Azerbaijan's central bank cut its benchmark interest rate for the 10th time since February 2018 but signaled it may now pause by saying future decisions on interest rates will be based on actual and projected inflation along with the impact of internal and external risks to inflation.
The Central Bank of the Republic of Azerbaijan (CBA) cut its discount rate by 25 basis points to 8.0 percent and has now cut it by 7 percentage points since last February. It is CBA's sixth rate cut this year, with the rate cut 175 points.
CBA's reference to inflation determining its next rate move compares with its guidance from July when it said the trend toward a neutral policy stance would continue as long as inflation is expected to remain within its target of 4.0 percent, plus/minus 2 percentage points.
Today CBA said it latest forecast sees inflation remaining within its target range by the end of 2019 and while inflation expectations had not changed, external factors - such as volatile trade, currency and commodity markets in the context of worsening global growth - now have a greater potential to impact inflation than domestic factors.
Azerbaijan's inflation rate eased to 2.6 percent in August from 2.7 percent in July but is expected to rise to within the target range by the end of this year due to rising fiscal spending and consumption.
In the first 7 months of the year, gross domestic product expanded by 2.5 percent, with the growth in the non-oil sector 3 percent and currency reserves have risen 10.5 percent, or by US$4.7 billion, since the start of the year to $49.4 billion.
www.CentralBankNews.info
Friday, September 13, 2019
Thursday, September 12, 2019
ECB cuts deposit rate 10 bps, restarts QE at 20 bln euros
The European Central Bank (ECB) lowered one of its key policy rates and restarted its asset purchases, and signaled it could loosen its policy further to ensure inflation rises towards its target amid protracted economic weakness and persistent downside risks.
The ECB, the central bank for the 19 counties that share the euro, cut its deposit rate by another 10 basis points to minus 0.50 percent, the first cut since March 2016, but left its benchmark refinancing rate steady at 0.0 percent and the lending rate at 0.25 percent.
The ECB omitted its previous reference of keeping rates low through the first half of 2020 and said it now expects rates "to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistent reflected in underlying inflation dynamics."
As signaled in July, the ECB restarted its asset purchase program - known as quantitative easing - and will be buying securities worth 20 billion euros from Nov. 1, with the program to "run as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates."
The ECB's previous asset purchase program was wrapped up at the end of 2018 after the ECB had accumulated some 2.6 trillion euros of bonds. At that point, the ECB was still optimistic the economic slowdown in the second half of last year was temporary.
In addition, reinvestments of any maturing securities will continue "for an extended period" past the date the ECB stars raising rates, or as long as necessary to maintain favorable liquidity conditions.
The ECB, which in March decided to proceed with another round of targeted longer-term refinancing operations, TLTRO III, said this would be adjusted to ensure favorable bank lending conditions, with maturities lengthened to 3 years from 2 years.
To blunt some of the sting from the negative rate on banks' earnings, the ECB will also create a two-tier system for reserve renumeration, which exempts parts of banks' holdings of excess liquidity from the negative deposit facility.
"Today's decisions were taken in response to the continued shortfall of inflation with respect to our aim," ECB President Mario Draghi said in his last press conference before handing over the stewardship to Christine Lagarde on Nov. 1 after eight years.
In an update to its economic forecasts, the ECB lowered its forecast for economic growth in 2019 to 1.1 percent from June's forecast of 1.2 percent and 2018's 1.9 percent.
In 2020 the euro area economy is expected to remain sluggish with growth of 1.2 percent, down from the previous forecast of 1.4 percent, and then improve to 1.4 percent in 2021.
"The risks surrounding the euro area growth outlook remain tilted to the downside," Draghi said, referring to the rising threat of protectionism, vulnerabilities in emerging markets and other geopolitical factors.
In the second quarter of this year the euro area gross domestic product grew by an annual 1.2 percent, down from 1.3 percent in the first quarter.
Inflation is also well below the ECB's target of close to, but below, 2 percent. In August and July inflation was 1.0 percent and the ECB expects inflation to decline further before rising towards the end of the year.
The ECB lowered its forecast for inflation this year to average 1.2 percent, down from June's forecast of 1.3 percent, and then decline further in 2020 to only 1.0 percent, sharply down from June's forecast of 1.4 percent.
