The Role of the Major Central

Banks in the Forex Market

Setting Lending Ratescc: LendingMemo - https://www.flickr.com/photos/92802060@N06

The discount rate is the base rate set by the central bank

from which other types of lending rates are calculated. This

has a direct effect on the cost of funds to the end borrower.

cc: Jeremy Brooks - https://www.flickr.com/photos/85853333@N00

Setting Monetary Policycc: DonkeyHotey - https://www.flickr.com/photos/47422005@N04

Monetary Policy is defined as the actions

taken by a central bank to regulate the

supply of its currency.cc: rafael-castillo - https://www.flickr.com/photos/7972895@N02

Lender of Last Resortcc: michael2baer - https://www.flickr.com/photos/118520657@N08

The Major Central Banks

around the World

U.S FEDERAL RESERVE ( THE FED )

• The Federal Reserve is considered to be the most influential central bank in the world.

• The Federal Reserve has a division within it, namely the Federal Open Market Committee (FOMC which is responsible for making interest rate decisions.

• The FOMC meets eight times per year.

BANK OF ENGLAND (BOE)

• The BOE aims to keep inflation

at a 2% target per year.

• Any deviation from that, and

they take measures to reach

that target.

EUROPEAN CENTRAL BANK (ECB)

• The European Central Bank was

organized after the creation of

the EURO in 1998.

• The committee which is primarily

responsible for monetary policy is

known as the Governing Council.

SWISS NATIONAL BANK (SNB)

• The Swiss National Bank’s monetary committee meets quarterly.

• As of this writing, the key person within the committee is Jean-Pierre Roth, the Chairman of the SNB.

BANK OF JAPAN (BOJ)

• Japan’s economy is highly dependent on exports, one of the major concerns of the BOJ committee is to ensure a relatively weak Yen.

• The BOJ is quite active in the Open Market to ensure this goal. The Bank of Japan typically meets once or twice a month.

BANK OF CANADA (BOC)

• The BOC has set an inflation

target of 1-3% per year, and

thus far has been successful

in meeting that goal over the

last 15 years.

RESERVE BANK OF AUSTRALIA (RBA)

• The RBA has an inflation target rate of 2-3% per year.

• The committee meets eleven times per year to discuss and make monetary policy decisions.

RESERVE BANK OF NEW ZEALAND ( RBNZ )

• The Reserve Bank of New Zealand’s monetary policy decisions rests in the hands of the Central Bank Governor

• The RBNZ has an inflation target of 1.5% per year, and the current governor Alan Bollard, is responsible for meeting that objective.

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