Georgia's central bank raised its monetary policy rate for the third time in two months and reiterated that it would continue to tighten its policy until the pressure on the lari's exchange rate is eliminated and ease the upward pressure on inflation.
The National Bank of Georgia (NBG) raised its rate by 100 basis points to 8.50 percent and has now raised it 200 basis points following earlier hikes on Sept. 4 and Sept. 25.
The three rate hikes more than reverse two 25-basis point rate cuts in January and March, and the lari responded positively to the central bank's move, rising 0.2 percent to 2.960 per U.S. dollar. However, the lari still remains 9.5 percent below the start of this year.
"The nominal effective exchange rate of the GEL remains at an impaired level and is pushing up inflation," the central bank said, adding further policy decisions will depend on how quickly inflationary pressures from the exchange rate will be eliminated.
Georgia's inflation rate has accelerated in the last three months, rising to 6.4 percent in September from 4.9 percent in August, boosted by higher taxes on cigarettes and the lower lari.
The central bank targets inflation of 3.0 percent and said demand is only partly offsetting the upward pressure on inflation from the fall in the lari as preliminary data indicate an acceleration in economic growth.
Georgia's gross domestic product eased to annual growth of 4.5 percent in the second quarter from 4.9 percent in the first quarter and NBG said early data show the improvement in the current account balance had continued in the third quarter.
In the second quarter Georgia's current account deficit narrowed to US$139.6 million from $232.3 in the first quarter and NBG said maintaining this positive trend, along with tighter monetary policy, will help strengthen the exchange rate and thus change the inflationary trend
Last month the International Monetary Fund (IMF) welcomed Georgian authorities commitment to prudent macroeconomic policies and structural reform, including NBG's rate hike.
The IMF also noted a significant adjustment in the current account in the first half of this year, with higher exports and remittances, along with falling imports, helping narrow the deficit.
The IMF maintained its forecast for Georgia's economy to growth 4.6 percent this year and inflation to ease to 5.4 percent by the end of the year and then converge toward the 3.0 percent target in 2020 as monetary conditions tighten.
The current account deficit is projected by the IMF to narrow by almost 2 percentage points of GDP to 6.0 percent of GDP this year.
www.CentralBankNews.info
Wednesday, October 23, 2019
Sunday, October 20, 2019
China maintains LPR at 4.20% and 5-yr rate at 4.85%
China's central bank left its new benchmark interest rate, the Loan Prime Rate (LPR), steady at 4.20 percent from September and the 5-year rate unchanged at 4.85 percent.
In August the People's Bank of China (PBOC) reformed its method for setting LPR to improve the transmission of its monetary policy and lower the cost of financing, making LPR the pricing benchmark for all types of loans by commercial lenders instead of its lending rate.
In August the People's Bank of China (PBOC) reformed its method for setting LPR to improve the transmission of its monetary policy and lower the cost of financing, making LPR the pricing benchmark for all types of loans by commercial lenders instead of its lending rate.
LPR, which is linked to PBOC's medium-term lending facility (MLF), is the average of prices submitted by 18 banks, and currently comprises two varieties, a 1 year and a 5 year.
LPR is published on the 20th of each month, and if this falls on a weekend or holiday, LPR is published the following day.
LPR is published on the 20th of each month, and if this falls on a weekend or holiday, LPR is published the following day.
On Aug. 20 LPR was published for the first time since the reform and set at 4.25 percent, 6 basis points below the 4.31 percent it had been since it was first introduced in October 2013, and 10 points below the lending rate of 4.35 percent. The 5-year LPR was set at 4.85 percent.
On Sept. 19 LPR was published for the second time at 4.20 percent for a decline of 5 basis points.
Earlier today Yi Gang, PBOC governor, said in Washington DC that China would continue to pursue a prudent monetary policy and recent policy measures, such as three cuts to the reserve requirements for banks and the market-based reform on interest rates, had achieved desired results.
This includes stable growth of money supply and credit and low market interest rates, and the transmission mechanism for monetary policy will be improved further to reduce firms' funding cost and promote high-quality economic growth.
