Monday, May 25, 2015

This week in monetary policy: Israel, Angola, Kyrgyzstan, Hungary, Canada, Ukraine, Fiji and Trinidad & Tobago

    This week (May 25 through May 30) central banks from eight countries or jurisdictions are scheduled to decide on monetary policy: Israel, Angola, the Kyrgyz Republic, Hungary, Canada, Ukraine, Fiji and Trinidad & Tobago.
    Following table includes the name of the country, its MSCI classification, the direction of the latest decision, the date the new policy decision will be announced, the current policy rate, 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.

COUNTRY MSCI  LATEST              DATE   CURRENT  RATE         1 YEAR AGO
ISRAEL DM UNCH. 25-May 0.10% 0.75%
ANGOLA UNCH. 25-May 9.25% 9.25%
KYRGYZSTAN UNCH. 25-May 11.00% 6.00%
HUNGARY EM CUT 26-May 1.80% 2.40%
CANADA DM UNCH. 27-May 0.75% 1.00%
UKRAINE FM UNCH. 28-May 30.00% 9.50%
FIJI UNCH. 28-May 0.50% 0.50%
TRINIDAD & TOBAGO RAISE 29-May 3.75% 2.75%



Saturday, May 23, 2015

Pakistan cuts rates 100 bps as inflation continues to fall

    Pakistan's central bank effectively cut its policy interest rates by 100 basis points and narrowed its rate corridor by 50 points to 200 basis points as inflation continues its downward trajectory and economic conditions improve, including a smaller current account deficit.
    The State Bank of Pakistan (SBP), which earlier this year revised its rate corridor and introduced a SBP target rate for the money market overnight repo rate, said economic growth was expected to accelerate due to the gradual realization of investments in energy and infrastructure projects.
    "Overcoming energy shortages and improving law and order conditions is expected to provide further impetus in reviving investment and higher production," SBP said.
    Pakistan's Gross Domestic Product is estimated to have expanded by 4.2 percent in fiscal 2015, which ends on June 30, up from 4.0 percent in FY14.
    Pakistan's consumer price inflation rate declined to 2.11 percent in April from 2.49 percent the previous month, continuing the drop since 8.2 percent in June last year, reflecting soft international commodity prices, a stable exchange rate, contained government borrowing, moderate aggregate demand and the central bank's "earlier conservative monetary policy stance."
    SBP said inflation expectations also remain subdued but uncertainty about oil prices and possible changes in domestic energy prices are the main risks to its outlook.
    In March the SBP's board of directors approved changes to the bank's rate corridor to enhance the effectiveness of its monetary policy and better manage liquidity in the interbank market. Under its previous regime from 2009, when the SBP established an interest rate corridor, there was no instrument to limit very frequent drops in the repo rate and the money market repo rate also at times exceeded the reverse repo rate, which was the policy rate.
    In order to improve the rate corridor, the SBP set a target rate between the floor and ceiling rates of the corridor and use purchases and sales of government securities along with other open market operations to keep the money market weighted overnight rate close to the target rate.
    Today the ceiling of the rate corridor was reduced by 100 basis points to 7.0 percent from 8.0 percent, with the new SBP target rate, or its main policy rate, set 50 points below this ceiling rate. By narrowing the rate corridor by 50 points to 200 points, the floor rate is set at 5.0 percent.

Friday, May 22, 2015

Central Bank News Link List - May 22, 2015: Yellen sees rate rise in 2015, gradual pace of tightening

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.



Sri Lanka maintain rates as inflation seen at low levels

    Sri Lanka's central bank maintained its benchmark policy rates, with inflation projected to "remain at low levels in the months ahead."
    The Central Bank of Sri Lanka, which cut its policy rates by 50 basis points in April, added that the recent US$ 400 million currency swap agreement with the Reserve Bank India had strengthened reserves and together with expected capital inflows, including tourism and workers' remittances, will improve the country's balance of payments during the year.
    Sri Lanka's consumer price inflation rate was steady at 0.1 percent in April and March, well below the bank's target of 3.0 to 5.0 percent, reflecting a downward revision in energy prices and lower prices of consumer items.
    The International Monetary Fund (IMF) forecasts average inflation this year of 1.7 percent, with inflation ending the year at 3.2 percent, and averaging 3.4 percent in 2016. Gross Domestic Product is projected to expand by 6.5 percent this year and beyond, down from 7.4 percent in 2014 and 7.2 percent in 2013.
    Sri Lanka's GDP expanded by an annual 6.4 percent in the fourth quarter of 2014, down from 7.7 percent in the third quarter.
     The central bank maintained its benchmark Standing Deposit Facility Rate (SDRF) at 6.0 percent and the Standing Lending Facility Rate (SLFR) at 7.50 percent.

Thursday, May 21, 2015

UPDATE-This week in monetary policy: Indonesia, Nigeria, Turkey, South Africa, Japan and Pakistan

     (Following item has been updated to include Pakistan)
    This week (May 18 through May 23) central banks from six countries or jurisdictions are scheduled to decide on monetary policy: Indonesia, Nigeria  Turkey, South Africa, Japan and Pakistan.
    Following table includes the name of the country, its MSCI classification, the direction of the latest decision, the date the new policy decision will be announced, the current policy rate, 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.

