Central Bank News and Interest Rates

Interest Rates

Central BankInterest RateLast ChangeNext Meeting
Federal Reserve1.00 %Mar 15, 2017May 3, 18:00 GMT
European Central Bank0 %Mar 10, 2016Jun 8, 11:45 GMT
Bank of Japan-0.1 %Jan 29, 2016Jun 16, 02:00 GMT
Bank of England0.25 %Aug 4, 2016May 11, 11:00 GMT
Bank of Canada0.5 %Jul 15, 2015May 24, 14:00 GMT
Reserve Bank of Australia1.5 %Aug 2, 2016May 2, 03:30 GMT
Reserve Bank of New Zealand1.75 %Nov 10, 2016May 11, 21:00 GMT
Swiss National Bank-0.75 %Jan 15, 2015Jun 15, 07:30 GMT
Euro Dollar EUR/USD

EUR/USD Sells Off on ECB Rate Decision

As was expected, the European Central Bank made no changes to its record low interest rates during today's policy announcement. The benchmark rate remains...

ECB Leaves Main Interest Rate at 0.0%, Forward Guidance Unchanged

The ECB left all benchmark interest rates on hold following the latest Council meeting with the main refi rate remaining at 0.0% and the...
Japan Currency JPY

USD/JPY Higher After Bank of Japan Rate Decision

USD/JPY is higher in today's trading after the Bank of Japan's decision to keep interest rates at -0.1% where they have stood since the...
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BOJ Rate Decision: Monetary Policy Left Unchanged Amid Higher Growth Outlook

The Bank of Japan (BOJ) toed the line on monetary policy Thursday while upping its forecast for economic growth, as the world's third largest...

Populist Support Ebbs In Europe, ECB Policies Playing Crucial Role

Following the French first-round Presidential vote, there is likely to be increased confidence in Euro-zone and European assets, at least in the short term...

March Chicago Fed National Activity Index Declines to 0.08, Consumption Subdued

The Chicago Fed National Activity Index (CFNAI) declined to 0.08 for March following a revised 0.27 gain for February which was originally reported as...
Bank of England

Bank of England Saunders: UK Inflation Liable To Reach 3%

In a speech on Friday, external Bank of England MPC member Saunders suspected that there will be steady growth over the next 1-2 years...
Australian Dollar AUD

AUD/USD Drops Lower As RBA Minutes Continue To Weigh

In a two-day decline, AUD/USD has erased most of last week's gain. The pair is testing support that has held it higher within...

RBA Minutes Suggest Housing Market Risks are “Rising”

The Australian economy likely made steady progress in the first quarter, although risks associated with the housing market appear to be growing, members of...
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european central bank
bank of japan
bank of england
bank of canada
reserve bank of australia
reserve bank of new zealand
swiss national bank

What are Central Banks?

Central banks are responsible for the monetary system of their country. Through monetary policy, changes are made in lending, interest rates, reserve requirements and open market operations. Central banks have a monopoly over the money supply of their country and are able to print the national currency.

By controlling the money supply of its country, the central bank has a great deal of influence on the value of its currency. Monetary policy statements are provided by central banks at regular intervals to offer transparency in their actions, and market participants follow these statements to assist in the speculation of a country’s currency or equity market value.

Central Banks’ Goals and Objectives

Central banks have target mandates that usually relate to employment, price stability, and economic growth. Most central banks have similar targets for price stability, for example, a 2% inflation target is common among most banks. The method of economics used to achieve their targets can differ from one central bank to another.

The Federal Reserve, as an example, is focused on 2% inflation and maximum employment. Fed Chair Janet Yellen is a Keynesian economist who believes in the modern version of the Phillips curve. The model points out an inverse relationship between unemployment and inflation. The idea being that if an economy succeeds in reducing their unemployment rate, inflation levels should increase. Interest rates are then used to control inflation, to prevent the figure from going over the 2% objective.

The Federal Reserve cut their interest rates aggressively following the financial crisis. As the economy has improved, it would be appropriate to raise interest rates once again. But as the Fed’s target mandate is price stability, and maximum employment, they will not take any action that would contradict their mandate. While employment levels have improved, inflation has not reached the 2% level.

Central Banks and Interest Rates

Interest rates impact inflation levels through money supply. When a country raises their interest rate, the cost to borrow increases, resulting in a smaller money supply. When the availability of money decreases, the prices of goods and services either remain stagnant or decrease, hence downside pressure on inflation. For this reason, a central bank would have difficulty raising interest rates during times of low inflation, and inversely cutting interest rates during times of high inflation.

In the Phillips curve model, the inverse relationship pointed out between inflation and employment has resulted in the Fed focusing on employment, with the aim of increasing inflation, so that interest rates can be returned towards prior level.

Each central bank has its own challenges and focus. The Reserve Bank of India is on the opposite end of the spectrum. They have faced an extended period of high inflation, and therefore the interest rate is high, and the currency value is low. While the focus of the RBI is similar in that it pays importance to inflation and employment, their goals differ from the United States.

Central banks aim to deliver transparency in their actions. Their websites will often state their target mandate, as well as include minutes from prior monetary policy meeting minutes, which allow the public to know what the bank is doing.

The major central banks include:

Quantitative Easing (QE) and Open Market Operations

Following the financial crisis, several banks lowered their interest rates to aid the economy. Due to the severity of the crisis, further was action was needed, and Quantitative Easing (QE) measures were implemented in several economies. QE is an unconventional monetary policy that is often referred to as open market operations.

Open market operations allow the central bank a method of directly injecting money into the economy. It can be used as an alternative, or used together with interest rates to increase the money supply. Central banks will purchase government securities or other securities, in doing so the bank turns over its money into the economy while decreasing the supply of the security. These measures are used when there is a need for urgency in increasing the money supply. Timing plays a big role during a crisis, and adjusting interest rates can take time to filter through prior to increases in money supply being realized.


Central banks play a crucial role in the health of a country’s economy, and in the financial markets. The monetary policy action of a central bank carries a great deal of influence on that country’s currency and equity markets. If a central bank is concerned with a specific data set, then market participants will focus on that data and additional volatility is seen in the markets during the release of that data. The website of a central bank provides information on the health of the country’s economy and is a good indicator for market participants in speculating future value of the country’s currency and equity market.


Upcoming Economic Events

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