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Monetary policy

A snapshot of central banks’ positions on policy rates

ECB – opened the door for further rate cuts. Interest rates will be the primary tool to fight against slow economic recovery. But the room to cut deeper into negative is very limited. The ECB might have to amend the primary approach with communication tools.

U. S. Fed – rate cut is now on the table thanks to economic slowdown, trade conflicts, geopolitical tensions with Middle East and political pressure from the U. S. president. The Fed is likely refrain from cutting the rate too many times as after all the domestic economy is still growing though not as fast.

Bank of England – hold the line of rate change for now. But if the risk of hard Brexit is materialized, then an emergent rate cut is unavoidable.

China Central Bank (PBOC) – it has the most tools available for use compared with other central banks. Each tool, including interest rate and bank reserve rate ratio, has ample room to ease. The PBOC is likely cautious on monetary ease unless the trade talk with the U. S. is escalated further.

Overall monetary policies around the world are not likely to be tightened any time soon. To include some gold positions in investment portfolios might be a smart thing to do.