By 2021 inflation is forecast to pick up speed to 1.5 percent.
To help the ECB in its quest to boost growth and inflation, Draghi appealed to euro area governments to not only step up the pace of reform to structural policies to boost productivity and growth potential but also use any space for fiscal stimulus.
"In view of the weakening economic outlook and the continued prominence of downside risks, governments with fiscal space should act in an effective and timely manner," Draghi said.
The ECB, the central bank for the 19 counties that share the euro, cut its deposit rate by another 10 basis points to minus 0.50 percent, the first cut since March 2016, but left its benchmark refinancing rate steady at 0.0 percent and the lending rate at 0.25 percent.
The ECB omitted its previous reference of keeping rates low through the first half of 2020 and said it now expects rates "to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistent reflected in underlying inflation dynamics."
As signaled in July, the ECB restarted its asset purchase program - known as quantitative easing - and will be buying securities worth 20 billion euros from Nov. 1, with the program to "run as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates."
The ECB's previous asset purchase program was wrapped up at the end of 2018 after the ECB had accumulated some 2.6 trillion euros of bonds. At that point, the ECB was still optimistic the economic slowdown in the second half of last year was temporary.
In addition, reinvestments of any maturing securities will continue "for an extended period" past the date the ECB stars raising rates, or as long as necessary to maintain favorable liquidity conditions.
The ECB, which in March decided to proceed with another round of targeted longer-term refinancing operations, TLTRO III, said this would be adjusted to ensure favorable bank lending conditions, with maturities lengthened to 3 years from 2 years.
To blunt some of the sting from the negative rate on banks' earnings, the ECB will also create a two-tier system for reserve renumeration, which exempts parts of banks' holdings of excess liquidity from the negative deposit facility.
"Today's decisions were taken in response to the continued shortfall of inflation with respect to our aim," ECB President Mario Draghi said in his last press conference before handing over the stewardship to Christine Lagarde on Nov. 1 after eight years.
In an update to its economic forecasts, the ECB lowered its forecast for economic growth in 2019 to 1.1 percent from June's forecast of 1.2 percent and 2018's 1.9 percent.
In 2020 the euro area economy is expected to remain sluggish with growth of 1.2 percent, down from the previous forecast of 1.4 percent, and then improve to 1.4 percent in 2021.
"The risks surrounding the euro area growth outlook remain tilted to the downside," Draghi said, referring to the rising threat of protectionism, vulnerabilities in emerging markets and other geopolitical factors.
In the second quarter of this year the euro area gross domestic product grew by an annual 1.2 percent, down from 1.3 percent in the first quarter.
Inflation is also well below the ECB's target of close to, but below, 2 percent. In August and July inflation was 1.0 percent and the ECB expects inflation to decline further before rising towards the end of the year.
The ECB lowered its forecast for inflation this year to average 1.2 percent, down from June's forecast of 1.3 percent, and then decline further in 2020 to only 1.0 percent, sharply down from June's forecast of 1.4 percent.
By 2021 inflation is forecast to pick up speed to 1.5 percent.
To help the ECB in its quest to boost growth and inflation, Draghi appealed to euro area governments to not only step up the pace of reform to structural policies to boost productivity and growth potential but also use any space for fiscal stimulus.
"In view of the weakening economic outlook and the continued prominence of downside risks, governments with fiscal space should act in an effective and timely manner," Draghi said.
Turkey cuts rate another 325 bps but to remain cautious
Turkey's central bank lowered its policy rate for the second time this year but said it would maintain a cautious monetary stance to ensure inflation continues to decline, with the outlook for inflation determining the extent of future monetary tightness.
The Central Bank of Turkey (CBRT) cut its benchmark one-week repo rate by a larger-than-expected 325 basis points to 16.50 percent and has now lowered it by a total of 750 points this year following a cut in July after Governor Murat Uysal took over from Murat Cetinkaya who was fired for failing to follow President Recep Tayyip Erdogan's instructions to lower rates.
CBRT said the repo rate was now consistent with its projected disinflation path, which is critical for achieving lower sovereign risk, lower long-term rates and a stronger economic recovery.
