Wednesday, March 4, 2015

Poland says monetary easing cycle has now ended

    Poland's central bank, which earlier today cut its monetary policy reference rate by 50 basis points to 1.50 percent, said it had now ended its monetary easing cycle.
    The National Bank of Poland (NBP), which has cut its policy rate by 325 basis points since embarking on the easing cycle in November 2012, said today's rate cut reflected the prolonged period of deflation and a significant risk that inflation would remain below its target in the medium term.
    The NBP lowered its forecast for inflation in its latest projection to minus 1.0 to 0.0 percent in 2015 from the previous forecast from November of 0.4-1.7 percent.
    For 2016 the inflation forecast was cut to minus 0.1-1.8 percent from the previous forecast of 0.6-2.3 percent. For 2017 the central bank forecast inflation of 0.1-2.2 percent.
    Polish consumer price inflation fell to minus 1.3 percent in January from minus 1.0 percent in December, the seventh consecutive month of deflation.
    Inflation has now been below the NBP's target of 2.5 percent for 26 months and below the lower bound of its 1.5-3.5 percent tolerance range since February 2013.

    The National Bank of Poland issued the following statement:

Brazil raises Selic rate by another 50 bps to 12.75%

    Brazil's central bank raised its benchmark Selic interest rate by another 50 basis points to 12.75 percent, a move that was expected following a rise in inflation and further weakening of the real's exchange rate.
    In a brief statement by the Central Bank of Brazil's monetary policy committee, known as Copom, the bank said the policy decision was unanimous and no bias was indicated.
    The central bank has now raised its policy rate by 100 basis points this year alone and by 550 points since embarking on a tightening cycle in April 2013 in an effort to force stubbornly high inflation back to the bank's target of 4.5 percent, plus/minus 2 percentage points.
    Brazil's consumer price inflation rate jumped to 7.14 percent in January from 6.41 percent in December and through mid-February the rolling 12-month mid-month IPCA index was up 7.36 percent from 6.69 percent in mid-January due to higher transportation, education and housing costs.
    Brazil's real weakened further after the bank's decision to raise its rate, hitting 2.98 to the U.S. dollar from 2.93, and is now down almost 11 percent this year against the dollar. Since September last year when the real started to fall, it is down 25 percent.
    On Feb. 10 central bank Director Luiz Awazu Pereira da Silva told reporters that policy makers must remain especially vigilant to prevent consumer price pressures from spreading and moving further away from the central bank's target of getting inflation back to 4.5 percent by December 2016.


Albania maintains rate at 2.0% as inflation picks up

    Albania's central bank maintained its key interest rate at 2.0 percent, but issued no immediate statement.
    The Bank of Albania, which cut its rate by 25 basis points in January following cuts of 75 basis points in 2014, said on Jan. 28 that it would maintain easy monetary conditions "some quarters ahead" to achieve its inflation target but also signaled that it was unlikely to reduce rates further.
    Albania's inflation rate rose to 1.3 percent in January from 0.7 percent in December.
    In January the central bank forecast annual inflation ranging from 1.2 to 3.8 percent in the four quarters ahead, with inflation returning to the bank's 3.0 percent target medium term, helped by economic growth and the closure of the negative output gap.


Canada holds rate, lower dollar to help boost exports

    Canada's central bank maintained its benchmark target for the overnight rate at 0.75 percent, as expected, saying easier financial conditions and a lower dollar since its January rate cut will help boost exports and investments, helping mitigate the negative effects from lower oil prices.
    The Bank of Canada (BOC), which surprised markets by cutting its rate by 25 basis points in January, said economic growth in the fourth quarter of 2014 was in line with its expectations and most of the negative impact on income and demand would appear in the first half of 2015.
    "Nevertheless, data for 2014 as a whole suggest the anticipated rotation into stronger growth in non-energy exports and investment is well under way," the BOC said, adding:
    "In light of these developments, the risk around the inflation profile are now more balanced and financial stability risks are evolving as expected in January."
    Canada's Gross Domestic Product expanded by a faster-than-expected 0.6 percent in the fourth quarter of 2014 from the third quarter for annual growth of 2.63 percent, down from 2.75 percent, while inflation fell to 1.0 percent in January from 1.5 percent.
    Canada's dollar has been falling against the U.S. dollar since July 2014 but the depreciation picked up speed following the BOC's rate cut on Jan. 21. Today the Canadian dollar strengthened following the decision to keep rates steady and was trading around 1.245 to the U.S. dollar, down 6.8 percent this year.

