New Tactics From AAA CBs?
The central bank releases on Wednesday from the RBNZ and Norges Bank have provided us with unique insight in how policymakers in the minor G10 yet AAA economies (for simplicity we include New Zealand) are dealing with potential or realised currency strength. As we enter a fifth year of quantitative easing, and with intensity of the liquidity provision itself actually increasing, such central banks are largely resigned to seeing elevated currency levels on a structural basis. Nonetheless, growing global disinflation and the risk of downside price pressures being actively imported requires a response. Emulating the SNB is the last resort, but it appears that a combination of stealth intervention, rate cut threats and verbal jousting is the new modus operandi. NZD aside, it seems to have worked decently for the other four, but we doubt long-term success can be guaranteed.
Click here to read the full report: UBS