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Central bank inactivity

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  • That shining example of the limits of what quantitative policy can accomplish, the Bank of Japan, left policy unchanged. The BoJ did revise its core inflation figure lower (Japan's core inflation has oil in it, as do other countries' core inflation figures, but in the case of Japan the oil is more directly included).
  • Japan's experience with lower oil prices may differ from other energy importers, because Japan's economy has experienced demand deficient deflation and thus deflation fears may be more embedded in consumer psychology. Elsewhere lower oil is a more unambiguous stimulus.
  • The Bank of England is likely to regard lower oil as a stimulus, in a similar manner to the US Federal Reserve. The BoE minutes are due out today - having tightened quantitative and regulatory policy, the timing of the tightening of UK monetary policy is still uncertain.
  • The Euro area is just waiting for Mr Draghi's big idea to be unveiled tomorrow. Oil price stimulus is not likely to be considered, in spite of the reported role lower oil prices had in creating positive data from Germany yesterday. The US is offering more housing data.