Turkey's inflation rate declined to 15.01 percent in August from 16.65 percent in July and domestic demand and the current tight monetary policy continue to support a further decline, with the central bank expecting inflation to fall faster than it projected in July.
Turkey's economy is slowly improving but remains in contraction, with gross domestic product in the second quarter shrinking by an annual 1.5 percent following a fall of 2.4 percent in the first quarter and 2.8 percent in the fourth quarter of last year.
"Recently released data indicate that moderate recovery in economic activity continues," the central bank said, adding net exports were contributing to growth while investment remains weak and private consumption has gradually improved.
The Central Bank of Turkey (CBRT) cut its benchmark one-week repo rate by a larger-than-expected 325 basis points to 16.50 percent and has now lowered it by a total of 750 points this year following a cut in July after Governor Murat Uysal took over from Murat Cetinkaya who was fired for failing to follow President Recep Tayyip Erdogan's instructions to lower rates.
CBRT said the repo rate was now consistent with its projected disinflation path, which is critical for achieving lower sovereign risk, lower long-term rates and a stronger economic recovery.
Turkey's inflation rate declined to 15.01 percent in August from 16.65 percent in July and domestic demand and the current tight monetary policy continue to support a further decline, with the central bank expecting inflation to fall faster than it projected in July.
Turkey's economy is slowly improving but remains in contraction, with gross domestic product in the second quarter shrinking by an annual 1.5 percent following a fall of 2.4 percent in the first quarter and 2.8 percent in the fourth quarter of last year.
"Recently released data indicate that moderate recovery in economic activity continues," the central bank said, adding net exports were contributing to growth while investment remains weak and private consumption has gradually improved.
Malaysia maintains rate but sees further downside risks
Malaysia's central bank left its benchmark Overnight Policy Rate (OPR) steady at 3.0 percent and while it confirmed its forecast for growth this year it was also more downbeat, saying the projection was "subject to further downside risks from worsening trade tensions, uncertainties in the global and domestic environment, and extended weakness in commodity-related sectors."
The comment about the risks to economic growth by Bank Negara Malaysia (BNM) underlines the threat to Asian economies from the fallout of the trade conflict between the U.S. and China, with BNM saying the global economy was now "expanding at a more modest pace amid slower growth in most major advanced and emerging economies,"
In July BNM also referred to the downside risks from the ongoing uncertainties in the global economy but said the global economy "continues to expand moderately."
BNM confirmed its forecast for growth this year in a range of 4.3 to 4.8 percent, but said the recent escalation of trade tensions was pointing to weaker global trading going forward while domestic growth is expected to be supported by private spending.
Malaysia's economy expanded by annual 4.9 percent in the second quarter of this year, up from 4.5 percent in the first quarter.
Inflation eased to 1.4 percent in July from 1.5 percent in June and BNM expects it to remain low but rise from the current year-to-date average of 0.3 percent.
In May BNM lowered its OPR rate by 25 basis points in the first easing since July 2016 and reiterated that its current monetary policy stance remained accommodative.
The comment about the risks to economic growth by Bank Negara Malaysia (BNM) underlines the threat to Asian economies from the fallout of the trade conflict between the U.S. and China, with BNM saying the global economy was now "expanding at a more modest pace amid slower growth in most major advanced and emerging economies,"
In July BNM also referred to the downside risks from the ongoing uncertainties in the global economy but said the global economy "continues to expand moderately."
BNM confirmed its forecast for growth this year in a range of 4.3 to 4.8 percent, but said the recent escalation of trade tensions was pointing to weaker global trading going forward while domestic growth is expected to be supported by private spending.
Malaysia's economy expanded by annual 4.9 percent in the second quarter of this year, up from 4.5 percent in the first quarter.
Inflation eased to 1.4 percent in July from 1.5 percent in June and BNM expects it to remain low but rise from the current year-to-date average of 0.3 percent.
In May BNM lowered its OPR rate by 25 basis points in the first easing since July 2016 and reiterated that its current monetary policy stance remained accommodative.
