This week in monetary policy: Serbia, New Zealand, Uganda, Namibia, South Korea, Turkey and Ukraine

    This week - April 12 through April 17 - central banks from 7 countries or jurisdictions are scheduled to decide on monetary policy: Serbia, New Zealand, Uganda, Namibia, South Korea, Turkey and Ukraine.

     Following table includes the name of the country, the date of the next policy decision, the current policy rate, the local time a policy decision is announced, 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 be accessed by clicking on This Week.

WEEK 15
APR 12- APR 17, 2021:
SERBIA	13-Apr	1.00%	12:00	0	0	1.50%	FM
NEW ZEALAND	14-Apr	0.25%	14:00	0	0	0.25%	DM
UGANDA	14-Apr	7.00%		0	0	8.00%
NAMIBIA	14-Apr	3.75%		0	0	4.25%
SOUTH KOREA	15-Apr	0.50%		0	0	0.75%	EM
TURKEY	15-Apr	19.00%	14:00	200	200	8.75%	EM
UKRAINE	15-Apr	6.50%	14:00	50	50	8.00%	FM

 
    www.CentralBankNews.info

This week in monetary policy: Australia, India, Poland, Sri Lanka and Peru

    This week - April 5 through April 11 - central banks from 5 countries or jurisdictions are scheduled to decide on monetary policy: Australia, India, Poland, Sri Lanka and Peru.

     Following table includes the name of the country, the date of the next policy decision, the current policy rate, the local time a policy decision is announced, 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 be accessed by clicking on This Week.

WEEK 14
APR 5- APR 11, 2021:
AUSTRALIA	6-Apr	0.10%	14:30	0	0	0.25%	DM
INDIA	7-Apr	4.00%		0	0	4.40%	EM
POLAND	7-Apr	0.10%		0	0	0.50%	EM
SRI LANKA	8-Apr	4.50%	7:30	0	0	6.00%	FM
PERU	8-Apr	0.25%		0	0	0.25%	EM

 
    www.CentralBankNews.info

Jamaica holds rate, to keep stance till econ pre-Covid

     Jamaica's central bank maintained its main interest rate and accommodative monetary policy stance to support a "speedy economic recovery" and said it intends to "maintain this monetary policy stance until there are clear signs that economic activity in Jamaica is returning to pre-COVID-19 levels."
     The Bank of Jamaica (BOJ) left its policy interest rate - the overnight deposit rate - at 0.50 percent, unchanged since it was cut in August 2019 by 25 basis points.

     The rate cut in August 2019 was the culmination of 12 rate cuts with BOJ lowering the key rate by a total of 3.25 percentage points starting in July 2017 when the central bank adopted a new monetary policy framework.

     The bank's guidance that it will maintain its policy stance until there are clear signs that economic activity is recovering is new.

     In February, when it released its quarterly monetary policy report, Governor Richard Byles said the outlook suggested the economy may be past the worst and BOJ would remain focused on ensuring that inflation remains within its target range and it would deploy additional measures, as needed, to ensure the continued smooth flow of liquidity to the financial system.

     BOJ has kept its policy rate at the current level based on the assessment that inflation will generally remain within its target of 4.0 to 6.0 percent over the next two years and today said it currents assessment is in line with its projections from February.
     Inflation in Jamaica eased to 3.7 percent in February from 4.7 percent in January - largely due to lower vegetable prices - and BOJ forecasts inflation will average around 5.0 percent over the next two years and mainly stay within the target range.
     "Bank of Jamaica remains committed to ensuring that inflation remains low and stable, within its target, and at the same time, is prepared to take all necessary actions to ensure that Jamaica's financial system remains sound," the bank said.

     In February, BOJ forecast inflation in the March quarter would be 4.0 to 6.0 percent, then 4.0 to 5.0 percent in the June quarter and 4.5 to 5.5 percent in the September quarter.

     The coronavirus pandemic hit Jamaica's main foreign currency earner tourism hard and BOJ reiterated the island's economy would contract 10.0 to 12.0 percent in the 2020/21 financial year that ends April 1.

     "The economic outlook for Jamaica remains uncertain in the context of the ongoing COVID-19 pandemic but BOJ remains cautiously optimistic, particularly in light of the commencement of the domestic vaccination programme against the COVID-19 virus," BOJ said, forecasting growth in the range of 4.0 to 8.0 percent in the 2021/22 year, as in February, with the highest estimate based on a strong recovery in tourism.

Angola holds key rate but raises liquidity absorption rate

     Angola's central bank left its benchmark interest rate steady but raised the rate on its permanent liquidity absorption facility, saying there are persistent inflationary pressures in the economy despite a stable exchange rate and contained aggregate demand. 
     The Bank of Angola (BNA), one of the few central banks to have maintained interest rates last year as the COVID-19 pandemic swept the world, left its basic interest rate BNA at 15.50 percent, unchanged since it was lowered in May 2019.
     But the central bank's monetary policy committee, which in January said there was an "evident" need for a more restrictive policy this year to reach its target of single digit inflation next year, raised the liquidity absorption rate 500 basis points to 12.0 percent.