This week in monetary policy: China, Paraguay, Hungary, Georgia, Angola, Namibia, Chile, Indonesia, Sweden, Norway, Turkey, Ukraine, ECB, Azerbaijan & Russia
This week - October 20 through October 26 - central banks from 15 countries or jurisdictions are scheduled to decide on monetary policy: China, Paraguay, Hungary, Georgia, Angola, Namibia, Chile, Indonesia, Sweden, Norway, Turkey, Ukraine, euro area, Azerbaijan and Russia.
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 43 | ||||||
| OCT 20 - OCT 26, 2019: | ||||||
| CHINA (LPR) | 21-Oct | 4.20% | -5 | -11 | 4.31% | EM |
| PARAGUAY | 21-Oct | 4.00% | -25 | -125 | 5.25% | |
| HUNGARY | 22-Oct | 0.90% | 0 | 0 | 0.90% | EM |
| GEORGIA | 23-Oct | 7.50% | 50 | 50 | 7.00% | |
| ANGOLA 1) | 23-Oct | 15.50% | 0 | -100 | 16.50% | |
| NAMIBIA | 23-Oct | 6.50% | -25 | -25 | 6.75% | |
| CHILE | 23-Oct | 2.00% | -50 | -75 | 2.75% | EM |
| INDONESIA | 24-Oct | 5.25% | -25 | -75 | 5.75% | EM |
| SWEDEN | 24-Oct | -0.25% | 0 | 0 | -0.50% | DM |
| NORWAY | 24-Oct | 1.50% | 25 | 75 | 0.75% | DM |
| TURKEY | 24-Oct | 16.50% | -325 | -750 | 24.00% | EM |
| UKRAINE | 24-Oct | 16.50% | -50 | -150 | 18.00% | FM |
| EURO AREA | 24-Oct | 0.00% | 0 | 0 | 0.00% | DM |
| AZERBAIJAN | 25-Oct | 8.00% | -25 | -175 | 9.75% | |
| RUSSIA | 25-Oct | 7.00% | -25 | -75 | 7.50% | EM |
| 1) extraordinary MPC sesssion | ||||||
Uzbekistan holds rate but takes steps to curtail lending
Uzbekistan's central bank left its benchmark refinancing rate unchanged at 16.0 percent but said it would undertake a series of macro prudential measures to restrain lending by banks, eliminate imbalances in the financial markets and ensure overall financial stability.
The Central Bank of the Republic of Uzbekistan (CBU), which has maintained its rate since raising it by 200 basis points in September 2018, described its decision as a "prudent approach" to monetary policy that takes into account the existing realities of the economy and ensures stable prices and financial stability.
Inflation in Uzbekistan has been accelerating this year and rose to a higher-than-forecast 16.5 percent in August due to an acceleration in investment loans, government spending, a devaluation of the sum along with higher regulated prices of electricity and gas, and the indexation of wages and pensions.
In 2018 inflation in Uzbekistan averaged 14.3 percent, steady from 2017's 14.4 percent.
But CBU said in a statement from Oct. 19 that inflation eased to 16.0 percent in September, confirming that some of the price rises were temporary in nature, and inflation is expected to ease toward 15.5 percent - the upper boundary of its 13.5-15.5 percent forecast corridor for 2019 - as one-time effects slowly fade.
In October, however, inflation is expected to rise temporarily due to the abolition of VAT exemptions on a number of imported goods as well as the liberalization of prices for flour and bread.
In July the central bank said it was still assuming inflation would ease to 10-12 percent in 2020 and then decelerate further to single digits in 2021.
Uzbekistan's economy has been growing rapidly this year, boosted by banks' lending and government spending, with gross domestic product up 5.8 percent year-on-year in the second quarter, up from 5.3 percent in the first quarter.
Lending by banks rose 38.3 percent in the first 9 months of the year, including loans in the national currency, which were up 34.3 percent, down from 61.1 percent in the same 2018 period, partly due to a gradual liberalization of interest rates in the country and the simultaneous improvement in lending conditions and mechanism, which are enhancing the efficiency of the central bank's transmission mechanism.
But there was also a rise in the demand for foreign currency, resulting in a faster devaluation of the sum, in particular in July and August. In the second half of August the sum fell sharply against the U.S. dollar and was on Friday trading around 9,452 to the U.S. dollar, down 7.9 percent from Aug. 14 and down 11.8 percent since the start of this year.
Uzbekistan's economy is in the midst of major economic reforms begun in 2016, with reforms so far including liberalization of foreign exchange, tax reform and an upgrade in the quality and availability of economic statistics.
