Central Bank News Link List - Dec 10, 2013: ECB's Coeure sees no need to deploy 'spectacular' policy tools

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.

• ECB's Coeure sees no need to deploy 'spectacular' policy tools given inflation outlook (WSJ)
• Policy centrist says ready to taper Fed bond buys (Reuters)
• U.S. regulators seek to curb Wall St. trades with Volker rule (Reuters)
• Four Asian central banks to hold rates this week, cross fingers as Fed taper looms (Reuters)
• Emerging markets can deal with gradual U.S. Fed taper-World Bank's Kim (Reuters)
• Indonesia's central bank to keep rates on hold Thursday, but hike in Q1 (Reuters)
• ECB official rejects Summers view of managing 'secular stagnation' (WSJ)
• New Zealand dollar pacing ahead of RBNZ rate decision (WSJ)
• 'Warp speed' risk for UK house prices but hiking rates off radar (Reuters)
• IMF's Largarde singles out ECB as key to euro-zone recovery (WSJ)
• IMF cuts Russia growth forecast, calls for monetary tightening (Dow Jones)
• Czech banks resilient to potential shocks, central bank says (Reuters)
• Peru economy to grow 5.6 pct in 4th quarter-cenbank chief (Reuters)
• Former Buba chief Weber: Inflation-targeting framework not the best (Dow Jones)
• BOI Visco: Central banks' role to restore trust (MNI)
• Poland close to naming dove Osiatynski as rate-setter-sources (Reuters)
• www.CentralBankNews.info

Botswana cuts rate 50 bps, inflation likely to fall further

    Botswana's central bank cut its bank rate by 50 basis points to 7.50 percent, saying inflation is set to remain within the bank's target range and "the current state of the economy, in which unemployment remains high alongside below-trend economic activity, suggests scope for monetary policy easing to stimulate stronger output growth."
    The Bank of Botswana has now cut rates four times this year for a total reduction of 200 basis points in sync with a decline in inflation since a 2013-high of 7.6 percent in March.
    In October inflation dropped to 4.8 percent from September's 5.0 percent and within the bank's target of 3-6 percent.
    "Weak domestic demand and the forecast benign external price developments contribute to the positive inflation outlook in the medium term, with the likelihood of a further fall in inflation in the short term," the central bank said.
    The bank cautioned, however, that this outlook could be negatively affected by large increases in administered prices and government levies, along with higher-than-forecast international food prices.
    Botswana's Gross Domestic Product expanded by an annual 7.9 percent in the second quarter, up from 3.3 percent in the first quarter but the bank said non-mining GDP is expected to remain below potential in the medium term and generate minimal inflationary pressures.

Central Bank News Link List - Dec 9, 2013: China bank funding set to ease with certificate of deposits

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.

• China bank funding set to ease with certificate of deposits (Bloomberg)
• BOE Carney: Recovery gains pace but econ long way from normal (MNI)
• ECB ready to act further if necessary-Weidmann (Reuters)
• China c.banker says to liberalise rates, widen yuan band-paper (Reuters)
• Soaring kiwi to weigh on New Zealand's OCR (stuff.co.nz)
• Poland may leave rates at record low to end-'14, Chojna says (Bloomberg)
• Mersch says QE would pose immense challenges for ECB (Reuters)
• Banks trim risk but fail to raise provisions ahead of EU review (Reuters)
• Riksbank sows confusion as analysts split on December move (Bloomberg)
• Australian central bank governor warns against hubris (WSJ)
• Fearing the Fed, aching for the ECB (Reuters)
• First China default seen as record $427 billion debt due (Bloomberg)
• BOJ Gov Kuroda warns against overly complex forward guidance (Reuters)
• Venezuela hikes bank reserve rate amid inflation fight (Reuters)

Monetary Policy Week in Review – Dec 2-6, 2013: Egypt, Uganda cut as low inflation worries ECB, Canada, Norway