Poland cuts rate 50 bps as deflation deepens

    Poland's central bank cut its monetary policy reference rate by 50 basis points to 1.50 percent, a move that was largely expected following last month's guidance by the National Bank of Poland (NBP) that it did not rule out further rate cuts if deflation continued.
    The NBP's previous rate cut of 50 basis points was in October 2014 but since then the fall in consumer prices has deepened. Since the NBP embarked on a monetary easing cycle in November 2012, it has cut the benchmark rate by 325 points.
    Polish consumer price inflation fell to minus 1.3 percent in January from 1.0 percent in December, the seventh consecutive month of deflation.
    Inflation has now been below the NBP's target of 2.5 percent for 26 months and below the lower bound of its 1.5-3.5 percent tolerance range since February 2013.
    The NBP will later today issue a statement about its decision and is also due to update its inflation and growth forecasts.
    In addition to cutting the reference rate, the NBP also cut the deposit rate by 50 basis points to 0.50 percent, the lombard rate to 2.50 percent and the rediscount rate to 1.75 percent.
    This year's strength in Poland's zloty currency against the euro has been worrying Polish policy makers with Marek Belka, NBP governor, signaling that the central bank was keeping an eye on zloty and was likely to act if there was further appreciation.
    The zloty was quoted at 4.17 today, up 4.6 percent against the euro this year though slightly weaker than last week's close around 4.15 to the euro.

Tuesday, March 3, 2015

India cuts rate by 25 bps in another surprise move

     India's central bank cut its benchmark repo rate by 25 basis points to 7.50 percent in a surprise move and said further adjustment of monetary policy would depend on new data.
    The Reserve Bank of India (RBI), which also surprised financial markets in January by cutting its rate by 25 basis points in January, said softer readings on inflation were expected to come through in  the first half of the 2015/16 financial year, which begins on April 1, before rising to below 6 percent in the second half of the year.
    "Given low capacity utilization and still-weak indicators of production and credit off-take, it is appropriate for the Reserve Bank to be pre-emptive in its policy action to utilize available space for monetary accommodation," RBI Governor Raghuram Rajan said in a statement.

    The Reserve Bank of India issued the following statement by Governor Raghuram Rajan:

Central Bank News Link List - Mar 3, 2015: Denmark spends $25 bln in Feb to keep peg, reserves to hit high

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.

All major global banks now meet Basel III requirements

    The world's 224 major international banks now meet the risk-based capital requirements under the tougher Basel III banking regulations and have further narrowed the shortfall in capital required to meet targets for 2019, according to the Basel Committee on Banking Supervision (BCBS).
    The Basel Committee, which sets global standards for banking supervision, said the aggregate shortfall for the 98 largest internationally active banks relative to the 7 percent target for common equity (CET 1) in 2019 amounted to 3.9 billion euros as of June 30, 2014, down from a shortfall of 15.1 billion as of end-2013 and from a shortfall of 485.6 billion euros on June 30, 2011.
    In comparison, these 98 banks - known as Group 1 banks with Tier 1 capital in excess of 3 billion euros - had total after-tax profits prior to distributions of 210.1 billion euros in the six months ending June 30, 2014.
    The shortfall for the smaller Group 2 banks, which have Tier 1 capital below 3 billion euros, narrowed to a mere 0.1 billion euros relative to the minimum level of 4.5 percent and was 1.8 billion relative to the 7.0 percent target, down from shortfalls of 2.0 billion and 9.4 billion, respectively from the previous survey in September last year.
    The Basel Committee, which groups supervisory authorities from almost 30 jurisdictions, has published six previous reviews of how Basel III rules will impact banks and financial markets.
    Basel III was agreed by global leaders ion 2010 in an effort to strengthen the global financial system following the crises in 2008, and imposed higher capital charges on banks to ensure they had enough of a cushion to withstand the stress from a financial crises along with stricter supervision.

