If the economy and the financial system were a ship, the captain of that ship would be the central bank of that economy. That conveys the importance of central banks across economies. While central banks may not be hogging as much limelight as governments, they end up doing majority of the work.
Primarily, other than regulating banks within the country, a central bank is tasked with two major macroeconomic responsibilities – to ensure that the growth engine keeps revving and to keep inflation under check.
Usually, with the tools available with a central bank, growth and inflation become inversely related. Take this example. A central bank usually uses interest rates as a tool to rev up growth. Afterall, lesser interest rate means cheaper loans and more lending, and hence, more economic activity. But on the flip side of it, once more lending happens, it ends up disbursing more money with the hands of retail customer – which would, in turn, lead to increased spends, and hence, inflation.
To tide over this dilemma, every central bank has a set of wise people, who sit together on regular intervals at the monetary policy meets to discuss what should be the road ahead. In the upcoming months, the world will see these major monetary policymakers’ meetings:
Reserve Bank of Australia: The central bank of Australia – Reserve Bank of Australia – would announce its updated monetary policy on 3 August 2021, with rising coronavirus cases in Sydney, despite the lockdown and its economic fallout being reflected in June's preliminary retail sales (a dip of 1.8% month-over-month – more than double the decline anticipated). Analysts state that it looks likely for RBA to provide more support through stepped-up bond buying. The RBA is currently buying AU$5 billion a week and may increase further by up to 25%.
Bank of England: The British central bank would be coming up with its monetary policy two days later – on 5 August 2021. Some of the monetary policy committee officials in the country have already turned hawkish due to a rising inflation and a fast-recovering economy. The chances of a dissent in favour of a truncation in bond purchases may see increase when the committee meets. However, until the furlough program concludes at the end of September, the health of the labour market would be sort of ambiguous. That said, the market seems to be discounting for a rate hike by the British central bank in the second half of next year.
Bank of Thailand: The Thai economy has been worst hit due to the COVID-19 pandemic and the restrictions because of it. The country’s much-needed forex hasn’t been flocking in, as tourists have been avoiding any kind of travel. Result? Thai Baht is the worst performing currency in the Asia Pacific (APAC) markets for 2021. Analysts believe that in a bid to boost the economy, the Thai central bank may end up slashing interest rates – that currently stand at 0.50%.
Reserve Bank of India: The past decade has been hectic for the India’s central bank. It had to maneuver through multiple banking and shadow banking collapses – that too in a country where a financial institution failing is still a taboo. But that doesn’t spare it from having crucial monetary policy meets during this tumultuous time of the pandemic. The Indian central bank’s monetary policy committee is again meeting this week. However, it is unlikely to tweak it for now.
Others: The Czech central bank, which has already started increasing interest rates, would meet again this month. Across Atlantic, in Brazil, the central bank would be meeting this week and deliberating over the hike of interest rate.