RHB | United States | Unusual but Not Unprecedented

Economic Research	05 January 2014
US
Economic Highlights
Unusual but Not Unprecedented Monetary policy decisions at major central banks (i.e., BoJ, BoE, BoC and ECB (Buba prior to 1999)) tend to be positively correlated, though not necessarily in lock-step, with Fed policy actions on balance. Therefore, the possibility of diverging major central bank policy this year--in particular, with the Fed and BoE normalizing policy, while the BoJ and ECB on an easing path--is undoubtedly intriguing. Although the expected divergence in major central bank policy is unusual, it is not unprecedented. When we examine the policy episodes from 1984-2008, we find that interest rate decisions, say at two or more major central banks, have only deviated from Fed policy actions roughly 5% of the time on balance. Economist:  Thomas Lam  | +65 6533 0389