Wednesday, September 11, 2019
Armenia cuts rate 25 bps, to keep easy policy stance
Armenia's central bank lowered its refinancing rate by 25 basis points to 5.50 percent, reiterating that it expects to maintain a stimulative monetary policy stance in the medium term to achieve its inflation target due to the deflationary impact from the external sector, where economic growth and inflation is slowing.
The Central Bank of Armenia (CBA), which has now cut its rate twice this year following a cut in January for a total decline of 50 basis points, also said it expects inflation to remain below its target of 4.0 percent, plus/minus 1.5 percentage points, in coming months before stabilizing around the target in the medium term.
Armenia's inflation rate slumped to 0.6 percent in August from 1.7 percent in July, partly due to a seasonal decline in agricultural prices that is also reflecting international commodity markets.
Economic activity in Armenia remained high in the third quarter, largely driven by growth in processing industries and private consumption while fiscal policy is acting as a brake on demand.
Armenia's dram rose steadily from March through August and has remained stable this month, trading at 476.6 to the U.S. dollar today, up 1.5 percent this year.
Aided by a pickup in private investment and private remittances, Armenia's economy grew 5.2 percent last year and 6.5 percent year-on-year in the second quarter of this year.
In late May the International Monetary Fund forecast growth of a more sustainable 4.6 percent this year and stabilize around 4.5 percent in the medium term, with fiscal consolidation remaining on track to bring government debt below 50 percent of gross domestic product in the medium term.
www.CentralBankNews.info
The Central Bank of Armenia (CBA), which has now cut its rate twice this year following a cut in January for a total decline of 50 basis points, also said it expects inflation to remain below its target of 4.0 percent, plus/minus 1.5 percentage points, in coming months before stabilizing around the target in the medium term.
Armenia's inflation rate slumped to 0.6 percent in August from 1.7 percent in July, partly due to a seasonal decline in agricultural prices that is also reflecting international commodity markets.
Economic activity in Armenia remained high in the third quarter, largely driven by growth in processing industries and private consumption while fiscal policy is acting as a brake on demand.
Armenia's dram rose steadily from March through August and has remained stable this month, trading at 476.6 to the U.S. dollar today, up 1.5 percent this year.
Aided by a pickup in private investment and private remittances, Armenia's economy grew 5.2 percent last year and 6.5 percent year-on-year in the second quarter of this year.
In late May the International Monetary Fund forecast growth of a more sustainable 4.6 percent this year and stabilize around 4.5 percent in the medium term, with fiscal consolidation remaining on track to bring government debt below 50 percent of gross domestic product in the medium term.
www.CentralBankNews.info
Monday, September 9, 2019
Kazakhstan raises rate 25 bps as inflation tops forecast
Kazakhstan's central bank lived up to its guidance from July and raised it base rate by 25 basis points to 9.25 percent as inflation is above expectations and said future policy decisions will be based on how inflation is expected to develop with respect to the bank's 4.0 to 6.0 percent target corridor.
The rate hike by the National Bank of the Republic of Kazakhstan (NBK) follows a 25-basis-point rate cut in April and brings the rate back to the level seen from October 2018 to March 2019.
Kazakhstan's inflation rate declined to 5.2 percent in August from 5.4 percent in July but the central bank expects inflation to rise toward the top of its target corridor at 5.7 to 5.8 percent by the end of this year due to robust consumer demand, price increases on certain foods and the waning effect of lower tariffs on regulated services, which it said creates the risk of inflation exceeding the upper bound of the target corridor.
Raising the base rate now will help increase the attractiveness of the tenge currency, reducing the risk of higher inflation from import prices, NBK said, adding during 2020 inflation is then expected to decelerate and settle within its target corridor.
Economic growth in the first 7 months of the year is forecast at 4.2 percent by the NBK, which creates inflationary pressure and is above expectations.
For the full year, NBK forecast growth of 3.8 percent before slowing to 3.5 percent in 2020, with expanding household consumption and growth in investment the main drivers. Economic growth will then ease due to weaker fiscal stimulus and net exports.
The central bank added that during the next week it will release an inflation report that will contain a detailed analysis of the main macroeconomic factors affecting inflation to increase transparency and improve its communications.
