Liquidity Insights Overview

Liquidity Insights

Discover our vast array of liquidity insights covering global investment news and trends that may impact your cash portfolios

LATEST LIQUIDITY COMMENTARY

The RBA surprises as inflation trumps growth

At its 6 of June Monetary Policy Meeting the Reserve Bank of Australia (RBA) raised its Overnight Cash Rate (OCR) by 25bps to a new cycle high of 4.10%. The rate hike surprised investors, who were expecting additional rate hikes following the RBA’s hawkish pivot at its May Monetary Policy Committee (MPC) meeting but remained uncertain as to the exact timing of any RBA action.

What happens when Hong Kong’s Aggregate Balance hits zero?

Since February this year, the Hong Kong Dollar (HK$) has hit the weak side of its convertibility versus the US Dollar (US$) on multiple occasions. This has necessitated ongoing foreign exchange intervention by the Hong Kong Monetary Authority (HKMA) to support the HK$.

BoE hike in May, recession gone away

The Bank of England (BoE) raised the Bank Rate by 25 basis points (bps) to 4.50% in a split 7-2 vote as the Monetary Policy Committee (MPC) believes persistent inflationary pressures and a tight labour market justified a twelfth consecutive increase.

ECB slows hikes, but has “more ground to cover”

At its 4th of May monetary policy meeting, the ECB increased all three key interest rates by 25bps, bringing the refinancing rate to 3.75%, the marginal lending facility to 4.00% and the deposit facility rate to 3.25%.

The U.S. debt ceiling: Latest thoughts and updates

The U.S. federal government reached its debt limit - Commonly called the “debt ceiling”, the debt limit is the maximum amount of debt that the U.S. Department of the Treasury can issue to the public or to other federal agencies.

The RBA’s narrowing path to a soft landing

At its monetary policy meeting on May 3, the Reserve Bank of Australia (RBA) surprised the market by hiking its Overnight Cash Rate by 25bps to 3.85%. Justifying its abrupt volte-face, the central bank said “inflation… is still too high and it will be some time yet before it is back in the target range”.

MAS pauses as growth outlook dims

Following its semi-annual monetary policy meeting on April 14, the Monetary Authority of Singapore (MAS) left its prevailing monetary policy unchanged – including the slope, width and center-point of the band – unchanged. This represents the central bank’s first pause since it began tightening its policy in October 2021.

RBA - On hold for now

On 4 April, the Reserve bank of Australia (RBA) decided to leave the Overnight Cash Rate unchanged at 3.60%. This represents the first pause by a major central bank and follows a cumulative 350bps of hikes over the past ten consecutive meetings.

The Fed’s balancing act

The FOMC maintained its firm stance against inflation by raising interest rates 25bps to 4.75%-5.00%, despite heightened financial stability risk. Interest on reserve balances (IORB) and the overnight reverse repo rate (RRP) were also increased by equivalent amounts to 4.9% and 4.8%, respectively.

Bank of England keeping options on the table

At its March 2023 meeting, the Monetary Policy Committee (MPC) raised the Bank Rate by 25bps to 4.25%, the highest level since November 2008. The increase was largely expected by the market despite recent global financial market volatility.

PBOC RRR cut – Front Loading Policy Support

On Friday 17th March, the People’s Bank of China (PBOC) announced a broad-based 25bps Reserve Requirement Ratio (RRR) rate cut, releasing additional liquidity into the banking system and reducing commercial bank funding costs.

ECB sticks with 50bps hike, despite market turmoil

The European Central Bank (ECB) acted on February’s forward guidance by increasing key interest rates by 50 basis points (bps), despite current market volatility.

Reserve Bank of Australia - A pivot to less hawkish

At its monetary policy meeting on the 7th of March, the Reserve Bank of Australia (RBA) hiked its Overnight Cash Rate by 25bps to an eleven-year high of 3.60%. The rate hike was widely anticipated following last month’s hawkish pivot.

Hong Kong Interest Rates – rational confusion

The HKMA intervened to defend the peg and purchased HKD 19bn on February 14-15. This has reduced its aggregate balance to HKD 77bn, the lowest level in almost three years.

