Three types of central bank
- There are three sorts of central banks in the world today: commodity exporting economies' banks have an incentive to ease; commodity importers' banks have an incentive to tighten; opportunistic central banks will manipulate commodity price consequences in support of their preset objectives.
- The Reserve Bank of Australia lies clearly in the first camp, easing monetary policy today with a quarter point rate cut to offset the growth consequences of a weaker commodity price environment. The move was not a surprise as to direction, but was earlier than expected.
- The Euro area will see the benefits of lower commodity prices, as a net commodity importer, and the scale of that benefit should be hinted at in the release of producer price data today (negative, of course, as it has a higher commodity component than consumer price data).
- The lack of need for stimulus in the US was hinted at with yesterday's senior loan officers' survey of credit conditions, which showed further incremental easing. The credit cycle is starting to show signs of maturing in the US.