Sunday, September 25, 2016

This week in monetary policy: Israel, Kyrgyzstan, Morocco, Sri Lanka, Angola, Taiwan, Czech Rep., Moldova, Mexico, Romania, Bulgaria, Colombia, Trinidad & Tobago and Dominican Rep.

    This week (September 25 through October 1) central banks from 14 countries or jurisdictions are scheduled to decide on monetary policy: Israel, Kyrgyz Republic, Morocco, Sri Lanka, Angola, Taiwan, Czech Republic, Moldova, Mexico, Romania, Bulgaria, Colombia, Trinidad and Tobago, and the Dominican Republic.
    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, the rate one year ago, and the country’s MSCI classification.
    The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.

SEP 25 - OCT 1, 2016:
COUNTRY       DATE           RATE      LATEST        YTD     1 YR AGO    MSCI
ISRAEL 26-Sep 0.10% 0 0 0.10%       DM
KYRGYZSTAN 26-Sep 6.00% 0 -400 10.00%
MOROCCO 27-Sep 2.25% 0 -25 2.50%       FM
SRI LANKA 28-Sep 7.00% 0 100 6.00%       FM
ANGOLA 28-Sep 16.00% 200 500 10.50%
TAIWAN 29-Sep 1.38% -12.5 -25 1.75%       EM
CZECH REPUBLIC 29-Sep 0.05% 0 0 0.05%       EM
MOLDOVA 29-Sep 10.00% -300 -950 19.50%
MEXICO 29-Sep 4.25% 0 100 3.00%       EM
ROMANIA 30-Sep 1.75% 0 0 1.75%       FM
BULGARIA 30-Sep 0.00% 0 -1 0.01%       FM
COLOMBIA 30-Sep 7.75% 0 200 4.75%       EM
TRINIDAD & TOBAGO 30-Sep 4.75% 0 0 4.50%
DOMINICAN REP. 30-Sep 5.00% 0 0 5.00%

Saturday, September 24, 2016

Pakistan retains rate, sees rising domestic demand

    Pakistan's central bank left its policy rate at 5.75 percent, saying an expected increase in domestic demand would largely determine inflation in the remaining months of fiscal 2017, which began July 1, with oil prices remaining the major risk factor
    The State Bank of Pakistan (SBP), which cut its rate by 25 basis points in May, added that the country's economy had "fared well" due to a supportive economic environment, with record-high foreign exchange reserves supporting a stable exchange rate.
    However, the SBB added that the current account was at risk of widening further due to declining exports and rising imports.
    Pakistan's inflation rate declined to 3.56 percent in August from 4.12 percent in July, but up from 1.8 percent in August last year. In the first two months of the current fiscal year inflation was double the rate seen 12 months ago.
    In fiscal 2016, which ended June 30, Pakistan's average consumer price inflation rate declined to a 47-year low of 2.9 percent while Gross Domestic Growth touched an 8-year high of 4.7 percent.
    The economy is expected to expand further this year on improving industrial activity, with lower prices of inputs, low interest rates and better energy supplies seen boosting manufacturing.