Kazakhstan's tenge firmed in the wake of the rate hike to 384.5 to the U.S. dollar but has depreciated since steadily since September 2018 and is 2.3 percent down since the start of 2019.
www.CentralBankNews.info
The rate hike by the National Bank of the Republic of Kazakhstan (NBK) follows a 25-basis-point rate cut in April and brings the rate back to the level seen from October 2018 to March 2019.
Kazakhstan's inflation rate declined to 5.2 percent in August from 5.4 percent in July but the central bank expects inflation to rise toward the top of its target corridor at 5.7 to 5.8 percent by the end of this year due to robust consumer demand, price increases on certain foods and the waning effect of lower tariffs on regulated services, which it said creates the risk of inflation exceeding the upper bound of the target corridor.
Raising the base rate now will help increase the attractiveness of the tenge currency, reducing the risk of higher inflation from import prices, NBK said, adding during 2020 inflation is then expected to decelerate and settle within its target corridor.
Economic growth in the first 7 months of the year is forecast at 4.2 percent by the NBK, which creates inflationary pressure and is above expectations.
For the full year, NBK forecast growth of 3.8 percent before slowing to 3.5 percent in 2020, with expanding household consumption and growth in investment the main drivers. Economic growth will then ease due to weaker fiscal stimulus and net exports.
The central bank added that during the next week it will release an inflation report that will contain a detailed analysis of the main macroeconomic factors affecting inflation to increase transparency and improve its communications.
Kazakhstan's tenge firmed in the wake of the rate hike to 384.5 to the U.S. dollar but has depreciated since steadily since September 2018 and is 2.3 percent down since the start of 2019.
www.CentralBankNews.info
Sunday, September 8, 2019
This week in monetary policy: Kazakhstan, Armenia, Poland, Moldova, Malaysia, Serbia, Turkey, ECB, Peru & Azerbaijan
This week - September 8 through September 14 - central banks from 10 countries or jurisdictions are scheduled to decide on monetary policy: Kazakhstan, Armenia, Poland, Moldova, Malaysia, Serbia, Turkey, euro area, Peru and Azerbaijan.
Following table includes the name of the country, the date of the next policy decision, the current policy rate, the result of the last policy decision, the change in the policy rate year to date, and the rate one year ago.
The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.
| WEEK 37 | ||||||
| SEP 8 - SEP 14, 2019: | ||||||
| KAZAKHSTAN | 9-Sep | 9.00% | 0 | -25 | 9.00% | FM |
| ARMENIA | 10-Sep | 5.75% | 0 | -25 | 6.00% | |
| POLAND | 11-Sep | 1.50% | 0 | 0 | 1.50% | EM |
| MOLDOVA | 11-Sep | 7.50% | 50 | 100 | 6.50% | |
| MALAYSIA | 12-Sep | 3.00% | 0 | -25 | 3.25% | EM |
| SERBIA | 12-Sep | 2.50% | -25 | -50 | 3.00% | FM |
| TURKEY | 12-Sep | 19.75% | -425 | -425 | 24.00% | EM |
| EURO AREA | 12-Sep | 0.00% | 0 | 0 | 0.00% | DM |
| PERU | 12-Sep | 2.50% | -25 | -25 | 2.75% | EM |
| AZERBAIJAN | 13-Sep | 8.25% | -25 | -150 | 10.00% | |
Wednesday, September 4, 2019
Georgia raises rate 50 bps to curb inflation from lari fall
Georgia's central bank lived up to its warning from July and raised its benchmark rate to curb inflationary pressures from a depreciation of its lari currency and said it was "ready to continue tightening policy until the pressure on the exchange rate weakens."
The National Bank of Georgia (NBG) raised its refinancing rate by 50 basis points to 7.0 percent, saying the impact of the exchange rate depreciation on inflation had increased recently and this was now exacerbating inflationary expectations.
The rate hike by NBG comes as inflation has begun to accelerate following a steady fall in the lari since February and after the central bank cut its rate twice this year in January and March by a total of 50 basis points.
Georgia's inflation rate rose to 4.9 percent in July from 4.6 percent in June and only 2.2 percent in January, boosted by higher taxes on cigarettes. Core inflation, which excludes food, energy and tobacco, is still low at 2.4 percent, indicating weakening demand-side pressures, NBG said.
