Russian to a decision
As a change of pace, the Russian central bank seems to be somewhat divided in terms of the best policy to navigate through the dire economic situation facing them currently. The external factors affecting them are significant. Sanctions and political tension, for example, are really hurting the economy but more than this, the oil prices continuing to languish at low levels is really putting a great deal of strain on the Central Bank reserves. The result of this means that the Ruble has lost as much as 20% in a single day before and needs to be stabilised desperately.
The issue is the lessons of the early nineties, when the Central Bank flooded the market with cheap credit – principally to breathe life into the large, failing companies weighing on their economy. The result of this was 1000% inflation figures. The committee appears split now between reviving a similar plan, and easing credit conditions and offering more volume in lending or sticking to their existing ethos of having a more traditional approach which limits lending and is more cautious in an attempt to cap inflation from running away from them. Time will tell which of these will win out and provide a direction for a nation that needs an answer yesterday.
China’s Central Bank sought to support the Yuan by issuing a statement suggesting that it will take action where excess volatility exists. The recent change in the way that China sets its daily reference rate means that the markets have more influence in the value of the currency. Of course, when this changed recently the biggest selloff in 21 years occurred, battering the strength of the currency – you might have expected some unsettled movements but that was a particularly big shift.
Today, the ECB will release their Monetary Policy Meeting Accounts which should prove interesting reading. Following this, we have a slew of US data including: Retail Sales, Initial Jobless Claims, Import Price Index. Then later today we have the third bailout program vote for Greece – which, it goes almost without saying, is vital for them