The liberalization has unleashed strong demand for investments that have been unmet for years, boosting the trade deficit which the CBU expects will be covered by the current and financial account and thus not create significant pressures on the sum's exchange rate.
In April CBU undertook three major projects to upgrade the payment system that should allow the interbank payment system to function 24 hours, 7 days a week in contrast to the current system which doesn't permit financial transactions after 5 p.m. local time and on the weekends and holidays.
www.CentralBankNews.info
The Central Bank of the Republic of Uzbekistan (CBU), which has maintained its rate since raising it by 200 basis points in September 2018, described its decision as a "prudent approach" to monetary policy that takes into account the existing realities of the economy and ensures stable prices and financial stability.
Inflation in Uzbekistan has been accelerating this year and rose to a higher-than-forecast 16.5 percent in August due to an acceleration in investment loans, government spending, a devaluation of the sum along with higher regulated prices of electricity and gas, and the indexation of wages and pensions.
In 2018 inflation in Uzbekistan averaged 14.3 percent, steady from 2017's 14.4 percent.
But CBU said in a statement from Oct. 19 that inflation eased to 16.0 percent in September, confirming that some of the price rises were temporary in nature, and inflation is expected to ease toward 15.5 percent - the upper boundary of its 13.5-15.5 percent forecast corridor for 2019 - as one-time effects slowly fade.
In October, however, inflation is expected to rise temporarily due to the abolition of VAT exemptions on a number of imported goods as well as the liberalization of prices for flour and bread.
In July the central bank said it was still assuming inflation would ease to 10-12 percent in 2020 and then decelerate further to single digits in 2021.
Uzbekistan's economy has been growing rapidly this year, boosted by banks' lending and government spending, with gross domestic product up 5.8 percent year-on-year in the second quarter, up from 5.3 percent in the first quarter.
Lending by banks rose 38.3 percent in the first 9 months of the year, including loans in the national currency, which were up 34.3 percent, down from 61.1 percent in the same 2018 period, partly due to a gradual liberalization of interest rates in the country and the simultaneous improvement in lending conditions and mechanism, which are enhancing the efficiency of the central bank's transmission mechanism.
But there was also a rise in the demand for foreign currency, resulting in a faster devaluation of the sum, in particular in July and August. In the second half of August the sum fell sharply against the U.S. dollar and was on Friday trading around 9,452 to the U.S. dollar, down 7.9 percent from Aug. 14 and down 11.8 percent since the start of this year.
Uzbekistan's economy is in the midst of major economic reforms begun in 2016, with reforms so far including liberalization of foreign exchange, tax reform and an upgrade in the quality and availability of economic statistics.
The liberalization has unleashed strong demand for investments that have been unmet for years, boosting the trade deficit which the CBU expects will be covered by the current and financial account and thus not create significant pressures on the sum's exchange rate.
In April CBU undertook three major projects to upgrade the payment system that should allow the interbank payment system to function 24 hours, 7 days a week in contrast to the current system which doesn't permit financial transactions after 5 p.m. local time and on the weekends and holidays.
www.CentralBankNews.info
Tuesday, October 15, 2019
South Korea cuts rate 2nd time and will keep easy stance
South Korea's central bank lowered its benchmark base rate for the second time this year, saying it was maintaining an accommodative monetary policy stance due to moderate domestic growth and low inflation, and would judge whether to adjust the degree of monetary policy accommodation while observing the effect of two rate cuts and any changes to economic and financial stability.
As expected, the Bank of Korea (BOK) cut its base rate by another 25 basis points to 1.25 percent and has now cut it by 50 points this year.
South Korea's economy, closely tied to the health of the global economy due to its exports, has slowed this year due to weaker domestic growth and BOK said the pace of the global economic growth has continued to slow as trade has contracted.
"Going forward, the Board expects domestic economic growth to fall below the July projection, owing chiefly to the continued US-China trade dispute and heightened geopolitical risks," BOK said.
In July BOK lowered its 2019 growth forecast to 2.2 percent from 2.5 percent and late last month Governor Lee-Ju-yeol said growth was likely to be lower than this forecast.
A new forecast will be released next month.
South Korea's economy grew by an annual 2.0 percent in the second quarter of this year, up from 1.7 percent in the first quarter.
