Weekly Comic: Central Bank Games

This week’s discussion centers around the 2016 Olympic Games in Rio and the recent flurry of activity from central banks in developed economies.

The Bank of England, under the leadership of Governor Mark Carney, recently cut interest rates to a historic low of 0.25% and implemented new easing measures to support the economy in light of the potential downturn predicted after the Brexit vote.

In the eurozone, slow economic growth and nearly nonexistent inflation are likely to prompt European Central Bank President Mario Draghi to both extend and broaden the asset purchase program as early as next month, according to market analysts.

Meanwhile, the Bank of Japan, led by Governor Haruhiko Kuroda, opted for only moderate stimulus measures following its latest monetary policy meeting, disappointing investors who were hoping for more aggressive easing actions. Although the BoJ increased its purchases of exchange-traded funds, it refrained from further reducing interest rates into negative territory or expanding the monetary base, which many analysts had anticipated.

The Bank of Japan announced it would thoroughly assess the impacts of its negative interest rates and extensive asset-buying program in September, indicating that significant changes to its stimulus strategy could be on the horizon.

Conversely, market participants are gauging the potential for the Federal Reserve to raise interest rates by the end of this year. Fed funds futures pricing reveals that traders now estimate a 40% probability of a rate hike in the U.S. by December, compared to around 9% for September.

A forthcoming speech by Fed Chair Janet Yellen during a central bank symposium in Jackson Hole, Wyoming, on August 26, will be closely monitored for insights into the timing of any potential interest rate increase.

Given the performances of these central bankers, and in the spirit of the Olympic Games, we invite you to share your opinions in the comments section about which central banker deserves a gold medal and who should be left off the podium.