Tokyo changes course. While interest rates were rising throughout the world, Japan maintained the same position for 17 years: stable and/or negative rates. Today, however, stop. The cost of borrowing was raised by 0.1%. End of the only negative interest rate regime in the world. What about the other central banks? Wait-and-see reigns. Many say that the Fed dictates the line and everyone waits for the first move and then follows. As it always has been.
Tokyo raised interest rates today for the first time since 2007. Short-term interest rates rise to around 0%-0.1% from -0.1%. An expected decision, given the growth in inflation and the 5.3% increase in wages. With its historic decision to exit the very long and decades-long phase of ultra-expansionary monetary policy, Japan has kicked off a crucial week. In fact, all the banks are meeting these days, except the ECB which has however already clearly made it clear that there will be talk of a cut in April, but more likely in June, despite the fact that inflation in the Eurozone continues to fall. In February it stood at 2.6%, compared to 2.8% in January (Eurostat).
Now it's the Fed's turn (which meets today and tomorrow). Immobility. This seems like the most likely scenario. As at the end of January, the US central bank is now in a maintenance position. Warmer-than-expected February jobs and inflation data are prompting the Fed to reconsider how much it will cut rates, and that could lead to waiting longer. Powell & Co have always maintained, ever since they started the increase, that monetary policy would only change in the face of inflation in line with (or close to) the objective (2%) and a greater balance between demand and job offer. And the time hasn't come?
Thursday is London's turn. Inaction is also expected here. Rates unchanged and for the Bank of England it would be the fifth time in a row. An alignment with the Fed and the ECB, with eyes focused on wage growth above all, while there seems to be more tranquility about the constant cooling of inflation. There is talk of August to have the first cuts in London. Do they wait for the Fed and the ECB before acting?
The Australian Central Bank is also taking its time, not planning to cut interest rates before September. Here the expansionary monetary policy to support the economic recovery awaits the third phase of tax reduction starting at the beginning of July.
And Switzerland? The Swiss National Bank could reverse on Thursday, with an initial rate cut to weaken the Swiss franc which, due to excessive strength against the dollar, is causing damage to foreign trade and the competitiveness of Swiss producers. But with stabilized growth, even if less strong than usual, and normalized inflation, the Swiss National Bank does not have all this urgency to reverse monetary policy. So he could also decide to wait for the Fed and the ECB.
And Frankfurt? April is the next date. The latest ECB governing council spoke of a 0.25% cut, most likely in June. The objective is 2% inflation and for this reason we have seen years of raised rates, the strongest monetary tightening in the history of the euro. And now it's time to scissor. Rhythm is what matters. After the first cuts, rates will still remain restrictive and therefore the compression of economic growth will continue. We need to start and we will need to accelerate if, as it seems, growth is weaker than expected and inflation falls more rapidly. And the consequences of the credit crunch are now evident. The economic situation in the Eurozone pushes for an autonomous decision from Frankfurt: to cut. Without waiting, as always, for the first move to arrive from the other side of the Atlantic.
