Wednesday, April 23, 2014

New Zealand raises rate another 25 bps to 3.0%

    New Zealand's central bank raised its benchmark Official Cash Rate by another 25 basis points to 3.0  percent, as widely expected, saying it is important to contain rising inflationary pressures.
    But the Reserve Bank of New Zealand (RBNZ), which last month became the first central bank in the world's advanced economies to raise its rate since July 2011, tweaked its guidance from March to specifically take account of the impact of the high exchange rate of the New Zealand dollar on inflation.
    "The speed and extent to which the OCR will be raised will depend on economic data and our ongoing assessment of emerging inflationary pressure, including the extent to which the high exchange rate leads to lower inflationary pressure," RBNZ Governor Graeme Wheeler said in a statement.
     On March 13, when the central bank raised its rate by 25 basis points, the first change in rates since a cut in March 2011, the RBNZ only said the pace of future rate increases would depend on inflationary pressures, omitting any reference to the exchange rate.
     New Zealand's headline inflation rate eased to 1.5 percent in the first quarter of 2014 from 1.6 percent in the fourth quarter of last year, but Wheeler said that "headline inflation is moderate, but inflationary pressures are increasing and are expected to continue doing so over the next two years."

Central Bank News Link List - Apr 23, 2014 - BOE voted 9-0 to keep rates at record low, QE unchanged

Here's today's Central Bank News' link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don't miss any important news.

Thailand holds rate, to ensure stance supports growth

    Thailand's central bank maintained its policy rate at 2.0 percent but said economic growth in the first quarter is expected to contract by more than previously expected and it would "closely monitor economic and financial developments, and ensure that the monetary policy stance continues to lend sufficient support to the economy."
    The easing bias by the Bank of Thailand (BOT) follows a 25 basis point cut in March and one of the members of the bank's monetary policy committee voted to lower the policy rate by another 25 points. But six members of the committee voted to maintain rates.
    "The Committee deems prolonged political uncertainties to be the main cause for higher downside risks to growth. Financial conditions are accommodative, and are not hindering domestic spending," the BOT said.
    In March the central bank said that it had still scope to ease, but omitted that statement today.
    As expected, the bank said growth this year is expected to be lower than forecast and mainly driven by exports while inflationary pressures rose in line with expectations.
    On Sunday, BOT Governor Prasern Trairatvorakul was quoted as saying the central bank would likely lower its 2.7 percent growth forecast in June due to the sluggish economy and the impact of budget problems caused by the dissolution of the Thai parliament.

Tuesday, April 22, 2014

Botswana holds rate, inflation seen in 3-6% target range

    Botswana's central bank maintained its bank rate at 7.5 percent, saying the economic outlook and inflation forecast is consistent with keeping inflation in the bank's 3-6 percent medium-term objective.
    The Bank of Botswana, which cut its rate by 200 basis points in 2013 as inflation declined, said moderate domestic demand and expected benign external prices contribute to the positive inflation outlook though this could be affected by unanticipated large increases in administered prices and government levies as well as international food and oil prices beyond the current forecast.
    Botswana's inflation rate eased to 4.4 percent in March from 4.6 percent in February, with the trimmed mean measure of core inflation down to 4.0 percent from 4.1 percent and inflation excluding administered prices down to 5.2 percent from 5.5 percent.
    Botswana's headline inflation rate fell to 5.8 percent in 2013 from 7.5 percent in 2012 and the central bank expects inflation to remain within its 3-6 percent range this year.
    The bank said in February this would give it scope to support economic activity through the current accommodative policy stance.
    The International Monetary Fund has forecast 3.8 percent inflation this year and 3.4 percent in 2015.

Central Bank News Link List - Apr 22, 2014 - ECB Coeure: Still room to lower key rates: press

Here's today's Central Bank News' link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don't miss any important news.

