Federal Reserve, ECB, BOE to Keep Rates Steady, But Which Is the Most Dovish?

Published August 13th, 2009 - 08:29 GMT

During the month of August, the Federal Reserve, European Central Bank, and the Bank of England have all decided to keep rates unchanged. However, with unconventional policy measures like quantitative easing in place, which central bank is the most dovish of the bunch?

Federal Reserve
Bias: Dovish-Neutral
Current Rate: 0.25% (0.0% - 0.25%)
Next Meeting: September 23, 2009
Credit Suisse OIS 1-Year: +104bps
Latest Comments: The Federal Open Market Committee (FOMC) said in their latest policy statement on August 12 that, “economic activity is leveling out," but is "likely to remain weak for a time." Going forward, the FOMC anticipates that their past and current policy actions "will contribute to a gradual resumption of sustainable economic growth in a context of price stability." However, a reiteration of past statements that "economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period" and a commitment to complete purchases of $300 billion worth of Treasury securities through the end of October made this otherwise "neutral” statement a "dovish-neutral" one.

European Central Bank
Current Rate: 1.00%
Next Meeting: September 3, 2009
Credit Suisse OIS 1-Year: +60.9bps
Latest Comments: European Central Bank President Jean-Claude Trichet stated on August 6 that rates are “appropriate” as the pace of economic contraction is “clearly slowing.” Trichet also said that the overall mood is “a little better” than before, and that the central bank didn’t discuss whether rates were at their lowest level. Beyond that, there were few new insights on the outlook as the ECB will not publish revised forecasts until their next meeting, and ultimately, the ECB’s neutral tone suggesting that they will not expand their €60 billion covered bond buying program or adjust interest rates anytime soon.

Bank of England
Bias: Dovish
Current Rate: 0.50%
Next Meeting: September 10, 2009
Credit Suisse OIS 1-Year: +91.6bps
Latest Comments: Though no one anticipates that the Bank of England will reduce their Bank Rate any further, the central bank still remains dovish in terms of quantitative easing after they expanded their goal for purchases via the Asset Purchase Facility by £50 billion to £175 billion on August 6. 

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