Inflation turned negative in September, falling 0.4 percent after a flat reading in August, and BOK said inflation will fall short of the path projected in July and fluctuate for some time around zero and then rise to the 1.0 percent range from next year.
In July BOK forecast inflation would fluctuate below 1.0 percent for some time and then be at the low to mid-1.0 percent level in 2020.
BOK targets inflation of 2.0 percent.
As expected, the Bank of Korea (BOK) cut its base rate by another 25 basis points to 1.25 percent and has now cut it by 50 points this year.
South Korea's economy, closely tied to the health of the global economy due to its exports, has slowed this year due to weaker domestic growth and BOK said the pace of the global economic growth has continued to slow as trade has contracted.
"Going forward, the Board expects domestic economic growth to fall below the July projection, owing chiefly to the continued US-China trade dispute and heightened geopolitical risks," BOK said.
In July BOK lowered its 2019 growth forecast to 2.2 percent from 2.5 percent and late last month Governor Lee-Ju-yeol said growth was likely to be lower than this forecast.
A new forecast will be released next month.
South Korea's economy grew by an annual 2.0 percent in the second quarter of this year, up from 1.7 percent in the first quarter.
Inflation turned negative in September, falling 0.4 percent after a flat reading in August, and BOK said inflation will fall short of the path projected in July and fluctuate for some time around zero and then rise to the 1.0 percent range from next year.
In July BOK forecast inflation would fluctuate below 1.0 percent for some time and then be at the low to mid-1.0 percent level in 2020.
BOK targets inflation of 2.0 percent.
Sunday, October 13, 2019
Singapore eases policy on muted inflation and growth
Singapore's central bank loosened its monetary policy stance for the first time since April 2016 as inflationary pressures are expected to remain muted and economic growth below potential due to the ongoing downturn in the global electronics cycle as well as the pullback in investment spending, partly from the uncertainty in U.S.-China trade relations.
The Monetary Authority of Singapore (MAS), which targets the value of the Singapore dollar against a basket of currencies to control inflation, said it would "reduce slightly the rate of appreciation the S$NEER policy band" but retain the width of the policy band and the level at which it is centered.
MAS described its move as "measured adjustment" that was consistent with medium-term price stability given the economic outlook and signaled it was prepared to loosen its policy further if economic growth weakens.
"MAS will continue to closely monitor economic developments and is prepared to recalibrate monetary policy should prospect for inflation and growth weaken significantly," MAS said.
The economy of trade-reliant Singapore has slowed sharply in the last five quarters due to the drag on growth from the manufacturing sector while the services and construction sectors have expanded.
Singapore's gross domestic product grew by annual 0.1 percent in the third and second quarters of this year and MAS said there were "nascent signs" the global downturn could spill into domestic demand in some of Singapore's major trading partners despite more accommodative policy.
MAS expects Singapore's economy to pick up modestly in 2020 but output is still expected to remain below potential, keeping inflation muted.
GDP is expected to growth around the midpoint of the zero to 1.0 percent range this year.
Core inflation has been decelerating since December last year and was steady at 0.8 percent t in July and August. In the quarters ahead, MAS expects external sources of inflation to remain benign amid weak demand and well-supplied food and oil markets.
For this year MAS expects core inflation in the lower end of a 1.0 to 2.0 percent range and then average 0.5 to 1.5 percent in 2020.
The Monetary Authority of Singapore (MAS), which targets the value of the Singapore dollar against a basket of currencies to control inflation, said it would "reduce slightly the rate of appreciation the S$NEER policy band" but retain the width of the policy band and the level at which it is centered.
MAS described its move as "measured adjustment" that was consistent with medium-term price stability given the economic outlook and signaled it was prepared to loosen its policy further if economic growth weakens.
"MAS will continue to closely monitor economic developments and is prepared to recalibrate monetary policy should prospect for inflation and growth weaken significantly," MAS said.
The economy of trade-reliant Singapore has slowed sharply in the last five quarters due to the drag on growth from the manufacturing sector while the services and construction sectors have expanded.
Singapore's gross domestic product grew by annual 0.1 percent in the third and second quarters of this year and MAS said there were "nascent signs" the global downturn could spill into domestic demand in some of Singapore's major trading partners despite more accommodative policy.
MAS expects Singapore's economy to pick up modestly in 2020 but output is still expected to remain below potential, keeping inflation muted.
