EconReporter

A careful study of Hong Kong's currency peg that explain why the current low-interest rate environment can be interpreted as a result of the Hong Kong Monetary Authority's policy choice.

Macroprudential policies, it is argued, are more targeted and can complement central bank’s use of interest rate policy.

Since the Euro crisis, investors and policymakers are well aware of the so-called "doom loop" between the banking system and the sovereign. That is, a crisis originating in the banking system (sovereign) will weaken the sovereign (banking system), which in turn will worsen the banking (sovereign) crisis itself. In a recent ECB discussion Paper "Managing the sovereign-bank nexus", the 7 economists - Giovanni Dell’Ariccia, Caio Ferreira, Nigel Jenkinson, Luc Laeven, Alberto Martin, Camelia Minoiu, and Alexander Popov - coauthored the paper suggested that the banks and sovereigns are linked by three interacting channels:

In recent months, the Global Economic Policy Uncertainty index has risen to a level much higher than periods around the 911 Terrorist Attack or the 2008 Financial Crisis, hence the conclusion that the economic policy is unprecedently uncertain now. But here is why you might not have to worry.

"The [Standing Repo Facility (SRF)] rate is set at the top of the FOMC’s target range for the federal funds rate. This combination of an ample supply of reserves and an SRF rate at the top of the target range reduces the day-to-day reliance on the facility except during periods of significant upward pressure on rates resulting from strong liquidity demand or market stress," said John Williams

HKD tends to be on the strong side (closer to HKD 7.75 per USD) when the interest rate differential is positive (HIBOR > LIBOR).

The Federal Reserve is expected to cut its benchmark interest rate by 25 basis points this week. This has been the baseline market assumption since Chairman Jerome Powell's speech at Jackson Hole, in which he proclaimed, “the shifting balance of risks may warrant adjusting our policy stance." The question is, how many dissenting votes will Powell face in this meeting?

The Bank of Canada on Wednesday decided to hold policy rate at 2.25% unchanged, as expected by markets. However, what is a notable is the Bank continues to show dovish bias given the recent rebound in economic data. 

An important question is how do we get the series IDs for the data you need. The short answer is through BLS's Data Finder

The above figure shows the balance sheet of four major central banks from 2005 to 2015. Above the horizontal axis is the asset side...