Central Bank

The Bank of England on Thursday ramped up its UK economic growth forecasts for the next three years, despite the threat of Brexit storm clouds.
The bank voted unanimously in its February meeting to keep interest rates at the record low level of 0.25% and keep its quantitative easing (QE) purchase targets at up to £10 billion ($12.6 billion) for corporate bonds and £435 billion for U.K. government bonds.

Then, the British central bank lifted its 2017 economic growth prediction to 2.0% from a 1.4% forecast signalling the better-than expected performance of the UK economy since the June referendum.
The BOE still believes growth will slow as Brexit negotiations begin, predicting GDP growth of 1.6% in 2018 and 1.7% in 2019. That was up from growth estimates of 1.5% and 1.6% respectively.

“The most interesting part of Thursday’s events will be Mark Carney’s press conference. The Bank will probably revise up their forecasts for inflation and growth in the short term. So Mr Carney is bound to be asked why he’s not planning on raising interest rates in response. The answer will be that the central bank looks beyond this kind of inflation because it thinks it won’t last.

After a lengthy stay in the land of Oz down under, where one has a very different point of view, a return to a new situation that is still very much the old situation is enlightening.

The European Central Bank (ECB) made no changes to its record-low interest rates and announced no new measures on Thursday in what was its first policy decision of 2017. Specifically, the ECB left its benchmark interest rate unchanged at a record-low 0.0%, in line with forecasts.

The central bank also held its deposit facility rate steady at -0.4% and its marginal lending rate remained at 0.25%.
Additionally, the Governing Council confirms that it will continue to make purchases under the asset purchase programme (APP) at the current monthly pace of €80 billion until the end of March 2017 and that, from April 2017, the net asset purchases are intended to continue at a monthly pace of €60 billion until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.

Inflation has been the target of central bank policies since the beginning of the crisis.

Switzerland’s central bank expects a 2016 full-year profit of 24 billion francs ($23.6 billion), it said on Monday; the results were largely down to foreign currency holdings built up to weaken the strong Swiss franc and its negative interest rate policy.

Profit from foreign currency positions amounted to more than CHF19 billion, the SNB added in the statement while a valuation gain of CHF3.9 billion was also recorded on gold holdings. Last year’s result is set to be the second-best in the last decade and follows a record loss for 2015.

The bank has built up foreign currency reserves by selling francs and buying foreign currency to weaken the franc, which it has consistently described as "significantly overvalued".

The government defended he Swiss National Bank’s (SNB) independence and rejected a number of proposals to reform Switzerland’s central bank.

"The SNB’s monetary policy concept has proved its worth also in difficult situations such as in the wake of the global financial crisis from 2007 to 2009," the cabinet said in a statement after a meeting.

The abandonment of the CHF1.20 peg to the euro in January 2015 saw the franc appreciate further against the euro at the expense of exporters and the Swiss tourism industry. This sparked a raft of parliamentary proposals to force the SNB to change course.

The Swiss National Bank said Monday that it would add 4.6 billion Swiss francs ($4.5 billion) to its financial buffer for currency reserves in an effort to strengthen the central bank’s finances against any future bouts of economic weakness, raising the provisions to 62.8 billion francs.

"The annual allocation will continue to be determined on the basis of double the average nominal economic growth rate over the previous five years. However, a minimum annual allocation of 8 percent of the provisions will now also apply," the SNB said in a statement.