The lari has been falling since mid-February and was trading at 2.96 to the U.S. dollar today, down 9.5 percent since the start of this year.
The central bank said it would "use all available means to ensure price stability" and if necessary its monetary policy committee would consider meeting at an extraordinary session. Its next meeting is scheduled for Oct. 23.
The National Bank of Georgia (NBG) raised its refinancing rate by 50 basis points to 7.0 percent, saying the impact of the exchange rate depreciation on inflation had increased recently and this was now exacerbating inflationary expectations.
The rate hike by NBG comes as inflation has begun to accelerate following a steady fall in the lari since February and after the central bank cut its rate twice this year in January and March by a total of 50 basis points.
Georgia's inflation rate rose to 4.9 percent in July from 4.6 percent in June and only 2.2 percent in January, boosted by higher taxes on cigarettes. Core inflation, which excludes food, energy and tobacco, is still low at 2.4 percent, indicating weakening demand-side pressures, NBG said.
The lari has been falling since mid-February and was trading at 2.96 to the U.S. dollar today, down 9.5 percent since the start of this year.
The central bank said it would "use all available means to ensure price stability" and if necessary its monetary policy committee would consider meeting at an extraordinary session. Its next meeting is scheduled for Oct. 23.
Chile cuts rate another 50 bps, more cuts may be needed
Chile's central bank lowered its monetary policy rate by another 50 basis points to 2.0 percent and said further monetary stimulus might be required to boost inflation amid disappointing domestic activity and the escalating trade conflict between the U.S. and China that is affecting other economies that are integrated into value chains and financial markets.
It is the second rate cut by the Central Bank of Chile this year following a similar-sized cut in June and the policy rate has now been cut 100 basis points this year, putting the rate at a level not seen since August 2010.
The rate cut was widely expected following the central bank's guidance in July that it may be necessary to ease further if the current trends continue, with the size of any easing to be assessed in connection with the September monetary policy report, which will be released on Sep. 4.
"The board's decision considers that the economy's performance of the second quarter and its outlook indicated that inflation will take longer to converge to the target, calling for stronger monetary stimulus," the central bank said, adding:
"It also estimates that further stimulus might be required, which will be evaluated in the upcoming meetings in light of the evolution of the macroeconomic scenario."
Unlike its cut in June, the board was unanimous in today's decision to cut the rate. In July a majority of its board decided to maintain the rate.
"The main development since the previous meeting has been the worsening of the external scenario," the central bank said, adding global trade volume has virtually stagnated and the impact of the U.S.-Sino trade conflict is compounded by likelihood of the U.K.'s non-deal exit from the European Union and the severe deterioration of the situation in Argentina.
As the world's largest copper producer, Chile's economy has been hit by falling demand and a slump in prices for for copper since June last year, with economic growth slowing to an annual rate of 1.9 percent in the second quarter following 1.6 percent in the first quarter.
"In the second quarter, domestic activity and demand growth disappointed expectations," the central bank said, as exports had performed worse than expected and private consumption was also soft.
In its June policy report, the central bank lowered its 2019 growth forecast to 2.75 - 3.5 percent from March's forecast of 3.0 - 4.0 percent and 2018's growth of 4.0 percent and last month Chile's government lowered its 2019 forecast to around 3.0 percent from an earlier forecast of 3.8 percent.
The economic expectations survey for August showed 2.6 percent growth for 2019, 3.1 percent for 2020 and 3.3 percent for 2021.
Inflation remained below the central bank's target of 3.0 percent at 2.2 percent in July while Chile's peso has been depreciating steadily since April last year and was trading at 725.9 to the U.S. dollar today, down 4.4 percent this year.
It is the second rate cut by the Central Bank of Chile this year following a similar-sized cut in June and the policy rate has now been cut 100 basis points this year, putting the rate at a level not seen since August 2010.
The rate cut was widely expected following the central bank's guidance in July that it may be necessary to ease further if the current trends continue, with the size of any easing to be assessed in connection with the September monetary policy report, which will be released on Sep. 4.