Thursday, September 22, 2016

Egypt leaves rate steady, says rise in inflation transitory

    Egypt's central bank left its key policy rates unchanged, attributing the rise in inflation and future upside inflation risks to "transitory cost-push factors" while the demand side poses a risk to the outlook for inflation.
   The Central Bank of Egypt (CBE), which has raised its rate by 250 basis points this year, left the benchmark overnight deposit rate at 11.75 percent, the overnight lending rate at 12.75 percent, and the rates on its main operation and the discount rate at 12.25 percent.
   Egypt's headline inflation rate accelerated to 15.47 percent in August - its highest level since December 2008 -  from 14.0 percent in the previous two months as Egypt's government implements reforms, including a cut to energy subsidies and the imposition of value-added-tax (VAT), that will help trim the budget deficit but push up prices.
    In addition, the prices of fresh vegetables rose and there was a seasonal rise in the cost of meat in connection with Eid-Al-Adha while the pass-through from past exchange rate movements to domestic prices was limited.
   In August the International Monetary Fund (IMF) agreed in principle to grant Egypt a $12 billion, 3-year loan to support the government's reform program and help its foreign currency shortage.
    The extended fund facility is subject to final approval by the IMF executive committee and on Sunday the country's deputy finance minister was quoted as saying it was making good progress that would help release the first tranche of the loan.
    The funds would help bolster Egypt's international reserves of US$16.6 billion, still about half of the levels seen before the uprising in 20111 that ousted Hosni Mubarak from power. Egypt is also planning to sell between $3 billion and $5 billion in international bonds and is in talks with China for a $4 billion loan to help finance sewage and renewable energy projects.
    The central bank added that the country's economy expanded by 4.3 percent in the first nine months of the 2015/16 financial year, down from 4.8 percent in the same period a year ago, with growth driven by domestic demand from consumption while investment was weak.

South Africa holds rate, may be ending tightening cycle

    South Africa's central bank left its benchmark repurchase rate steady at 7.0 percent, as expected, citing an improvement in the outlook for inflation and a weak outlook for the economy.
    Although the South African Reserve Bank (SARB) - which has raised its rate by 200 basis points since January 2014, including 75 basis points this year - is still concerned about inflation, it added that its monetary policy committee "may be close to the end of the tightening cycle" if forecasts hold.
    The bank's policy committee was unanimous in its policy decision and said it considers the risks to its inflation forecast to be "more or less balanced," with the rand's exchange rate, which is currently stronger than expected, moderating risks to inflation.
    However, SARB added that some of the factors helping the rand may be temporary and it remains vulnerable to domestic and external shocks.
    Despite improved economic growth in the second quarter, SARB said the outlook remains constrained with the risks to its outlook broadly balanced as risks stem from global conditions, the implementation of structural reforms, business and consumer confidence.
    South Africa's Gross Domestic Product was up by an annual 0.6 percent in the second quarter, rebounding from a 0.1 percent contraction in the first quarter.
    The central bank raised its forecast for growth this year to average 0.4 percent, up from zero percent previously forecast, and the 2017 forecast to 1.2 percent from 1.1 percent. For 2018 SARB is expecting growth of 1.6 percent, up from 1.5 percent.

     SARB lowered its outlook for inflation to average 6.4 percent this year, down from 6.6 percent previously forecast, with a peak of 6.7 percent being reached in the fourth quarter of this year, down from a previous forecast of a peak of 7.1 percent.
    Inflation is now seen returning to SARB's 3-6 percent target range in the second quarter of 2017 and average 5.8 percent that year, down from the previous forecast of 6.0 percent. For 2018 inflation  is seen declining further to an unchanged 5.5 percent.
   South Africa's inflation rate eased to 5.9 percent in August from 6.0 percent in July, just below the central bank's upper limit of 6 percent. 
     After depreciating from mid-2011 to January this year, the rand has trended higher on general optimism about emerging markets but has been volatile, buffeted by domestic political turmoil.
    Earlier this month Lesetja Kganyago, SARB governor, said the dispute between the finance minster and a police unit was creating uncertainty that wasn't "helping the rand," and he was concerned that this volatility could feed into inflation.
   Today the rand was trading at 13.48 to the U.S. dollar, up from 16.9 seen on Jan. 17 and 15 percent higher than a rate of 15.5 at the start of the year.