GDP is expected to growth around the midpoint of the zero to 1.0 percent range this year.
Core inflation has been decelerating since December last year and was steady at 0.8 percent t in July and August. In the quarters ahead, MAS expects external sources of inflation to remain benign amid weak demand and well-supplied food and oil markets.
For this year MAS expects core inflation in the lower end of a 1.0 to 2.0 percent range and then average 0.5 to 1.5 percent in 2020.
This week in monetary policy: Singapore and South Korea
This week - October 13 through October 17 - central banks from 2 countries or jurisdictions are scheduled to decide on monetary policy: Singapore and South Korea.
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 42 | ||||||
| OCT 13 - OCT 19, 2019: | ||||||
| SINGAPORE | 14-Oct | N/A | N/A | DM | ||
| SOUTH KOREA | 17-Oct | 1.50% | 0 | -25 | 1.50% | EM |
Monday, October 7, 2019
Uganda cuts rate 100 bps, slashes inflation outlook
Uganda's central bank lowered its Central Bank Rate (CBR) by 100 basis points to 9.0 percent, saying it believes "the benign inflation outlook provides room for a reduction in the policy rate to support economic growth."
It is Bank of Uganda's (BOU) first rate change since it raised the rate by the same amount in October 2018, returning its key rate to the level it was between February 2018 and October that year.
BOU lowered its inflation forecast sharply.
"The economy continues to grow but at a slowing rate," BOU said, noting gross domestic product slowed in the first half of 2019 from the second half of 2018 and the Composite Index of Economic Activity (CIEA) points to moderation of economic activity in the first quarter of the current 2019/20 financial year, which began July 1.
Uganda's GDP eased to annual growth of 5.4 percent in the second calendar quarter from 5.6 percent in the first quarter and in August BOU Governor Emmanuel Tumusiime-Mutebile had forecast growth in 2019/20 of 6.0 to 6.3 percent.
"The outlook is uncertain, particularly as a result of the unfavorable global economy," BOU said, adding a combination of widening fiscal and current account deficits could exert pressure on lending interest rates, leading to a further decline in economic growth.
Inflation in Uganda has been decelerating in the last three months and headline inflation fell to 1.9 percent in September from 2.1 percent in August, partly driven by a stronger shilling, moderating domestic demand and lower food prices.
Core inflation fell to 2.5 percent in September from 4.9 percent in June.
BOU lowered its forecast for core inflation to remain below its 5.0 percent target until the fourth quarter of 2020, with the risks to the downside and inflation forecast to converge to the target in the medium term, or over 2-3 years as demand side pressures remain subdued and the exchange rate is expected to remain relatively stable.
The revision to BOU's inflation forecast follows Tumusiime-Mutebile's forecast in August that core inflation would edge up and peak in the in the fourth quarter of 2020 at about 6.5 percent.
It is Bank of Uganda's (BOU) first rate change since it raised the rate by the same amount in October 2018, returning its key rate to the level it was between February 2018 and October that year.
BOU lowered its inflation forecast sharply.
"The economy continues to grow but at a slowing rate," BOU said, noting gross domestic product slowed in the first half of 2019 from the second half of 2018 and the Composite Index of Economic Activity (CIEA) points to moderation of economic activity in the first quarter of the current 2019/20 financial year, which began July 1.
Uganda's GDP eased to annual growth of 5.4 percent in the second calendar quarter from 5.6 percent in the first quarter and in August BOU Governor Emmanuel Tumusiime-Mutebile had forecast growth in 2019/20 of 6.0 to 6.3 percent.
"The outlook is uncertain, particularly as a result of the unfavorable global economy," BOU said, adding a combination of widening fiscal and current account deficits could exert pressure on lending interest rates, leading to a further decline in economic growth.
Inflation in Uganda has been decelerating in the last three months and headline inflation fell to 1.9 percent in September from 2.1 percent in August, partly driven by a stronger shilling, moderating domestic demand and lower food prices.
Core inflation fell to 2.5 percent in September from 4.9 percent in June.
BOU lowered its forecast for core inflation to remain below its 5.0 percent target until the fourth quarter of 2020, with the risks to the downside and inflation forecast to converge to the target in the medium term, or over 2-3 years as demand side pressures remain subdued and the exchange rate is expected to remain relatively stable.
