The Bank of Russia unexpectedly maintained its key interest rate at a record-high 21% , defying analysts’ expectations of another significant hike as inflation remains stubbornly elevated. The decision marks a shift toward a more measured approach in balancing economic growth and price stability. Key Details Inflation Concerns: Annual inflation climbed to 8.9% in November, well above the central bank’s 4% target , with inflation expectations reaching 13.9% in December. Policy Rationale: The central bank cited the significant tightening of monetary conditions after October’s 200-basis point hike as sufficient to resume disinflationary processes. Governor Elvira Nabiullina emphasized avoiding both economic overheating and severe slowdowns. Economic Overheating: Elevated government spending on the war in Ukraine and social programs, coupled with labor shortages and rising wages, have fueled strong domestic demand, exacerbating price pressures...
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China's bond rally has hit record highs, leading to speculation about the People's Bank of China's (PBOC) next move.
Government debt yields have fallen to unprecedented lows, with the 10-year yield at 2.15%. This has been driven by investors seeking safety amidst declining stocks, property prices, and low deposit rates.
The PBOC is caught between reducing borrowing costs to stimulate the economy and preventing market instability. Though it hinted at selling bonds to cool the market, it recently opted for interest-rate cuts.
Investors remain divided. Some expect the PBOC to act if the rally goes too far, while others believe bond demand will continue due to strong fundamentals.
Upcoming political meetings and manufacturing data may provide further guidance on Beijing’s policy direction.
Key Takeaways:
- China’s bond rally pushes the 10-year yield to a historic low of 2.15%.
- Investors seek safe assets amidst market declines.
- PBOC balances economic stimulation with market stability.
- Interest-rate cuts have been favored over selling bonds.
- Further policy insights expected from upcoming events.
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