Turkey again cuts overnight rate 25 bps, retains key rate

    Turkey's central bank once again lowered its overnight funding rate and late lending rates by 25 basis points while it retained its benchmark one-week repo rate as it took another "measured and cautious step toward simplification" of its monetary policy framework.
    The Central Bank of the Republic of Turkey (CRT) also re-affirmed its guidance that future monetary policy decisions will depend on the outlook for inflation, and that a "cautious" policy stance will be maintained in light of inflation expectations, pricing behavior and "other factors" - viewed as a reference to the lira's exchange rate.
    As expected, the CBRT cut the overnight funding rate to 8.25 percent from 8.50 percent and has now cut it by 250 basis points since March. The borrowing rate remained at 7.25 percent. The late liquidity lending rate was also cut by 25 points to 9.75 percent and the borrowing rate stayed at zero.
    The benchmark one-week repo rate was left at 7.50 percent, unchanged since February 2015.
    Turkey's inflation headline inflation rate eased to 8.05 percent in August from 8.79 percent in July and the central bank said slower demand and falling food prices should push down inflation.
    However, a recent change in fuel taxes and other costs will limit any improvement in inflation and "thus necessitate the maintenance of a cautious monetary policy stance," the CBRT said.
    In its quarterly inflation report from July, the CBRT expects inflation to stabilize around its 5.0 percent target as of 2018 after easing to an average of 7.5 percent this year and 6.0 percent in 2017.
    Inflation is seen fluctuating between 6.6 percent and 8.4 percent in the rest of this year.
     The latest economic data showed a declaration in economic activity, with lower tourism revenues having a negative impact although demand from Europe still supports exports.
    "With the supportive measures and incentives provided recently, domestic demand is expected to recover starting from the final quarter," the CBRT said.
    The number of tourists arriving in Turkey in July fell by 36.7 percent to 3.47 million from a year ago due to the failed coup attempt, terrorist attacks and tensions between Russia and Turkey.

Indonesia cuts rate 25 bps to boost domestic demand

   Indonesia's central bank cut its new benchmark 7-day reverse repo rate by 25 basis points to 5.00 percent, as expected, to provide a further boost to domestic demand and economic growth at a time of low inflation, a current account deficit that is under control and a "relatively stable" exchange rate.
    Bank Indonesia (BI), which in August adopted the 7-day RR rate as its benchmark rate instead of the BI rate to improve the transmission of its monetary policy, also lowered the rate on its deposit facility by 25 points to 4.25 percent and the lending rate by 25 points to 5.75 percent.
     The BI has now cut its key policy rates five times this year by a total of 125 basis points. Earlier this month the BI's governor, Agus Martowardojo, said the central bank was ready to ease its policy subject to the latest economic data.
     Indonesia's inflation rate fell to 2.79 percent in August, the lowest rate since December 2009, from 3.21 percent in July, and the central bank said it now expects inflation to approach the lower limit of its target range this year.
   In August the BI forecast that inflation would end this year within the target corridor of 4.0 percent, plus/minus 1 percentage point.
    Indonesia's economy in the third quarter is not as strong as the central bank previously expected as non-construction investment is not showing "significant improvements' and fiscal stimulus is expected to remain limited, in line with the government's change for the second half of this year.
   The BI in August lowered its growth forecast for this year to 4.9 - 5.3 percent from a previous 5.0 - 5.4 percent as the government cut its budget by 133 trillion rupiah.


