil is not only the top rate cutter among emerging markets with 375 basis points cut so far this year, but also the fifth most aggressive rate cutter worldwide.

    AUSTRALIA ON TOP,  BUT EMERGING MARKETS AGGRESSIVE
    Australia is the top rate cutter among developed markets this year, having trimmed rates by 100 basis points.
    But, as expected, central banks in emerging markets have been the most aggressive in cutting rates this year, with 28 percent of emerging market banks cutting in October, compared with 15 percent of developed market central banks and 15 percent of frontier market central banks.
    Through October, a total of 71 percent of emerging market central banks have cut rates compared with 46 percent of developed market central banks and 40 percent of central banks in frontier markets.
    On average the 41 central banks that cut rates in the first 10 months reduced rates by 1.44 percentage points.
    The average rate rise by the 10 central banks that raised rates through October was 14.25 percentage points but that figure was skewed by Malawi’s 800 basis points hike. Excluding Malawi, rates were increased by 70 basis points, with 25 basis points the most common rise.

 INTEREST RATE CUTS, YEAR-TO-DATE IN BASIS POINTS, OCTOBER 2012:
COUNTRY      YTDCOUNTRY      YTDCOUNTRY      YTD 
UGANDA-1,000
LATVIA-100
NAMIBIA-50
VIETNAM-500
MONGOLIA-100
SOUTH AFRICA-50
MOZAMBIQUE-450
PHILIPPINES-100
SOUTH KOREA-50
MOLDOVA-400
ALBANIA-75
SWEDEN-50
BRAZIL-375
GEORGIA-75
NORWAY-49
TAJIKISTAN-330
HUNGARY-75
ANGOLA-25
KENYA-300
ISRAEL-75
EURO AREA-25
PAKISTAN-250
KUWAIT-75
INDONESIA-25
GAMBIA-200
ROMANIA-75
MACEDONIA-25
KAZAKHSTAN-200
CZECH REPUBLIC-70
MOROCCO-25
DOMINICAN REP.-175
CHINA-56
THAILAND-25
CAPE VERDE-150
DENMARK-50
T & T-25
AUSTRALIA-100
INDIA-50
W. AFRICAN STS.-25



MAURITIUS-50
BULGARIA-19