Monday, April 21, 2014

Sri Lanka maintains rates, poised for strong performance

    Sri Lanka's central bank maintained its monetary policy stance, as expected, and said the country's economy was poised for a stronger performance on the back of a recovery in the external sector, sustained momentum in construction and manufacturing, and low and stable inflation.
    The Central Bank of Sri Lanka kept its Standing Deposit Facility Rate (SDFR) at 6.50 percent and the Standing Lending Facility Rate (SLFR) at 8.0 percent. The central bank rejigged its policy framework in January with the SDRF rate replacing the previous benchmark repo rate.
    Sri Lanka's headline inflation rate was steady at 4.2 percent in March and February and the central bank expects inflation to remain in mid-single digits throughout the year although there might be some price pressures from supply disruptions linked to drought.
    The central bank targets inflation of 4-6 percent this year and 3-5 percent in 2015 and 2016. In 2013 the central bank cut the benchmark rate by 100 basis points to boost economic growth, which rose to 7.3 percent in 2013 from 6.3 percent in 2012.

Central Bank News Link List - Apr 21, 2014 - BOJ may still opt for huge JGB buys, when it acts - Suda

Here's today's Central Bank News' link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don't miss any important news.

Sunday, April 20, 2014

Monetary Policy Week in Review – Apr 14-18, 2014: Ukraine hikes rate as ECB takes gloves off over euro

    Last week Ukraine’s central bank boosted its policy rate to support its embattled hryvnia currency while six other central banks maintained their rates, including Serbia’s central bank which became the latest bank to postpone a rate cut for fear of triggering capital outflows and disrupting the relative calm in global financial markets.
    Six weeks after Russia’s central bank temporarily raised its rate by 150 basis points, the National Bank of Ukraine raised its benchmark discount rate by 300 points as the economic fallout from the political crises between the two countries widens.
    With financial markets so far digesting this year’s shift in U.S. monetary policy with less hiccups than expected and the economic slowdown in China proceeding largely according to plan, the crises in Ukraine is the only major uncertainty facing the global economy.
    So far, there has been limited global spillover from the Russia-Ukraine crises, with only neighboring Poland noticing a negative economic impact as its firms have revised down their forecasts for exports and view of current conditions.
    But it’s clear that any further escalation of tensions in eastern Ukraine and new sanctions from the West against Russia have the potential to trigger a flight to safety and harm economic confidence.
    "The situation in Ukraine is one which, if not well managed, could have broader spillover implications," IMF Managing Director Christine Lagarde Lagarde warned earlier this month.
    Although Romania provides a physical buffer between Serbia and Ukraine, the Bank of Serbia is clearly worried that its currency, stocks and bonds would be engulfed by a flight to safety.
    The Serbian central bank has on several occasions cited the need to keep domestic assets relatively attractive to global investors and said last week that the decision to maintain the rate at 9.50 percent was "guided by instability in international financial markets and heightened uncertainties surrounding the current geopolitical tensions."
    The Bank of Mozambique in southern Africa also reflects this awareness of how fast sentiment in global financial markets can turn, saying it was maintaining a “prudent monetary policy” amid domestic and international risks.
    Next week’s statement and policy decision by Russia’s central bank is likely to be scrutinized for warnings from the central bank of the economic and financial repercussions of further political brinkmanship by President Vladimir Putin.

    Meanwhile in the euro zone, the single currency didn’t take too seriously warnings of easier monetary policy by a string of European Central Bank (ECB) officials.
    After ECB Board Member Benoit Coeure on Friday, April 11 said "the stronger the euro, the more need for monetary accommodation," ECB President Mario Draghi on April 12 said a strengthening of the euro’s exchange rate would require further monetary stimulus. This message was then later echoed by Christian Noyer of the Bank of France and ECB Board Member Yves Mersch. 
    ECB policymakers were clearly hammering home the message from its April 3 statement that its council was “unanimous in its commitment to using also unconventional instruments within its mandate in order to cope effectively with risks of a too prolonged period of low inflation."
    But the frequency and unanimity in the statements from ECB council members is unusual and appear to be coordinated. 
   On April 3, when the ECB council last met, the euro was trading at 1.37 to the U.S. dollar. It then rose in the following days in response to the lack of any easing measures, ending the week just below 1.39 on Friday April 11.
    Draghi’s reference to the euro and further easing came on Saturday and on Monday Noyer said the ECB  was ready to use unconventional measures to fend off too low inflation.
    On Monday April 14 the euro eased slightly to 1.381 but it ended the week practically unchanged, down from 1.388 the previous Friday.
    On Thursday April 17 Mersch in Albania echoes the view that further euro strength would trigger a reaction by the ECB with France’s economy minister then adding that he wants euro zone member countries to meet and discuss the euro and it’s exchange rate needs to come down.