"The board's decision considers that the economy's performance of the second quarter and its outlook indicated that inflation will take longer to converge to the target, calling for stronger monetary stimulus," the central bank said, adding:
"It also estimates that further stimulus might be required, which will be evaluated in the upcoming meetings in light of the evolution of the macroeconomic scenario."
Unlike its cut in June, the board was unanimous in today's decision to cut the rate. In July a majority of its board decided to maintain the rate.
"The main development since the previous meeting has been the worsening of the external scenario," the central bank said, adding global trade volume has virtually stagnated and the impact of the U.S.-Sino trade conflict is compounded by likelihood of the U.K.'s non-deal exit from the European Union and the severe deterioration of the situation in Argentina.
As the world's largest copper producer, Chile's economy has been hit by falling demand and a slump in prices for for copper since June last year, with economic growth slowing to an annual rate of 1.9 percent in the second quarter following 1.6 percent in the first quarter.
"In the second quarter, domestic activity and demand growth disappointed expectations," the central bank said, as exports had performed worse than expected and private consumption was also soft.
In its June policy report, the central bank lowered its 2019 growth forecast to 2.75 - 3.5 percent from March's forecast of 3.0 - 4.0 percent and 2018's growth of 4.0 percent and last month Chile's government lowered its 2019 forecast to around 3.0 percent from an earlier forecast of 3.8 percent.
The economic expectations survey for August showed 2.6 percent growth for 2019, 3.1 percent for 2020 and 3.3 percent for 2021.
Inflation remained below the central bank's target of 3.0 percent at 2.2 percent in July while Chile's peso has been depreciating steadily since April last year and was trading at 725.9 to the U.S. dollar today, down 4.4 percent this year.
Tuesday, September 3, 2019
Australia keeps rate steady, confirms willing to cut again
Australia's central bank left its benchmark cash rate unchanged at a record low of 1.0 percent and confirmed its guidance from last month that it is willing to cut rates further if needed to support economic growth and reach its inflation target.
The Reserve Bank of Australia (RBA), which cut its rate in June and July by a total of 50 points before holding it steady in August, also reiterated that it expects to keep interest rates low "for an extended period" to help reduce unemployment and make progress in boosting inflation.
As in August, RBA Governor Philip Lowe described the outlook for the global economy as "reasonable," but the risks remains tilted to the downside as trade and technology disputes are affecting international trade and investment as businesses scale back spending due to uncertainty.
Australia's economy slowed sharply in the first half of this year with gross domestic product up by only 1.8 percent year-on-year in the first quarter, down from 2.3 percent in the previous quarter.
But in its monetary policy statement from last year the RBA said growth was likely to have troughed in the middle of this year and forecast growth of 2.4 percent this year and 2.75 percent next year, supported by low interest rates, tax cuts, infrastructure spending, stabilization of the housing market and a brighter outlook for the resources sector.
Sluggish growth has kept a lid on inflation, which is expected to remain subdued for some time, hitting a little under 2 percent in 2020 and a little above 2 percent in 2021.
Headline inflation rose to 1.6 percent in the second quarter from 1.3 percent in the first quarter, but is still below RBA's target of 2.0 to 3.0 percent.
Australia's dollar firmed slightly in response to the RBA's decision, which was largely as expected, to around 1.49 to the U.S. dollar, down 4.7 percent this year.
The Reserve Bank of Australia (RBA), which cut its rate in June and July by a total of 50 points before holding it steady in August, also reiterated that it expects to keep interest rates low "for an extended period" to help reduce unemployment and make progress in boosting inflation.
As in August, RBA Governor Philip Lowe described the outlook for the global economy as "reasonable," but the risks remains tilted to the downside as trade and technology disputes are affecting international trade and investment as businesses scale back spending due to uncertainty.
Australia's economy slowed sharply in the first half of this year with gross domestic product up by only 1.8 percent year-on-year in the first quarter, down from 2.3 percent in the previous quarter.
But in its monetary policy statement from last year the RBA said growth was likely to have troughed in the middle of this year and forecast growth of 2.4 percent this year and 2.75 percent next year, supported by low interest rates, tax cuts, infrastructure spending, stabilization of the housing market and a brighter outlook for the resources sector.
Sluggish growth has kept a lid on inflation, which is expected to remain subdued for some time, hitting a little under 2 percent in 2020 and a little above 2 percent in 2021.
