The Role of the Major Central Banks in the Forex Market
The Role of the Major Central
Banks in the Forex Market
Setting Lending Ratescc: LendingMemo - https://www.flickr.com/photos/92802060@N06
The discount rate is the base rate set by the central bank
from which other types of lending rates are calculated. This
has a direct effect on the cost of funds to the end borrower.
cc: Jeremy Brooks - https://www.flickr.com/photos/85853333@N00
Setting Monetary Policycc: DonkeyHotey - https://www.flickr.com/photos/47422005@N04
Monetary Policy is defined as the actions
taken by a central bank to regulate the
supply of its currency.cc: rafael-castillo - https://www.flickr.com/photos/7972895@N02
Lender of Last Resortcc: michael2baer - https://www.flickr.com/photos/118520657@N08
The Major Central Banks
around the World
U.S FEDERAL RESERVE ( THE FED )
• The Federal Reserve is considered to be the most influential central bank in the world.
• The Federal Reserve has a division within it, namely the Federal Open Market Committee (FOMC which is responsible for making interest rate decisions.
• The FOMC meets eight times per year.
BANK OF ENGLAND (BOE)
• The BOE aims to keep inflation
at a 2% target per year.
• Any deviation from that, and
they take measures to reach
that target.
EUROPEAN CENTRAL BANK (ECB)
• The European Central Bank was
organized after the creation of
the EURO in 1998.
• The committee which is primarily
responsible for monetary policy is
known as the Governing Council.
SWISS NATIONAL BANK (SNB)
• The Swiss National Bank’s monetary committee meets quarterly.
• As of this writing, the key person within the committee is Jean-Pierre Roth, the Chairman of the SNB.
BANK OF JAPAN (BOJ)
• Japan’s economy is highly dependent on exports, one of the major concerns of the BOJ committee is to ensure a relatively weak Yen.
• The BOJ is quite active in the Open Market to ensure this goal. The Bank of Japan typically meets once or twice a month.
BANK OF CANADA (BOC)
• The BOC has set an inflation
target of 1-3% per year, and
thus far has been successful
in meeting that goal over the
last 15 years.
RESERVE BANK OF AUSTRALIA (RBA)
• The RBA has an inflation target rate of 2-3% per year.
• The committee meets eleven times per year to discuss and make monetary policy decisions.
RESERVE BANK OF NEW ZEALAND ( RBNZ )
• The Reserve Bank of New Zealand’s monetary policy decisions rests in the hands of the Central Bank Governor
• The RBNZ has an inflation target of 1.5% per year, and the current governor Alan Bollard, is responsible for meeting that objective.
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