The US Federal Reserves gradual exit plan from printing money has shifted the worlds central bank landscape and thrown financial markets into a spin.
The US central bank has pumped $85 billion a month into its economy but has now said it will slow that rate and maybe halt it by mid-2014.
In the coming week,the European Central Bank,Bank of England and the central banks of Australia,Sweden,Poland and Romania all hold monetary policy meetings. Following is a breakdown of how these central banks,and others,may act as thoughts turn tentatively to quitting years of extraordinary policy measures.
EUROPEAN CENTRAL BANK
The ECB,unlike the central banks of the United States,Japan and Britain,has not created money out of thin air and is expected to leave interest rates at a record low 0.5 per cent next week and for the rest of the year. The ECB has denied a report that it was considering launching a new bond buying programme under which it would buy debt of all 17 euro zone countries.
BANK OF ENGLAND
Britains central bank holds a policy meeting on Thursday. It has created £375 billion of new money to buy government bonds and no more is expected to be sanctioned this time.
bank of JAPAN
It is heading in the opposite direction to the Fed. It stunned financial markets on April 4 by setting in motion an intense burst of monetary stimulus,promising to inject $1.4 trillion into the economy,doubling its bond holdings in two years and boost purchases of risky assets in an attempt to end years of deflation.
The Peoples Bank of China has put banks in the worlds second largest economy on notice that it will tighten credit conditions but has also moved to calm a recent crunch which saw money market rates soar.
The central bank wants to curtail funds flowing into Chinas vast shadow financial system that fuels property and stock speculation and push money into more productive areas of the economy to secure more sustained growth.
Around $8 trillion has flowed into emerging stock and bond markets since 2004. The fear is that a chunk may now flow out. Indonesia has already raised rates by a quarter point to 6 per cent in the face of pressure on the rupiah currency. India kept interest rates at 7.25 per cent,having cut at the previous three policy meetings.
Brazils central bank has been intervening to prop up its real currency and has also raised its inflation forecast,signaling a quicker pace of rate rises to come.