There was speculation more members would vote for a shift in monetary policy. The bank decided to keep policy with a 7-2 majority and that will make people feel comfortable purchasing bonds.

Monetary policy is not a panacea.

There is always the potential for a central bank to engage in discretionary monetary policy and to break the one-to-one link between changes in foreign reserves and changes in the money supply.

Domestic inflation reflects domestic monetary policy.

However, in spite of the general perception that monetary policy should be conducted so as to avert deflation, a central bank cannot lower interest rates below the zero lower bound.

Because of fears over an early end to the quantitative monetary easing policy and overrated speculation of subsequent rate increases following the policy shift, we have seen last week yields rise to levels that fully price in a 0.5 percentage point rate hike.