Markets across the globe have started the new year with alot of turbulence. In the past two days equity markets have tumbled. Investors are again looking to central banks to provide additional policy support.
This week, the Federal Reserve will wrap up its two-day policy meeting on Wednesday, but softness in recent economic data has prompted a number of analysts to push back expectations for additional interest rate rises this year.
The Bank of Japan hands down its policy decision on Friday, and although most in the market don’t expect it to ramp up its Y80tn per year stimulus programme, pressure to take further action is mounting.
Last week the European Central Bank gave strong hints that it might boost its monetary stimulus programme as soon as March provided some temporary reprieve for markets.
Meanwhile, in China, the central bank (PBOC) continued to keep the reference rate around which the renminbi is allowed to trade basically stable, at Rmb6.5548 per dollar. The central bank also continued its effort to pump more liquidity into the financial system through its open market operations, an action that may reduce the likelihood of further cuts to interest rates. This morning, the PBoC reportedly injected Y440bn ($66.9bn) into the financial system via reverse repurchase agreements during its regular monetary operations.