How interconnected is global monetary policy?

On Wednesday the RBNZ cut the Offical Cash Rate (OCR) by 25 basis points – 0.25%. It has now forecast the OCR to reduce by the same margin at their next 3 meetings and gradually work the rate down to 3%. However, further reductions are dependent upon inflation expectations remaining anchored around the two percent midpoint of the 1 – 3% policy target agreement, and “that pricing behaviour remains consistent with a low inflation environment”.

How do central bank interest rates movements compare across the globe? The FT have come up with some great interactive charts/graphs showing the movements of inflation / interest rates etc – see images below. Unfortunately New Zealand is not included in the “consumer inflation” and “how central banks tackle inflation” graphs. The latter is very interesting as it shows how quickly central banks respond to increasing inflation – is it delayed or synchronised? The European Central Bank (ECB), Bank of Canada (BoC) and Bank of England (BoE) have lowered their interest rates in recent months. The US Federal Reserve is forecast to lower rates in September with around 105 basis points reduction by the end of the year. The graphs below are great for class discussions.

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