RBA – No pause yet

At its first monetary policy meeting of 2023, the Reserve Bank of Australia (RBA) raised its Overnight Cash Rate by 25bps to 3.35%. The move represents the ninth consecutive hike in the current cycle, and the accompanying statement was more hawkish than expected.

ECB stays the course towards inflation reduction

The European Central Bank raised its key interest rates by 50 basis points, in line with expectations to a 15-year high of 3.00%. In the accompanying statement and subsequent press conference, the ECB maintained its hawkish tone, signalled an intention to increase rates by a further 50 bps in March.

UK turns a corner but risks remain large

The Bank of England raised the Bank Rate by 50 basis points to 4.00% in a split 7-2 vote as a tight labour market and continued domestic wage and price pressures justified a tenth consecutive increase.

On The U.S. Debt Ceiling

To prevent the United States from defaulting on its payment obligations, the Treasury will now be forced to utilize its cash balances and take steps towards “extraordinary measures.”

Downshift, but still hiking

The FOMC unanimously decided to downshift to a smaller but, in the words of Fed Chairman Jerome Powell, “still historically large increase” of 50 bps.

RBA – debating hikes and lags

At their final monetary policy meeting of 2022, the Reserve Bank of Australia raised its Overnight Cash Rate by 25bps to a decade high of 3.10%.

PBoC cuts RRR – A renewed dovish signal

On Friday 25 November, the People’s Bank of China announced a 25bps Reserve Requirement Ratio cut. In the accompanying statement, the PBoC confirmed the RRR cut was part of a package of measures to support economic growth.

Stepping out for the Fed pivot

After a series of jumbo rate hikes, it appears most investors are anticipating a pivot from the US Federal Reserve. However, the elevated level of inflation and resilience of the economy mean that rate cuts are unlikely for some time.

Fed - The lag effect

The FOMC showed once again that it is prepared to take interest rates into sufficiently restrictive territory in order to clamp down on inflation. For the fourth consecutive meeting, it unanimously decided to increase its Federal Funds target rate by 75bps to a range of 3.75%-4.00%. Interest on reserve balances (IORB) and the overnight RRP were also increased by equivalent amounts to 3.80% and 3.90%, respectively.

RBA committed to a slower cadence

At its monetary policy meeting on 1 November, the RBA raised the Overnight Cash Rate by 25bps to 2.85%. This was the seventh hike in the current cycle, taking base rates to a nine-year high.

Monetary Authority of Singapore - Leaning against price pressures

At its semi-annual monetary policy meeting on 14 October, the MAS re-centered the mid-point of the S$NEER up to its prevailing level – approximately a 2% increase – while keeping the slope and width of the policy band unchanged.

RBA: A commitment to guidance to balance inflation and growth

At its monetary policy meeting on 4 of October, the Reserve Bank of Australia raised its Overnight Cash Rate by 25 basis points to 2.60%

A divided Bank of England delivers 50bps as rates rise to 2.25%

The Bank of England raised the Bank Rate by 50 basis points to 2.25% in a split 5-3-1 vote as the tight labour market, higher wages and higher domestic inflation justified a seventh consecutive hike.

Getting tough on inflation

The Federal Open Market Committee unanimously decided to increase its federal funds target rate by 75bps for the third consecutive meeting, as Fed officials remain focused on dampening inflation.

RBA’s latest rate hike: Peak hawkishness?

The front-loading of rate hikes and belief that inflation is expected to peak later this year and then decline back towards the 2–3% range does suggest that the RBA may have reached peak hawkishness.

HKMA - defending the currency peg to the last breath

The recent, aggressive Fed interest rate tightening policy, combined with Hong Kong’s weak economic outlook, moribund Chinese growth and subdued local market sentiment, has pushed the HKD towards the weak side of its convertibility. The HIBOR-LIBOR spread has also widened the most since 2019.

PBOC attempts to jump-start the economy

On August 15, the People’s Bank of China announced a MLF rate cut of 10bps to 2.75%. Although small in size, the rate cut confirms the PBOC’s desire to jump-start the economy and sends an important monetary policy signal with significant implications for interest rates and RMB cash investors.

