Bank of Korea

While Brazil surprised the markets with a bigger-than-expected interest rate cut, South Korea and Indonesia on Thursday delivered exactly what had been predicted. 

The Bank of Korea and Bank Indonesia both left rates unchanged – in a clear sign that concerns about the impact of rising oil prices on inflation are matching worries about the threats to global growth coming from the eurozone. It’s a striking shift for Indonesia, which has – like Brazil – been a standard-bearer for aggressive pro-growth rate cuts.

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Claire Jones

Nobody is quite sure yet what does and doesn’t count as macroprudential policy. But, given it’s seen as a force for good, central bankers are keen to pin the tag on as much of what they do as possible. Once the hype fades, though, it is unlikely to displace interest rates as their most important tool.

A key, perhaps even the question for policymakers, then, is how monetary policy and macroprudential policy can best interact.

According to research from Standard Chartered’s Natalia Lechmanova, which looks at the lessons that can be learnt from how Asian policymakers have used macroprudential tools such as loan-to-value ratios, the two policy strands are most effective when they are combined. Read more