Headline inflation rose to 1.6 percent in the second quarter from 1.3 percent in the first quarter, but is still below RBA's target of 2.0 to 3.0 percent.
Australia's dollar firmed slightly in response to the RBA's decision, which was largely as expected, to around 1.49 to the U.S. dollar, down 4.7 percent this year.
Monday, September 2, 2019
Gambia maintains key rate but raises deposit rate 50 bps
Gambia's central bank kept its monetary policy rate (MPR) at 12.50 percent and the rate on its standing lending facility at 13.50 percent but raised the interest rate on the standing deposit facility by 50 basis points to 2.50 percent, pointing to "increased optimism on the economic growth prospects" and a continued decline in inflation.
The Central Bank of The Gambia (CBG), which cut its policy rate by 100 basis points in February on declining inflation, also said the current account deficit had narrowed in the first half of the year, supporting stability of the dalasi's exchange rate, while the fiscal deficit had also narrowed.
Gambia's headline inflation rate has begun to decelerate and stabilize after a jump in May following a sharp increase in postal charges in April, the effect of high demand during Ramadan in May and a recent rise in fuel prices, CBG said.
The headline inflation rate declined to 7.32 percent in July from 7.38 percent in June and 7.49 percent in May, CBG said, adding food inflation, which is the main driver of headline inflation, was unchanged in July and July around 6.7 percent while non-food inflation had decelerated.
CBG's monetary policy committee said price pressures had started to ease and underlying inflation remained broadly subdued and this was expected to continue in the medium term, premised on a continued stable exchange rate, well-anchored inflation expectations and moderate global food prices.
"Major risks to the inflation outlook, however continue to be the domestic food supply situation in the light of delayed rainfall experienced this year," CBG said in a statement from Aug. 29.
Gambia's economy rebounded strongly in 2018, with gross domestic product growing 6.5 percent after 4.8 percent in 2017 according to the country's statistics bureau, and the central bank said its composite index of economic activity suggests economic activity remained robust in the first half of this year and "points to stronger growth in the second half of the year."
An increased inflow of private remittances, higher tourism, official inflows from development partners has kept the foreign exchange market operating smoothly and kept the exchange rate of the dalasi stable, with the volume of transactions in the first seven months of the year up 14 percent.
The dalasi was trading at 50.50 to the U.S. dollar today, down 0.8 percent since last Monday, and down 2.3 percent since the start of this year.
The Central Bank of The Gambia (CBG), which cut its policy rate by 100 basis points in February on declining inflation, also said the current account deficit had narrowed in the first half of the year, supporting stability of the dalasi's exchange rate, while the fiscal deficit had also narrowed.
Gambia's headline inflation rate has begun to decelerate and stabilize after a jump in May following a sharp increase in postal charges in April, the effect of high demand during Ramadan in May and a recent rise in fuel prices, CBG said.
The headline inflation rate declined to 7.32 percent in July from 7.38 percent in June and 7.49 percent in May, CBG said, adding food inflation, which is the main driver of headline inflation, was unchanged in July and July around 6.7 percent while non-food inflation had decelerated.
CBG's monetary policy committee said price pressures had started to ease and underlying inflation remained broadly subdued and this was expected to continue in the medium term, premised on a continued stable exchange rate, well-anchored inflation expectations and moderate global food prices.
"Major risks to the inflation outlook, however continue to be the domestic food supply situation in the light of delayed rainfall experienced this year," CBG said in a statement from Aug. 29.
Gambia's economy rebounded strongly in 2018, with gross domestic product growing 6.5 percent after 4.8 percent in 2017 according to the country's statistics bureau, and the central bank said its composite index of economic activity suggests economic activity remained robust in the first half of this year and "points to stronger growth in the second half of the year."
An increased inflow of private remittances, higher tourism, official inflows from development partners has kept the foreign exchange market operating smoothly and kept the exchange rate of the dalasi stable, with the volume of transactions in the first seven months of the year up 14 percent.
The dalasi was trading at 50.50 to the U.S. dollar today, down 0.8 percent since last Monday, and down 2.3 percent since the start of this year.
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