STOCK MARKET WATCH -- Monday, 15 December 2014

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15. Oil Spilling Over Into Central Bank Policy as Fed Enters Fray

http://www.bloomberg.com/news/2014-12-15/oil-spilling-over-into-central-bank-policy-as-fed-enters-fray.html

Norway’s central bank stunned investors last week by cutting its main interest rate to head off a “severe downturn” due to plunging oil prices. Ninety minutes later, Russia’s central bank raised its benchmark to bolster a currency weakened by crude’s decline.

The split among two of the largest oil exporters shows how the slump in the price of crude to its lowest in five years will make 2015 a year of divergence for global central banks and increased volatility in financial markets.

The U.S. Federal Reserve enters the fray this week. Some economists expect it to drop the commitment to hold rates near zero for a “considerable time.” Hiring is accelerating and officials including Vice Chairman Stanley Fischer have emphasized the boost to consumer demand from oil’s decline.

Cheaper oil “lends support to our expectation of monetary-policy divergence next year, making Fed tightening in the first half more likely, while pushing other central bankers to be relatively more dovish,” Credit Suisse Group AG economists led by Neville Hill and James Sweeney said in a Dec. 12 report to clients.