Wednesday, October 29, 2014

New Zealand holds rate in pause before next change

    New Zealand's central bank maintained its policy rate at 3.50 percent, as widely expected, but said inflation is expected to rise as economic activity improves and a "period of assessment remains appropriate before considering further policy adjustment." 
    Although the Reserve Bank of New Zealand (RBNZ) still appears to be leaning towards raising rates, its guidance is considerably more dovish than in September when it said it expected "further policy tightening will be necessary to keep future average inflation near the 2 percent mid-point."
    The RBNZ raised its rate by 100 basis points since March to curb inflationary pressures but paused in July to assess the impact of its rate rises on the economy.
    The RBNZ also sharpened its language about the exchange rate of the New Zealand dollar - known as the kiwi - saying it's "current level remains unjustified and unsustainable and continues to contain growth in the tradables sector. We expect a further significant depreciation."
    New Zealand's headline inflation rate rose to 1.6 percent in September from 1.5 percent in August while the exchange rate of the kiwi has eased against the strong U.S. dollar this year, trading at 1.28 to the dollar today from around 1.22 at the start of the year 
    The RBNZ issued the following statement:
"Statement issued by Reserve Bank Governor Graeme Wheeler:
The Reserve Bank today left the Official Cash Rate unchanged at 3.5 percent.

Brazil surprises markets, raises rate 25 bps to 11.25%

    Brazil's central bank surprised financial markets and raised its benchmark Selic rate by 25 basis points to 11.25 percent to ensure that inflation starts to decline next year and 2016.
    The Central Bank of Brazil, which last raised its rate in May after nine rate rises, added that six of the members of its policy committee, known as Copom, had voted for the increase - including Chairman Alexandre Tombini - while three had voted to maintain rates.
    Economists had widely expected the central bank to keep rates steady until President Dilma Rousseff had time to announce her new key appointments following her narrow re-election.
    But the central bank has also been under pressure to raise rates soon to slow consumption that has helped pushed inflation, along with the declining real currency, to 6.75 percent in September from 6.51 percent in August, above the central bank's upper limit of its 2.5 to 6.5 percent target.

    The Central Bank of Brazil issued the following statement (translation by Google):

"The Monetary Policy Committee decided to raise the Selic rate to 11.25% pa, without bias, by five votes in favor and three votes for the Selic rate at 11.00% pa

Fed ends QE3, to hold key rate for "considerable time"

    The Federal Reserve wrapped up its third program of asset purchases since the global financial crises due to "a substantial improvement in the outlook for the labor market," but repeated that it expected to maintain its fed funds rate at zero to 0.25 percent "for a considerable time" following the end of the quantitative easing (QE) program, especially if inflation remains below its target.
    The Federal Reserve, the U.S. central bank, began its third installment of asset purchases, known as QE 3 in September 2012, purchasing $85 billion of U.S. Treasuries and housing-related debt, but began whittling down the purchases in January by $10 billion each month in light of the improving U.S. economy and falling unemployment.
    The remaining purchases of $15 billion worth of Treasuries and mortgage-backed securities will be concluded by the end of October, marking the conclusion of three rounds of asset purchases that have tripled the Fed's balance sheet to $4.482 trillion as of Oct. 22 from $1.504 on Oct. 1, 2008, just prior to the launch of QE1 when the Fed starting buying housing related debt.
    In its statement, the Federal Open Market Committee (FOMC), the Fed's policy-making body, acknowledged the improvement in U.S. labor markets, saying job gains had been "solid" and the "underutilization of labour resources is gradually diminishing," a strong shift in language since September when it said that the "remains significant underutilization of labor resources."
    In September the U.S. unemployment rate dropped to a six-year low of 5.9 percent from 6.1 percent but growth in wages and thus inflationary pressures remains subdued, reducing the need for the Fed to hike its rates to curb headline inflation, which was stable in September at 1.7 percent, below the Fed's target of 2.0 percent.
    The Fed, which has a dual mandate of maximum employment and price stability, issued the following statement:

Central Bank News Link List - Oct 29, 2014 - Fed set to end one crises chapter even as global risks rise

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.

Tuesday, October 28, 2014

Hungary holds rate, sees easy policy for extended period

    Hungary's central bank maintained its base rate at 2.10 percent, as widely expected, and confirmed its guidance that it expects to maintain loose monetary conditions "for an extended period" to achieve its medium-term inflation target.
    The National Bank of Hungary (MNB), which wrapped up a two-year easing cycle in July after cutting the base rate by 490 basis points, also said inflationary pressures were likely to remain moderate in the medium term with disinflationary pressures slowly weakening as economic activity gathers pace even as external demand has weakened slightly.
    There is still a degree on unused capacity in the economy but the negative output gap is expected to close gradually in the next few years and inflation is likely to be around 3 percent, consistent with price stability, in the second half of the forecast period, the central bank said.
    Headline inflation in Hungary fell to minus 0.5 percent in September from 0.2 percent in August while core inflation eased to 1.4 percent from 2.4 percent.

    The MNB issued the following statement:
"At its meeting on 28 October 2014, the Monetary Council reviewed the latest economic and financial developments and voted to leave the central bank base rate unchanged at 2.10%.

Central Bank News Link List - Oct 28, 2014 - BOJ Kuroda: Japan to hit 2% in FY15, no exit talk

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.