COUNTRY MSCI  LATEST              DATE   CURRENT  RATE         1 YEAR AGO
INDONESIA EM UNCH. 7.50% 7.50% 7.50%
NIGERIA FM UNCH. 13.00% 13.00% 12.00%
TURKEY EM UNCH. 7.50% 7.50% 9.50%
SOUTH AFRICA EM UNCH. 5.75% 5.75% 5.50%
JAPAN DM UNCH.                  N/A                  N/A                  N/A
PAKISTAN FM CUT 23-May 8.00% 10.00%



BOJ maintains stance, economy recovering moderately

    Japan's central bank maintained its target for boosting the country's monetary base by an annual 80 trillion yen and repeated its long-held view that the economy was "expected to continue recovering moderately."
    The Bank of Japan (BOJ), which last month pushed back its target for achieving 2 percent inflation and trimmed its growth forecast, also repeated that inflation, excluding the effects of last April tax rise, was around 0 percent but inflation expectations appeared to be rising.
    The BOJ embarked on "qualitative and quantitative easing" in April 2013 to rid the country of 15 years of deflation but last year's fall in oil prices has made it more difficult to boost inflation.
    In its quarterly update on April 30 the BOJ said it expects inflation to hit 2 percent in the first half of fiscal 2016, which begins on April 1 next year, instead of in the current fiscal year.
    The forecast for headline inflation for fiscal 2015 was trimmed to an average of 0.8 percent from the previous forecast in January of 1.0 percent and for fiscal 2016 inflation was seen hitting 2.0 percent, down from the previous forecast of 2.2 percent.
    In March Japan's consumer price inflation rate rose to 2.3 percent from February's 2.2 percent.
    Although the BOJ also cut its growth forecast, data this week showed first quarter 2015 growth above expectations, with signs of a pickup in exports and housing. Gross Domestic Product in the first quarter expanded by 0.6 percent from the fourth quarter of 2014 but on an annual basis, GDP still contracted by 1.4 percent, the fourth consecutive quarter of shrinkage.
    For fiscal 2015 the BOJ expects GDP growth of 2.0 percent, down from its January forecast of 2.1 percent, and growth in fiscal 2016 of 1.5 percent, down from the previous forecast of 1.6 percent.
    On Monday Eiji Maeda, the BOJ's chief economist, said the economy was likely to shift to an expansionary phase this fiscal year due to improving domestic demand, exports and the benefits from last year's decline in oil prices.
    In today's statement on monetary policy the BOJ said business fixed investment had been on a "moderate increasing trend," while public investment had entered a moderate declining trend, private consumption was resilient, housing investment had shown some signs of picking up and industrial production was rising.

    www.CentralBankNews.info

South Africa holds rate but to raise when appropriate

     South Africa's central bank held its benchmark repurchase rate steady at 5.75 percent but cautioned that "the deteriorating inflation outlook suggests that this unchanged stance cannot be maintained indefinitely" and it is closely monitoring the outlook for inflation and "stands ready to act when appropriate."
    The South African Reserve Bank (SARB), which raised its rate by 75 basis points last year and long maintained that it will return to tighter monetary policy to curb inflation, raised its forecast for inflation to average 4.9 percent this year from its March forecast of 4.8 percent, and to average 6.1 percent next year, up from its previous forecast of 5.9 percent.
    In April South African's consumer price inflation rate rose to 4.5 percent in April from 4.0 percent in March with last year's decline in oil prices helping check energy prices.
    But inflation is expected to peak at 6.8 percent in the first quarter of 2016 - temporarily breaching the central bank's upper inflation limit - before declining to 6.0 percent in the second quarter. SARB targets inflation in a range of 3 to 6 percent.
    SARB also extended its inflation forecast to 2017, forecasting average inflation of 5.7 percent for the year and 5.6 percent in the fourth quarter.
    While the central bank described the upward revision as "relatively small," its monetary policy committee is increasingly concerned over the "persistence of medium term inflation at elevated levels" and upside risks make its forecasts vulnerable to any changes in inflation pressures.
    The main risks to SARB's inflation outlook remains higher than expected increases to electricity tariffs, changes to the exchange rate of the rand and wage settlements.
    "The rand remains vulnerable to global market reaction to US policy normalization, particularly in the context of South Africa's twin deficits," SARB said, adding that "any significant weakening of the exchange rate in reaction to US monetary policy tightening could cause inflation to diverge even further from target, and set in motion an exchange rate-inflation spiral."
    The rand has been depreciating since mid-2011 and based on past experience, SARB expects some further pressure on the exchange rate and long bond yields as the start of the U.S. tightening cycle becomes more certain.
    Today the rand was trading around 11.8 to the U.S. dollar, down only 1.7 percent since the start of the year but down 11 percent since the start of 2014.
    The outlook for South Africa's economy also remains weak due to continuing electricity supply constraints, and low and declining business and consumer confidence.
    SARB trimmed its forecast for Gross Domestic Product growth to 2.1 percent for 2015 and 2.2 percent for 2016, largely in line with its estimate of potential growth of 2-2.5 percent. In 2017 growth is expected to accelerate to 2.7 percent, based on less electricity shortage.