    But Mersch also gives an important clue to what might be behind that spate of coordinated comments about the strong euro.
    Mersch said Draghi on April 3 had “explicitly mentioned … developments in the foreign exchange markets, which have increasingly an impact on our inflationary price developments.”
    He added that Draghi had made it very clear that if these developments, i.e. the euro’s exchange rate, were to continue, this would “inevitably have to trigger a reaction by the ECB in order to maintain our accommodative monetary policy stance.”
    What seems to have happened is that the wording of the statement issued by the ECB council was too balanced and thus wishy-washy in describing the harm a strong euro is doing to prices. 
    Draghi then fails to convey to the press the ECB council’s concern over the euro’s strength.
    Looking at the transcript from the ECB press conference, Draghi’s introductory statement makes only a passing reference to exchange rates.
    Draghi said the ECB council saw broadly balanced and limited upside and downside risks to the inflation outlook and “the possible repercussions of both geopolitical risks and exchange rate developments will be monitored closely.”
   Hardly a statement that conveys concern over the euro to foreign exchange markets or the public.
   At the start of the press conference, Draghi refers to the same statement, saying “the exchange rate is very important for price stability, so much so that we have made an explicit reference to it in the introductory statement.”
    “But, as I have said several times, it is not a policy target,” Draghi adds, a reflection of the code of conduct that major central banks should not target exchange rates, and certainly not in public.
   “It is an increasingly important factor in our medium-term assessment of price stability, but it is not a policy target. In this sense, we do not link our medium-term assessment to a precise level of the exchange rate. It is part of the overall information that comes into play when we undertake our medium-term assessment,” Draghi said.
   Out of respect for the rules among the Group of 20 leading economic powers and major central banks, Draghi and the ECB end up watering down their statement of the euro’s exchange rate so much that financial markets fail to notice. 
    Instead, headlines from the April 3 meeting by the ECB council are dominated by the message that the ECB has discussed, and is ready, to use some form of quantitative easing if inflation fails to accelerate. 

    Through the first 16 weeks of this year, policy rates have been raised 14 times, or 9.5 percent of this year’s 148 policy decisions by the 90 central banks followed by Central Bank News, up from 9.2 percent the previous week and 8.7 percent end-March but down from 10.1 percent end-February. 
    Policy rates have been cut 15 times so far this year, or 10.1 percent of this year’s policy decisions, down from 10.6 percent the previous week, and 14 percent at the end of February.


COUNTRY MSCI      NEW RATE            OLD RATE         1 YEAR AGO
SINGAPORE DM                  N/A                  N/A                  N/A
UKRAINE FM 9.50% 6.50% 7.50%
MOZAMBIQUE 8.25% 8.25% 9.50%
NAMIBIA 5.50% 5.50% 5.50%
CANADA DM 1.00% 1.00% 1.00%
SERBIA FM 9.50% 9.50% 11.75%
CHILE EM 4.00% 4.00% 5.00%

    This week (Week 17) seven central banks will be deciding on monetary policy, including Thailand, Turkey, New Zealand, Egypt, Fiji, Russia and Mexico.

TURKEY EM24-Apr10.00%5.00%
NEW ZEALANDDM24-Apr2.75%2.50%