Top Central Banks Set to Sell $150 Billion in Forex in 2023 and Consider First Rate Hikes on Ordinary Deposits

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Key Takeaways:

  • 💰 Swiss National Bank sold forex worth $149.51 billion in 2023

  • 📈 Significant increase in foreign currency sales compared to 2022

  • 🛡️ Strategy focused on supporting the Swiss franc as a defense against imported inflation

  • ⚖️ SNB’s foreign currency sales prevented weakening of the Swiss franc

  • 📆 SNB no longer focusing on foreign currency sales after achieving goal

  • 📌 Central bank to announce next monetary policy decisions on Thursday

  • 💰 Japanese banks are considering raising interest rates on regular deposits for the first time in 17 years

  • 📈 The potential rate hikes are prompted by the ultra-low interest rate environment and the need for banks to increase profitability

  • 🏦 This move is expected to benefit savers and depositors who have been earning very low interest rates on their deposits

  • 🔄 However, the impact on borrowers and the overall economy remains uncertain as higher rates could lead to reduced borrowing and spending

Swiss National Bank’s Forex Sales Strategy

The Swiss National Bank (SNB) made headlines by selling a significant amount of foreign exchange worth $149.51 billion in 2023, a substantial increase from the previous year. This strategy was primarily aimed at supporting the Swiss franc as a defense against imported inflation. By preventing the weakening of the Swiss franc through these foreign currency sales, the SNB successfully maintained Swiss inflation within the target range.

Having achieved its goal, the SNB announced that it will no longer focus on foreign currency sales. Market watchers are now eagerly awaiting the central bank’s next monetary policy decisions, which are set to be revealed on Thursday. This shift in focus by the SNB signals a potential change in their approach to monetary policy moving forward.

Japanese Banks Consider Interest Rate Hikes

In Japan, banks are contemplating raising interest rates on regular deposits for the first time in 17 years. The ultra-low interest rate environment has prompted this move, as banks seek to increase their profitability. While this potential rate hike may benefit savers and depositors who have been earning minimal returns on their deposits, the impact on borrowers and the broader economy remains uncertain.

Higher interest rates could lead to reduced borrowing and spending, which might dampen economic growth. It will be crucial to monitor how Japanese banks navigate this delicate balance between profitability and economic stability in the coming months.

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