The revision to BOU's inflation forecast follows Tumusiime-Mutebile's forecast in August that core inflation would edge up and peak in the in the fourth quarter of 2020 at about 6.5 percent.
Saturday, October 5, 2019
This week in monetary policy: Israel, Uganda, Serbia, Peru and Sri Lanka
This week - October 6 through October 12 - central banks from 5 countries or jurisdictions are scheduled to decide on monetary policy: Israel, Uganda, Serbia, Peru and Sri Lanka.
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 41 | ||||||
| OCT 6 - OCT 12, 2019: | ||||||
| ISRAEL | 7-Oct | 0.25% | 0 | 0 | 0.10% | DM |
| UGANDA | 7-Oct | 10.00% | 0 | 0 | 10.00% | |
| SERBIA | 10-Oct | 2.50% | 0 | -50 | 3.00% | FM |
| PERU | 10-Oct | 2.50% | 0 | -25 | 2.75% | EM |
| SRI LANKA | 11-Oct | 7.00% | -50 | -100 | 7.25% | FM |
Friday, October 4, 2019
India cuts rate 5th time, maintains accommodative stance
India's central bank cut its policy repo rate for the 5th time this year, as expected, and said it would "continue with an accommodative stance as long a it is necessary to revive growth, while ensuring that inflation remains within the target."
The Reserve Bank of India (RBI) cut the repo rate by another 25 basis points to 5.15 percent and has now cut it by a total of 135 points this year following cuts in February, April, June and August.
India's economy has slowed in the last four quarters and the RBI again lowered its forecast for economic growth in the 2019-20 financial year, which began April 1, to 6.1 percent from 6.9 percent forecast in August, with the risks evenly balanced, down from 6.8 percent in 2018-19.
Gross domestic product in the first quarter of 2019-20, or the second calendar quarter, slowed to 5.0 percent year-on-year, well below RBI's forecast range of 5.8-6.6 percent, amid weakening global growth and heightened uncertainty from trade and geopolitical tensions that cloud the outlook.
For the first quarter of next financial year, 2020-21, RBI also revised downwards its growth forecast to 7.2 percent from a previous 7.4 percent.
Although India's government has announced a $20 billion tax cut, which should strengthen private consumption and private investment, and past rate cuts should gradually boost demand, RBI added "the continuing slowdown warrants intensified efforts to restore the growth momentum."
"With inflation expected to remain below target in the remaining period of 2019-20 and Q1:2020-21, there is policy space to address these growth concerns by reinvigorating domestic demand within the flexible inflation targeting mandate," RBI said.
India's inflation rate rose for the 7th month in a row to 3.21 percent in August but remains below the RBI's target of 4.0 percent, plus/minus 2 percentage points, but in line with its past forecast.
RBI revised slightly upward its forecast for headline inflation to 3.4 percent for the second quarter of 2019-20, and retained them at 3.5-3.7 percent for the second half of 2019-20, and 3.6 percent for the first quarter of 2020-21.
The Reserve Bank of India (RBI) cut the repo rate by another 25 basis points to 5.15 percent and has now cut it by a total of 135 points this year following cuts in February, April, June and August.
India's economy has slowed in the last four quarters and the RBI again lowered its forecast for economic growth in the 2019-20 financial year, which began April 1, to 6.1 percent from 6.9 percent forecast in August, with the risks evenly balanced, down from 6.8 percent in 2018-19.
Gross domestic product in the first quarter of 2019-20, or the second calendar quarter, slowed to 5.0 percent year-on-year, well below RBI's forecast range of 5.8-6.6 percent, amid weakening global growth and heightened uncertainty from trade and geopolitical tensions that cloud the outlook.
For the first quarter of next financial year, 2020-21, RBI also revised downwards its growth forecast to 7.2 percent from a previous 7.4 percent.
Although India's government has announced a $20 billion tax cut, which should strengthen private consumption and private investment, and past rate cuts should gradually boost demand, RBI added "the continuing slowdown warrants intensified efforts to restore the growth momentum."
"With inflation expected to remain below target in the remaining period of 2019-20 and Q1:2020-21, there is policy space to address these growth concerns by reinvigorating domestic demand within the flexible inflation targeting mandate," RBI said.
India's inflation rate rose for the 7th month in a row to 3.21 percent in August but remains below the RBI's target of 4.0 percent, plus/minus 2 percentage points, but in line with its past forecast.
