VKF_FRAE_2017

33 VakıfBank Annual Report 2017 »» WHILE THE BOJ AND ECB MAINTAINED EXPANSIONARY MONETARY POLICIES, THE FED CONTINUED TO PURSUE A TIGHTENING MONETARY POLICY. Developed economies such as the USA, Europe and Japan have generally pursued expansionary monetary policies to trigger the recovery of the global economy. In 2014 and 2015, divergences started between the monetary policies of developed country central banks. The Fed had announced in May 2013 its decision to end the QE3 program initiated back in September 2012, and put an end to this program on October 29, 2014. In December 2015, the Fed hiked interest rates for the first time in almost 10 years. The Fed thus brought up its policy rate by 25 bps from 0.0-0.25% to 0.25-0.50%. In 2016, the Fed had announced only a single interest rate increase, at its last meeting of the year. In the year 2017, the Fed realized three interest rate hikes at its March, June and December meetings, raising the policy rate to the 1.25%-1.50% interval. At its June 2017 meeting, the Fed announced its plan for balance sheet reduction, which was initiated in October. It was also declared that Jerome Powell will be nominated to replace the Fed Chairman Janet Yellen, whose term of office expires in February 2018. Nevertheless, the Trump administration’s tax plan, introducing significant changes to the country’s tax system of, was approved at the US Senate in December. The Fed continues to tighten its monetary policy, and we shall keep a close watch on how the Fed’s monetary policy for 2018 will be affected by the Trump administration’s policies and the new Fed Chairman’s position. The Fed is expected to raise interest rates three times in 2018. The European Central Bank (ECB) continues its expansionary monetary policy supportive of economic activity. In 2017, the ECB did not change interest rates, leaving the policy rate at 0.00%, the marginal lending rate at 0.25% and the overnight deposit interest rate at -0.40%. The ECB does not consider changing interest rates before ending its bond purchase program. The ECB maintained its bond purchase program at the level of EUR 80 billion per month until March 2017. At the end of March, this level was reduced from EUR 80 billion to EUR 60 billion, and bond purchases continued at the latter level until end-December. At the October In the year 2017, the Fed realized three interest rate hikes at its March, June and December meetings, raising the policy rate to the 1.25%-1.50% interval The Fed continued to pursue a tightening monetary policy. CENTRAL BANK BALANCE SHEET SIZE Source: Bloomberg 1,500 0 2,000 2,500 3,000 200 3,500 4,000 4,500 400 600 12/2008 12/2009 12/2010 12/2011 12/2012 12/2013 12/2014 12/2015 12/2016 12/2017 Japan (Trillion Yen, right axis) Euro Zone (Billion Euros) US (Billion Dollars)