Wednesday, May 20, 2015

Central Bank News Link List - May 20, 2015: Fed officials felt data unlikely to support June rate hike

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.
          www.CentralBankNews.info

  


Turkey holds rates on uncertain markets, volatile energy

    Turkey's central bank maintained its policy rates, including the one-week repurchase rate at 7.50 percent, repeating its statement from recent months that its ongoing "cautious" monetary policy is having a favorable impact on inflation but uncertainty in global markets and volatile energy and food prices  "makes it necessary to maintain the cautious stance in monetary policy."
    The Central Bank of the Republic of Turkey (CBRT), which has cut its rate by 75 basis points this year, also repeated that "future monetary policy decisions will be conditional on the improvements in the inflation outlook" and the current cautious policy stance will be maintained by keeping a flat yield curve "until there is a significant improvement in the inflation outlook."
    The CBRT's decision to maintain rates today was widely expected.
    The central bank has been fighting to push down inflation that has been fueled by a depreciation of the lira. The lira has been falling for the last two years, hit by a reversal in capital flows ahead of an expected tightening in U.S. monetary policy and worries over the political influence on the central bank and its credibility.
    Last week European Union finance minsters were reported to have told Turkey that a tighter policy stance is needed to lower inflation and expressed their displeasure at President Tayyip Erdogan's pressure on the central bank to cut interest rates.
     The CBRT raised its repo rate by 550 basis points in January 2014 in response to capital outflows and a plunge in the lira and has been slowly unwinding this hike despite intense political pressure to cut rates much faster ahead of a June general election.
     Turkey's consumer price inflation rate rose to 7.91 percent in April from 7.61 percent in March, well above the central bank's 5.0 percent target. The core inflation rate eased to 8.1 percent from 8.9 percent.
     The central bank noted that its policy, along with prudent fiscal and macroprudential policies, had have a favorable impact on inflation, especially core inflation that excludes energy and food prices.
    "However, recently elevated volatility in the exchange rates has limited the improvement in the core inflation," the central bank said.
    The lira has been strengthening in the last week and was trading at 2.6 to the U.S. dollar today, up from a record low of 2.74 on April 24 but down 10 percent from the start of the year and 17 percent since the start of 2014.

Tuesday, May 19, 2015

Nigeria holds rate, unifies CRR, close to tightening limit

    Nigeria's central bank maintained is Monetary Policy Rate at 13.00 percent, as widely expected, but noted that "monetary policy is gradually approaching the limits of tightening and would, therefore, require complementary fiscal and structural policies" to protect reserves that safeguard the value of the naira currency and the overall stability of the banking system.
    The Central Bank of Nigeria (CBN), which raised its rate by 100 basis points in November 2014, also harmonized its reserve requirements on public and private sector deposits, which it said had "constrained" the policy space and could inspire moral hazard by private market participants.
    As additional tightening measures were not considered appropriate now, CBN imposed a 31 percent requirement on private sector deposits, up from the current 20 percent, and 31 percent on private sector funds, sharply below the 75 percent that was imposed in January last year in an attempt to support the naira's exchange rate.
     The naira fell sharply from November last year until March when it started to stabilize after the central bank introduced a series of measures that would limit the purchase of dollars in the interbank market in an effort to prevent speculative trading and save declining foreign reserves.
    The naira has also been supported by rebounding portfolio inflows after investors' nerves were soothed following a peaceful outcome to elections in late March. The incoming government of Muhammad Buhari takes office on May 29 after President Goodluck Jonathan lost the election.
    Africa's largest oil producer has been hit hard by last year's fall in oil prices and its Gross Domestic Product shrank by 11.57 percent in the first quarter from the fourth quarter for annual growth of only 3.96 percent compared with a rate of 5.94 percent in the fourth quarter and 6.21 percent in the first quarter of 2014.
    The CBN "expressed concern about the weakening economic momentum," but noted that other oil exporters are suffering from the same conditions, suggesting the need to accelerate initiatives to diversify the country's economy.
    CNB expects growth to decline to 5.54 percent this year from 6.22 percent in 2014.
    Nigeria's gross official reserves rose to $30.05 billion as of May 15 from $29.34 billion end-March.
    Nigeria's inflation rate rose to 8.7 percent in April from 8.5 percent in March, the fifth consecutive month of accelerating inflation, and the CBN said it was "concerned about the creeping headline inflation," but noted the rise was largely due to transient factors, such as high demand in the period around the elections, along with the pass-through effects of the naiba's exchange rate.
    Commenting on the risks to the global economy, CBN noted the possible tightness in global financial markets and the diverging stance of monetary policy in advanced economies, "which portend grave consequences for capital flows, exchange rate stability and inflation expectations."
    Turning the United Kingdom, CBN said that with UK inflation turning negative in April - the first time on record - it said "the size of its asset purchase program of 385 billion pounds may be revised by the Treasury."

Central Bank News Link List - May 19, 2015: Hedge fund diners get ECB’s market-moving news hours early

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.

          www.CentralBankNews.info