    Last week the central banks of Egypt and Uganda cut key interest rates while the ECB, the Bank of Canada and Norges Bank voiced concern over low inflation as the debate over the U.S. Federal Reserve’s tapering of asset purchases rumbled on.
    The use of exchange rates as a internationally competitive tool – one of this year’s recurring themes – also surfaced last week as the Reserve Bank of Australia (RBA) again voiced its concern over the “uncomfortably high” Australian dollar and the Canadian dollar fell to three-year lows on the view that the Bank of Canada (BOC) has turned more dovish just at the same time that the Fed may decide that the U.S. economy is strong enough to handle a reduction in its $85 billion monthly bond purchases.
   Mario Draghi, president of the European Central Bank (ECB), again stressed that he was ‘‘ready and able’’ to take new steps to aid the euro area economy and forecast a “prolonged period of low inflation,” a phenomenon that raises the specter of Japan’s 20 year battle to rid the country of deflation.
    Although the BOC already dropped its policy tightening bias in November, last week’s reference to the growing downside inflation risks, the lack of stronger exports and the expected soft landing for the housing sector reinforced the impression that Canadian rates will be on hold until 2015.
    Echoing Canada’s easier policy stance, Norway's central bank pushed back any rate increase by 12 months to the summer of 2015.
   As the BOC, Norges Bank referred to lower-than-expected inflation, a decline in house prices and the possibility of low wage growth. The only positive factor for Norway's economy was a depreciation of the krone currency.
    Uganda’s central bank surprised markets by cutting its rate by 50 basis points to 11.5 percent, only two months after warning that it could raise rates if core inflation were to accelerate and a rate rise in September.
    Egypt’s central bank also surprised markets by cutting its rate by 50 basis points to 8.25 percent as inflation rose in October and may rise further in November and December. Economists had also expected the bank to maintain rates to avoid any further outflow of capital.
    But the Central Bank of Egypt said the downside risks to the economy outweighed the upside risks to inflation given the “persistently negative output gap since 2011” and challenges facing the euro area and softer growth in emerging markets.
    In addition to the ECB, the BOC, the RBA and Norges Bank, the central banks of Poland, the United Kingdom and Mexico maintained their rates last week.
 
    Through the first 49 weeks of this year, central banks have cut their policy rates 111 times, or 23.6 percent of the 473 policy decisions taken by the 90 central banks followed by Central Bank News.
    This is unchanged from the previous week, but down from 25.3 percent after the first half, reflecting the recent rate rises by some of the major emerging market central banks.
     Policy rates have been raised 26 times this year, or 5.5 percent of this year’s policy decisions, up from 4.7 percent after the first half of the year.

     LAST WEEK’S (WEEK 49) MONETARY POLICY DECISIONS:

COUNTRY	MSCI	NEW RATE	OLD RATE	1 YEAR AGO
AUSTRALIA	DM	2.50%	2.50%	3.00%
UGANDA		11.50%	12.00%	12.00%
CANADA	DM	1.00%	1.00%	1.00%
POLAND	EM	2.50%	2.50%	4.25%
NORWAY	DM	1.50%	1.50%	1.50%
UNITED KINGDOM	DM	0.50%	0.50%	0.50%
EUROSYSTEM	DM	0.25%	0.25%	0.75%
EGYPT	EM	8.25%	8.75%	9.25%
MEXICO	EM	3.50%	3.50%	4.50%

    This week (week 50) 11 central banks are scheduled to hold policy meetings, including Sri Lanka, Iceland, South Korea, New Zealand, Namibia, the Philippines, Serbia, Indonesia, Switzerland, Peru and Fiji.

COUNTRY	MSCI	DATE	CURRENT  RATE	1 YEAR AGO
SRI LANKA	FM	9-Dec	6.50%	7.50%
ICELAND		11-Dec	6.00%	6.00%
SOUTH KOREA	EM	12-Dec	2.50%	2.75%
NEW ZEALAND	DM	12-Dec	2.50%	2.50%
NAMIBIA		12-Dec	5.50%	5.50%
PHILIPPINES	EM	12-Dec	3.50%	3.50%
SERBIA	FM	12-Dec	10.00%	11.25%
INDONESIA	EM	12-Dec	7.50%	5.75%
SWITZERLAND	DM	12-Dec	0.25%	0.25%
PERU	EM	12-Dec	4.00%	4.25%
FIJI		12-Dec	0.50%	0.50%