RBI revised slightly upward its forecast for headline inflation to 3.4 percent for the second quarter of 2019-20, and retained them at 3.5-3.7 percent for the second half of 2019-20, and 3.6 percent for the first quarter of 2020-21.
Wednesday, October 2, 2019
Iceland cuts 4th time on fear growth could weaken rapidly
Iceland's central bank cut its interest rates for the 4th time in a row, saying the economy could weaken more rapidly than it expects due to the uncertain outlook, particularly for the global economy.
The Central Bank of Iceland (CBI) cut the rate on its benchmark 7-day deposits by another 25 basis points to 3.25 percent and has now cut it by 125 points this year following cuts in May, June and August.
CBI said recent data shows economic activity has been stronger than assumed and growth was a bit stronger than projected in the August monetary bulletin, but this was mainly due to a shift in demand toward domestic production, partly offsetting the decline in exports.
"Leading indicators imply that economic activity will continue to slow, although there are signs that the economy may be regaining a foothold," CBI said.
In its latest forecast from August, CBI lowered its projection for economic growth in 2020 to 1.9 percent from an earlier forecast of 2.4 percent and revised its forecast for growth this year for a contraction of 0.2 percent, up from the May forecast of a 0.4 percent contraction.
Iceland's gross domestic product grew by an annual 2.7 percent in the second quarter of the year, rebounding from contraction of 0.9 percent in the first quarter.
By 2021 CBI expects the economy to rebound and expand by 2.7 percent, helped by stronger domestic demand, including a 6.6 percent rise in public investment.
After a severe recession in the wake of the global financial crises, tourism helped launch a boom in Iceland, which the economy growing 4.6 percent in 2017 and 2018.
Iceland is now facing a series of challengers after tourism began to decline, the budget airline WOW collapsed, uncertainty surrounds Icelandair's grounded Boeing 737 MAX aircraft, the Icelandic krona has been high, and exports were hit by the collapse of the fishing of capelin due to rising ocean temperatures.
Iceland's headline inflation rate eased to 3.0 percent in September from 3.2 percent in August and CBI said it expects it to ease faster than assumed in August while the krona has appreciated, leading to a slight tightening of the monetary policy stance.
In August CBI forecast consumer price inflation would average 3.1 this year and then decelerate to 2.4 percent in 2020 and 2.2 percent in 2021, below the bank's 2.5 percent target.
The Central Bank of Iceland (CBI) cut the rate on its benchmark 7-day deposits by another 25 basis points to 3.25 percent and has now cut it by 125 points this year following cuts in May, June and August.
CBI said recent data shows economic activity has been stronger than assumed and growth was a bit stronger than projected in the August monetary bulletin, but this was mainly due to a shift in demand toward domestic production, partly offsetting the decline in exports.
"Leading indicators imply that economic activity will continue to slow, although there are signs that the economy may be regaining a foothold," CBI said.
In its latest forecast from August, CBI lowered its projection for economic growth in 2020 to 1.9 percent from an earlier forecast of 2.4 percent and revised its forecast for growth this year for a contraction of 0.2 percent, up from the May forecast of a 0.4 percent contraction.
Iceland's gross domestic product grew by an annual 2.7 percent in the second quarter of the year, rebounding from contraction of 0.9 percent in the first quarter.
By 2021 CBI expects the economy to rebound and expand by 2.7 percent, helped by stronger domestic demand, including a 6.6 percent rise in public investment.
After a severe recession in the wake of the global financial crises, tourism helped launch a boom in Iceland, which the economy growing 4.6 percent in 2017 and 2018.
Iceland is now facing a series of challengers after tourism began to decline, the budget airline WOW collapsed, uncertainty surrounds Icelandair's grounded Boeing 737 MAX aircraft, the Icelandic krona has been high, and exports were hit by the collapse of the fishing of capelin due to rising ocean temperatures.
Iceland's headline inflation rate eased to 3.0 percent in September from 3.2 percent in August and CBI said it expects it to ease faster than assumed in August while the krona has appreciated, leading to a slight tightening of the monetary policy stance.
In August CBI forecast consumer price inflation would average 3.1 this year and then decelerate to 2.4 percent in 2020 and 2.2 percent in 2021, below the bank's 2.5 percent target.
Subscribe to:
Posts (Atom)