The European Central Bank kept interest rates on hold at 1.0 percent on Thursday and investors are now braced for signs that it will soon start weaning banks off cheap and abundant liquidity.
The Bank of England expanded its quantitative easing programme by 25 billion pounds to 200 billion pounds on Thursday, continuing its unprecedented scheme to revive Britain's recession-hit economy.
Risk aversion ahead of key central bank policy decisions put pressure on Britain's leading shares around midsession on Thursday, with weakness in banks and miners offsetting modest gains in defensive telecoms and tobacco firms.
The dollar and the yen edged up on Thursday as short-term investors and Japanese exporters sold into a rally in the euro and higher-yielding currencies which followed a repeated pledge by the U.S. Fed to keep rates low for a while.
The Bank of England said on Thursday it would expand its quantitative easing programme by 25 billion pounds to help kick-start Britain's recession-hit economy.
The U.S. Federal Reserve on Wednesday expressed growing confidence that an economic recovery was building, even as it stuck to its commitment to keep borrowing costs near zero for an extended period.
Benchmark sterling interbank lending rates paused at 5-week highs on Friday after news that Britain's economy unexpectedly contracted again, while abundant amounts of liquidity kept euro and dollar rates pinned at record lows.
The Bank of Canada is likely to play it safe when it outlines its policy stance this week, holding the line on interest rates and tinkering at the margins of its economic forecasts as it waits for firmer evidence that the recovery is for real.
Prime Minister Gordon Brown gave his backing on Monday to the central bank's program of pumping money into the economy to help pull Britain out of recession.
There may not be as much slack in the U.S. economy as many forecasters believe, which means medium-term inflation risks could be higher, a Federal Reserve official said on Sunday.
The Bank of England left interest rates at a record low of 0.5 percent for the seventh month running on Thursday and said it would keep its 175 billion pound asset buying programme in place, as expected.
St. Louis Federal Reserve President James Bullard said on Friday it is difficult to communicate the Fed's likely monetary policy direction clearly to markets with benchmark interest rates near zero.
U.S. Federal Reserve officials mused about the timing and pace of the central bank's removal of its unprecedented support for the economy on Friday, saying the shift could be abrupt and might be hard to communicate to financial markets.
Dollar interbank lending rates paused at record lows on Thursday after a report that Federal Reserve policymakers were divided on when to begin raising interest rates.
The Bank of England left interest rates at a record low of 0.5 percent for the sixth month running on Thursday and said it would keep its 175 billion pound asset buying programme in place.
The Federal Reserve has made $14 billion in profits on loans made in the last two years, The Financial Times reported on Monday, citing officials close to the matter.
Japanese core consumer prices fell at the fastest annual pace on record in July, potentially putting pressure on a reluctant Bank of Japan to rein in deepening deflation.
Faced with an economy starting to emerge from recession and stubborn prices pressures, Israel's central bank on Monday raised short-term borrowing costs by a quarter-point to 0.75 percent on Monday to rein in inflation.
The Bank of Japan will likely face political pressure regardless of whether the ruling coalition or the main opposition wins the upcoming election, with both parties seen leaning on monetary policy to support an economic recovery.
Uncertainty about the Federal Reserve's view on the U.S. economy and another sharp fall in Chinese stocks pushed equities lower across the world on Wednesday and drove lower-yielding currencies higher.
A shift in mindset among currency investors, who are now buying dollars on good news about the U.S. economy, may help the greenback in a week highlighted by a Federal Reserve policy meeting and data on retail sales.
The Bank of England took a far bigger step than expected to boost Britain's recession-hit economy on Thursday, stunning markets by expanding its quantitative easing plan to 175 billion pounds from 125 billion.