    www.CentralBankNews.info

Sri Lanka holds rate steady, sees over 7% growth in 2013

    Sri Lanka's central bank held its benchmark repurchase rate steady at 6.50 percent, citing several positive developments in the past month, including faster economic growth, a decline in inflation to a level that was lower than expected and progress in the external sector.
    The Central Bank of Sri Lanka has cut its rate by 100 basis points this year and said the positive developments indicated that "the monetary policy decisions implemented throughout 2013 were timely and appropriate."
    A turnaround in the financial position of key public corporations led to substantial repayments to the banking sector and enabled an increased flow of financing to the private sector and a strong 27.2 billion rupee rise in credit to the private sector by banks.
    "These factors augur well for future economic growth, while continued downward adjustments to longer term market rates would bolster market confidence and nurture positive investor sentiments," the central bank said, adding that continued improvement in public corporations and fiscal consolidation should make it easier to maintain the desired monetary expansion in the period ahead.
    Sri Lanka's Gross Domestic Product rose by an annual rate of 7.80 in the third quarter, up from 6.8 percent in the second quarter, with all key sectors of the economy contributing positively.

Banks in major economies face funding disadvantage-BIS

    Investors’ search for yield has continued unabated in recent months but banks in advanced economies are not benefitting as much as non-financial companies and this is “bad news” for small firms and Europe’s economic recovery, according to the Bank for International Settlements (BIS).
    Before the 2007-2009 global financial crises, banks had a funding advantage as they were able to borrow at a lower cost than non-financial corporations, partly because investors believed the public sector would always come to the rescue of banks that were in trouble.
    But banks can no longer rely on being “too big to fail” and although they have strengthened their capital and liquidity positions - especially U.S. banks - the impact of the hit that banks took during the financial cries still lingers.
    Prior to the financial crises, the spreads on bonds issued by banks were typically 20-30 percent lower than those of non-financial bonds but this reversed sharply in 2007.  While it has narrowed since then, and even disappeared for U.S. institutions, the spread in November was still 40 percent higher for UK banks and 10 percent for euro area banks in November, BIS said.
    “The financial crises of 2007-09 marked the end of an era in which banks had a funding advantage,” said the BIS in its December quarterly review.

Mexico holds rate, on alert for inflation from tax reform

    Mexico's central bank held its policy rate steady at 3.50 percent, as expected, but said it would remain alert to any impact on inflation from the government's tax reform.
    The Bank of Mexico, which has cut its target for overnight rates three times this year for a total reduction of 100 basis points, also said it would be "vigilant" to the inflationary effects of economic activity and the relative monetary stance of Mexico versus the United States in order to achieve its 3.0 percent inflation target.
    Mexico's headline inflation rate eased to 3.36 percent in October from 3.39 percent in September but picked up to 3.51 percent in early November on a seasonal rise in electricity prices.
    The central bank said inflation was still showing a positive trend and core inflation was near historically low levels of around 2.5 percent. But inflation expectations for the end of 2014 have risen slightly due to the potential impact of changes to taxes, but remain below 4 percent.
    The central bank added that expectations of economic agents for 2015 show that any increase in inflation will be "transient, moderate and will not lead to second order effects."

Central Bank News Link List - Dec 6, 2013: Fed's Plosser: Time to 'gracefully exit' QE3

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.

• Fed's Plosser: Time to 'gracefully exit' QE3 (MarketWatch)
• German central bank  raises economic growth forecast (WSJ)
• Fed's Evan's: Open to December taper, but prefers to wait (Reuters)
• Bank of Canada Senior Deputy Macklem to leave in May (Bloomberg)
• Chile, Colombia, Peru central banks ready for Fed taper - Peru (Reuters)
• POLL-Central Bank of Sri Lanka seen keeping rates steady on Monday (Reuters)
• Indonesia central bank urges exporters to sell dollars amid weak rupiah (Reuters)
• Central banks warn of bitcoin risks (WSJ) 
• Brazil analysts on Copom's next move; Tightening cycle near end (MNI)
• Russian central bank to act to curb growth in consumer lending (Reuters)
• Vietnam central bank to keep forex rate stable (Reuters)
• Ukraine central bank reserves deplete faster than expected in Nov (KyivPost)
• Special report: How Fed policy enriches private equity, if not workers (Reuters)
• Women rise at BOE from counting banknotes to supervising banks (Bloomberg)
• Central bank details risks to Ireland's banks (WSJ)
• Blow to Irish central bank as seventh regulator leaves (Independent)
• RBNZ commitment to inflation target considered crucial (TVNZ)
• Zambia's central bank to commence implementation of banking gauge (Xinhua)
• Tonga's banks urged to lend more (Matangi)
• www.CentralBankNews.info