Sweden slashes rate to zero, sees first rise in mid-2016

    Sweden's central bank cut its benchmark repurchase rate by a further 25 basis points to zero percent and expects to keep the rate at this level until mid-2016 when it plans to start raising the rate to reach 1.75 percent by the end of 2017 when inflation finally reaches the bank's target.
    The Riksbank, which has now cut its rate by 75 basis points this year, also cut its deposit rate to minus 0.75 percent and the lending rate to 0.75 percent while the rate for fine-tuning monetary transactions was set to zero.
   "The low repo rate increases demand in the economy, which contributes to higher inflationary pressures," the Riksbank said, adding:
     "The highly-expansionary monetary policy many also contribute to keeping inflation expectations anchored around 2 percent by sending a clear signal that monetary policy is focused on inflation approached the inflation target."
    The central bank underscored that it planned to retain the interest rate at this unusually low level to boost inflation at a time that economic activity was relatively strong and continuing to improve.
    The Riksbank, which has faced heavy criticism for being slow to cut interest rates in the face of underlying inflation that has been below its target for more than three years, warned that such an extraordinary low rate would increase the risks that households take on more debt and appealed to authorities to take action to manage these risk and reform the housing market.

Monday, October 27, 2014

Albania holds rate but will cut if economy worsens

    Albania's central bank left its key interest rate steady at 2.50 percent but said it would ease its monetary policy further if the economy deteriorates significantly more than forecast.
     The Bank of Albania, which has cut its rate by 50 basis points this year, issued the following statement:
"Today, on 27 October 2014, the Supervisory Council of the Bank of Albania reviewed and approved the Quarterly Monetary Policy Report. After discussions on the recent economic and monetary developments in Albania and their expected outcome, the Supervisory Council of the Bank of Albania decided to keep the key interest rate unchanged, at 2.50%. The Supervisory Council deems that the monetary policy stance and current financial conditions are adequate to ensure the return of the inflation to the target in the medium term. 
Recent data on the real sector show economic activity decelerated in Albania; however this deceleration is considered to be temporary.Domestic economic activity, calculated through the gross value added, declined in the second quarter. Additionally, the inflation rate fell in September. Available information suggests that these developments, unexpected to some extent in terms of their intensity, are largely explained through base effects and transitory supply-side shocks. Consequently, the Bank of Albania believes that the medium-term trends of aggregate demand and the forecasts for economic growth and inflation have not changed significantly from our previous projections.

Angola raises rate 25 bps as inflation, credit rises

    Angola's central bank raised its Basic Interest Rate (BNA) by 25 basis points to 9.0 percent but maintained its standing lending and absorption facility rates as inflation and credit increased.
    The National Bank of Angola (BNA) cut its rate by 50 basis points in July for a net reduction this this year of 25 points.
    In September Angola's inflation rate rose to 7.19 percent from 7.05 percent in August while credit to the economy rose by an annual 14.11 percent to 3.213 billion kwanza.
    Earlier this month the central bank said the country's economy should grow by an annual average of 5 percent over the next four years, boosted by the increasing participation of the private sector.
    The International Monetary Fund also said this month that Angola's growth was likely to slow to 3.9 percent this year from an estimated 6.8 percent in 2013 with improved agricultural production offsetting a drop in oil output.

    The BNA issued the following statement:

Mauritius maintains rates, forecasts inflation of 3.0%

    The central bank of the Republic of Mauritius kept its key repo rate steady at 4.65 percent as the outlook for the economy was largely unchanged from July while inflation has declined and the bank's staff forecast inflation of about 3.0 percent in December.
    The Bank of Mauritius, which last cut its rate by 25 basis points in June 2013, said the domestic economy rebounded in the second quarter and the underlying growth momentum is projected to remain positive in the second half of this year.
    However, the bank said it still remains concerned about investment, productivity, competitiveness and the current account deficit.
    Bank staff maintained their 2014 growth forecast from July for the economy to grow by 3.4 to 3.6 percent. In July the bank had downgraded it growth forecast. Mauritius' Gross Domestic Product expanded by 2.4 percent in the second quarter from the first for annual growth of 4.6 percent, up from 2.7 percent in the first quarter.
    In 2013 Mauritius' economy expanded by 3.2 percent.
    The central bank's monetary policy committee has been divided over the need to raise interest rates for many months and in July the governor, Rundheersing Bheenick, underlined that rates would be expected to be raised following the 2015 budget.
    In today's meeting, some of the MPC's members renewed their discussions about normalizing interest rates to diminish the risk to financial stability and improve the low domestic savings rate, but "agreed that the timing of such an approach would depend on future price and real sector developments."
    The Bank of Mauritius, located in the Indian Ocean, east of Madagascar, issued the following statement:

Israel holds rate, past cuts have not yet fully taken effect

    Israel's central bank maintained its benchmark interest rate at 0.25 percent, as expected, and said recent rate reductions had not yet been fully reflected in economic activity and inflation but it would use all available tools to meets its price stability objective, to boost employment and growth, and support a stable financial system.
    The Bank of Israel (BOI), which has cut its rate by a total of 75 basis points this year, also said inflation had continued to decline with expectations for the coming year dropping below the lower bound of its 1 - 3 percent target range. Longer-term inflation expectations have also declined but are near to the midpoint of the bank's range.
    Israel's headline inflation rate dropped to minus 0.3 percent in September from zero in August.
    The BOI also noted the continuing weakening of the shekel's exchange rate, with its effective exchange rate down by 2.8 percent in the last month for a cumulative drop of 4.1 percent this year.
    "Continued depreciation will support a recovery in exports and in the tradeable sector as a whole, and is expected to contribute to returning the inflation rate to within the target range," BOI said.
    Since Aug. 4 the shekel has been depreciating, trading at 3.79 to the U.S. dollar today, down  some 9 percent from 3.47 at the start of the year.