LONDON- Australia’s central bank said it would start to slow the pace of its bond purchases, the latest from the developed world to head towards exiting pandemic-time stimulus.
As major economies bounce back thanks to COVID-19 vaccination campaigns and an easing of lockdown restrictions, a debate about dialing back emergency stimulus has clearly begun.
Norges Bank is at the vanguard in terms of signaling a retreat. It could hike its key policy interest rate twice in the second half of this year and also twice during the first half of 2022, central bank Governor Oeystein Olsen said last month.
Its key rate is at a record low 0 percent and looks set to rise in September. This outlook has made the crown one of 2021’s best-performing G10 currency. The central bank doesn’t intervene in bond markets, so the taper debate is not applicable.
The Federal Reserve in June began closing the door on its pandemic-era stimulus. Officials moved their first projected rate increases to 2023 from 2024.
The Fed also opened talks on how to end crisis-era bond-buying, adding that the 15-month-old health emergency was no longer a core constraint on US commerce. But Fed bond buying is set to remain significant for some time, likely limiting a selloff in bonds.
Rate hike expectations in New Zealand are on the rise given stronger than expected economic growth in the COVID-free economy — business confidence improved sharply in the second quarter and firms are finding it harder to hire skilled labor.
Bank of New Zealand and ASB Bank economists have bought forward their rate-rise expectations to November 2021. A surging New Zealand dollar suggests investors agree. – Reuters