Ukraine raises rate 1050 bps to defend hryvenia

    Ukraine's central bank raised its benchmark discount rate by another 1050 basis points to 30.00 percent to defend the exchange rate of the embattled hryvenia currency, reduce tensions in the local money market and curb further inflationary pressures.
    The National Bank of Ukraine (NBU) has now raised its rate by 16 percentage points this year alone and by 23.50 percentage points since it started raising rates in April last year in response to the fall in the hryvenia and accelerating inflation.
    To cushion some of the impact on the rate rise, the NBU said it would allow banks to use the hryvenia currency to satisfy 100 percent of their required reserves, up from 50 percent.
    It said this should help neutralize around US$9 billion of the impact of the exchange rate fluctuation on reserves, with banks now having to create an additional $3 billion.
    The hryvenia currency came under pressure in February 2014 following the Ukrainian revolution that led to pro-Russian forces occupying the Crimean peninsula and later armed conflict in the Donbass area in Eastern Ukraine.
     In 2014 the hryvenia depreciated by 48 percent against the U.S. dollar and has continued to fall this year despite various administrative measures, including last week's ban on all commercial currency trading last week that was the lifted within hours.
    Today the hryvenia was quoted at 26.49 to the dollar, down another 40 percent this year. At the beginning of 2014 the hryvenia was trading at 8.24 to the dollar.
    Ukraine's consumer price inflation rate rose to 28.5 percent in January from 24.9 percent in December.

Monday, March 2, 2015

Australia holds rate, further easing may be appropriate

    Australia's central bank maintained its benchmark cash rate at 2.25 percent but said "further easing of policy may be appropriate over the period ahead in order to foster sustainable growth in demand and inflation consistent with the target."
    The Reserve Bank of Australia (RBA), which cut its rate by 25 basis points in February and was expected by many economists to again cut its rate today, said it had decided to keep rates steady in light of last month's easing but would assess the case for further cuts "at forthcoming meetings."
    As in February, the RBA said economic growth in Australia remained below trend with quite weak growth in domestic demand, resulting in an increase in the jobless rate, and a degree of spare capacity  for some time yet.
    As in other advanced economies, growth in Australian labour costs remain subdued, and together with the sharp fall in oil prices, this will result in lower inflation rates.
    In his statement, RBA Governor Glenn Stevens again called for a further decline in the exchange rate of the Australian dollar in order to achieve balanced growth, saying the dollar remains above most estimates of its fundamental value despite a noticeable decline against a rising U.S. dollar.
    Australia's consumer price inflation rate dropped to 1.7 percent in the fourth quarter of 2014, below the RBA's 2-3 percent target, but Stevens said he still expects inflation to remain consistent with the bank's target over the next one to two years, even with a lower exchange rate.
    Wages in Australia rose by only 2.5 percent in the fourth quarter of last year from the same period in 2013, down from 2.6 percent in the third quarter and the lowest rate in 17 years. The unemployment rate hit a 12-year high of 6.4 percent in January, up from December's 6.1 percent.
    The Australian dollar, known as the aussie, has been depreciating against the U.S. dollar since September last year but has stabilized in the last month. Today it was trading at 1.278 to the U.S. dollar, down 4.2 percent this year and down 16.5 percent since September 2014.

This week in monetary policy: Australia, Canada, Brazil, Poland, Albania, Malaysia, United Kingdom and euro area

    This week (March 2 through March 7) central banks from eight countries or jurisdictions are scheduled decide on monetary policy: Australia, Canada, Brazil, Poland, Albania, Malaysia, United Kingdom and the euro area.
    Following table includes the name of the country, its MSCI classification, the date the policy decision will be announced, the current policy rate, and the rate one year ago.

AUSTRALIA DM 3-Mar 2.25% 2.50%
CANADA DM 4-Mar 0.75% 1.00%
BRAZIL EM 4-Mar 12.25% 10.75%
POLAND EM 4-Mar 2.00% 2.50%
ALBANIA 4-Mar 2.00% 2.75%
MALAYSIA EM 5-Mar 3.25% 3.00%
UNITED KINGDOM DM 5-Mar 0.50% 0.50%
EURO AREA DM 5-Mar 0.05% 0.25%