Norway holds rate, raises policy rate, inflation forecasts

    Norway's central bank left its key policy rate at 0.50 percent, as expected, but raised its forecast for inflation and the policy rate due to a stronger-than-expected effect of inflation from a weaker krone, which may then translate into higher wages next year.
    Norges Bank (NB), which cut its rate by 25 basis points in March, said inflation had been "unexpectedly high" in recent months while there are also signs that economic growth was picking up at a slightly faster pace than projected in June while house price inflation has accelerated above expectations.
    “Our current assessment of the outlook suggests that the key policy rate will most likely remain at today’s level in the period ahead,” NB Governor Oeystein Olsen said, adding that the bank's forecast still implies a slightly higher probability of a rate cut in the year ahead.
    In its latest monetary policy report, the central bank raised its inflation forecast for 2016 to 3.6 percent from 3.3 percent forecast in June, the 2017 forecast to 2.6 percent from 2.2 percent, the 2018 forecast to 2.1 percent from 1.9 percent and the 2019 forecast to 1.8 percent from 1.7 percent.
    Norway's inflation rate eased to 4.0 percent in August from 4.4 percent in July, mainly due to lower airfares.
    NB raised its forecast for the key policy rate to average 0.6 percent this year, up from 0.5 percent, and the 2017 forecast to 0.4 percent from 0.3 percent. For 2018 the central bank also forecasts a key policy rate of 0.4 percent, rising to 0.7 percent in 2019.
    The forecast for economic growth this year was raised to 0.9 percent from 0.8 percent, rising to 1.8 percent in 2017, up from 1.6 percent. For 2018 Gross Domestic Product was seen rising by an unchanged 2.1 percent while the forecast for 2019 was trimmed to 2.1 percent from 2.3 percent.
    Norway's GDP grew by an annual rate of 2.5 percent in the second quarter of this year, up from 0.6 percent in the first quarter.

Philippines holds rate, risks to inflation now to upside

   The central bank of the Philippines left its benchmark overnight reverse repurchase rate (RRP) unchanged at 3.0 percent, as expected, and repeated that "increased uncertainty over prospects for growth and monetary policy action in major advanced economies warrants prudence in policy settings."
    Bangko Sentral ng Pilipinas (BSP), which lowered its RRP rate by 100 basis points in June as part of shift to an interest rate corridor system, added that the balance of risks surrounding the inflation outlook "appears to be tilted to the upside" from pending petitions to changes in electricity rates along with proposed change in taxes on petroleum products.
    In its August statement, the BSP described the balance of risks to inflation as "broadly balanced."
    As in August, the central bank described the inflation environment as "manageable," with inflation seen slightly below the range of 3.0 percent, plus/minus 1 percentage points this year before rising toward the mid-point of its target range in 2017 and 2018.
     The BSP currently forecasts average inflation of 1.8 percent for this year, 2.9 percent for 2017 and 2.6 percent for 2018.

Wednesday, September 21, 2016

Central Bank News Link List - Sep 22: Fed keeps rates steady, signals one hike by end of year

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.

Central Bank News Link List - Sep 21: BOJ overhauls policy framework, sets yield curve target

   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. 

Tuesday, September 20, 2016

Kenya cuts rate 50 bps, worried over slower credit growth

    Kenya's central bank cut its Central Bank Rate (CBR) by 50 basis points to 10.00 percent, saying it remains concerned over the "persistent" slowdown in private sector growth at the same time that inflation is expected to decline in the short term amid moderate demand pressure on inflation.
    The Central Bank of Kenya (CBK) has now cut its rate by 150 basis points this year following a 100-point reduction in May.
    Kenya's inflation rate eased to 6.26 percent in August from 6.4 percent in July, within the government's target range 2.5 percent to 7.5 percent.
    As in its July statement, the central bank said the 3-month annualized non-food-non-fuel inflation rate has remained stable since June, indicating no significant demand pressures in the economy.
    The foreign exchange market has also remained stable, reflecting a narrower current account deficit, resilient diaspora remittances and improved tourism earnings. The current account deficit is expected to narrow to 5.5 percent of Gross Domestic Product this year form 6.8 percent in 2015.
    The central bank's foreign exchange reserves rose to US$7.803.6 billion from $7.769.6 billion at the end of July.
    The CBK said it's monetary policy committee was "closely monitoring the impact" of the new banking act that took effect on Sept. 14 and would continue to put in place measures to sustainably reduce the cost of credit and improve liquidity management.
   Kenya's government has ordered commercial banks to limit their lending rates to 4 percentage points above the CBK's base rate. Last week the central bank said the base rate equaled its Central Bank Rate and not the Kenya Bank's Reference Rate.