RBA hikes rates, but pivots from a “pre-set path”

At its monetary policy meeting on August 2, the Reserve Bank of Australia (RBA), in-line with expectations, hiked the base rate by 50bps to 1.85%, taking total rate hikes to 175bps over the past 4-months.

When does unusually large become usual?

On July 27, the Federal Open Market Committee (FOMC) raised its Federal Funds Rate target range by 75 basis points (bps) to 2.25% - 2.50%. There were no dissenters.

The Monetary Authority of Singapore – an expected surprise of S$NEER hike

On July 14, the MAS announced it would tighten monetary policy by re-centering the S$NEER policy band upwards. While the timing of the MAS statement was a surprise, the market was expecting further policy actions.

The Reserve Bank of Australia delivered back-to-back 50bps rate hikes

At its monetary policy meeting on July 5, the RBA hiked its overnight cash rate by 50bps to 1.35%. This was also the third rate hike in the current cycle, and the first time ever the central bank has executed back-to-back 50bps hikes, reinforcing its inflation fighting credentials.

Fed gets aggressive on inflation

The Federal Open Market Committee matched market expectations for a 75bp increase to its target range, which now sits at 1.50%-1.75%. It also raised the Interest on Reserve Balances and the overnight Reverse Repo Rate by an equivalent amount to 1.65% and 1.55%, respectively.

The Reserve Bank of Australia: moving ahead of the curve?

On June 7, the RBA surprised the market by raising the Overnight Cash Rate by 50bps to 0.85%. This is the second rate hike in the current cycle, following a 25bps move in early May. The size of the rate hike also affirms the RBA’s desire to get ahead of the inflation fighting curve.

The Reserve Bank of Australia’s hawkish turn

The RBA hiked its Overnight Cash Rate for the first time in over a decade at its 3rd May monetary policy meeting. The hike was more hawkish than expected.

Monetary Authority of Singapore – affirming its inflation fighting credentials

At its semi-annual policy meeting on 14 April, the MAS announced its decision to further tighten monetary policy. The announcement and upward revision to the MAS's growth and inflation outlook will have important implications for Singapore interest rates and cash investment opportunities.

Reserve Bank of Australia: From patience to pragmatism

At its monetary policy meeting on Tuesday 5th of April, the RBA left base rates unchanged at a record low of 0.1% whilst acknowledged that “inflation has picked up and a further increase is expected” in the accompanying comments. Its hawkish tilt and giving a clear hint to potential rate rises in the coming months.

Fed lift-off

On 15-16 March, the Federal Open Market Committee (FOMC) held its two-day meeting and raised its federal funds rate target range by 25 basis points (bps) to 0.25%-0.5%, with one dissenting member calling for a 50bps increase.

The Reserve Bank of Australia: Stressing patience, confirming plausibility

At their first monetary policy meeting of 2022, the RBA acknowledged that the economy “remains resilient” despite the recent Omicron outbreak which has not derailed the recovery.

A surprise, pre-emptive policy hike by the Monetary Authority of Singapore

Singapore’s de-facto central bank hiked the slope of the S$NEER policy band, increasing the pace of appreciation. The unexpected hike was triggered by the strong inflation uptrend in recent days as well as a reassessment of Singapore’s growth and inflation expectations in 2022 by the MAS.

Inflation in Asia Pacific - A different phenomenon

Rising inflation concerns are amplifying developed market rate hike expectations; in contrast APAC central banks have benefitted from more muted CPI. The rationale for this difference has important implications for investors.

PBOC latest deposit price reform – limited implications for cash investors

In June 2021, the People’s Bank of China (PBoC) announced changes to commercial banks’ mechanism for setting the time deposit ceiling from a multiplier method to a basis points method.

PBoC RRR Cut - A dovish policy signal

On 9 July 2021, the PBoC announced a 50bps RRR cut that will reduce bank funding costs and unleash a substantial quantity of liquidity support. The size of the rate cut surprised the market and confirmed the authority’s dovish pivot.