     Angola's inflation rate accelerated steadily last year and rose to 24.85 percent in February from 24.41 percent in January, mainly due to a greater rise in the cost of food and non-alcoholic beverages.

     "CPM (monetary policy committee) found that inflationary pressures persist in the national economy in the short term despite the stability observed in the foreign exchange market and in the behavior of liquidity, as well as the existence of contained aggregate demand," BNA said.

     The monetary base in kwanza, one of the operational variables of monetary policy, grew 12.75 percent in the first two months of 2021 and 18 percent in the last 12 months while the bank's stock of gross international reserves dipped 0.7 percent to US$15.29 billion in February from January for import cover of 12.3 months.

     After falling 26 percent in 2020, the exchange rate of the kwanza has firmed this year and was trading at 626.1 to the U.S. dollar today, up 4.5 percent this year.

     The economy of Angola, Africa's second largest oil producer, was hit hard by the plunge in oil prices last year and one of the aims of President Joao Lourenco, who took over in 2017 after 38 years of rule by Jose Eduardo dos Santos, is to diversify away from oil in addition to opening up the country to foreign investment and tackling corruption.

     In the third quarter of last year Angola's economy shrank an annual 5.8 percent, down from an 8.3 percent decline in the second quarter.

    www.CentralBankNews.info

    

Kenya maintains rate 7th time, sees economic rebound

     Kenya's central bank left its policy rate steady for the 7th time, confirming it still expects the economy to rebound strongly this year while inflation remains well anchored and is forecast to remain within the bank's target range in the near term.

     The Central Bank of Kenya (CBK) kept its Central Bank Rate (CBR) at 7.0 percent, unchanged since April 2020 when it was cut for the third time in response to the impact of the COVID-19 pandemic.

     Since May 2016, when CBK began easing its policy stance, the key rate has been lowered eight times and by a total of 450 basis points, including three cuts in 2020 totaling 150 points in 2020.

     In addition to rate cuts, the central bank rolled out a number of emergency measures to mitigate the adverse impact of the pandemic and provide liquidity to the banking sector and CBK said one year on, it assessed the measures to have been "highly effective in providing the intended relief to borrowers."

     Measures to help borrowers restructure loans expired on March 2, 2021 and during the last year 1.7 trillion shilling of loans - or 57 percent of total gross loans - was restructured, while the lowering of the cash reserve ratio had injected 32.8 billion shilling to support lending.

     "The economy is expected to rebound strongly in 2021," CBK said, adding this would be supported by a recovery in the services sector, particularly education, wholesale and retail trade.

     In the third quarter of last year, Kenya's economy shrank 1.1 percent year-on-year after shrinking 5.5 percent in the second quarter.

     Four recent surveys by the central bank of the private sector, including hotels and flower farms, revealed optimism about the growth prospects for this year but respondents were also concerned about the uncertainty related to the pandemic and the increased cost of inputs.

     Exports from Kenya, such as tea and horticulture, rose 8.1 percent and 3.4 percent respectively in the 12 months to February from the same 2020 period, and CBK projects exports will improve due to global vaccinations that are expected to ease virus-related restrictions, while Kenya's new trade arrangement with the U.K. is a welcome development to support trade.

     Remittances have also risen, and were 11.4 percent higher in the 12 months to February, while growth in private sector credit rose 9.7 percent in the same period, and foreign exchange reserves declined to US$7.348 billion from $7.686 billion in January but still enough for 4.5 months of import cover and to act as a buffer against short-term shocks in the foreign exchange market.

     Kenya's inflation rose to 5.8 percent in February from 5.7 percent in January but CBK expects it to remain within its target range of 5.0 percent, plus/minus 2.5 percentage points, in the short term, supported by lower food prices and muted demand pressures.

     It added the rise in fuel prices is only expected to have a moderate impact on overall inflation.

This week in monetary policy: Angola, Kenya, Jamaica, Lesotho, Chile, Bulgaria and Dominican Rep.

    This week - March 29 through April 3 - central banks from 7 countries or jurisdictions are scheduled to decide on monetary policy: Angola, Kenya, Jamaica, Lesotho, Chile, Bulgaria and Dominican Republic.

     Following table includes the name of the country, the date of the next policy decision, the current policy rate, the local time a policy decision is announced, 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 be accessed by clicking on This Week.

 

WEEK 13
MAR 29 - APR 3, 2021:
ANGOLA	29-Mar	15.50%		0	0	15.50%
KENYA	29-Mar	7.00%		0	0	7.25%	FM
JAMAICA	29-Mar	0.50%		0	0	0.50%
LESOTHO	30-Mar	3.50%		0	0	5.25%
CHILE	30-Mar	0.50%	18:00	0	0	0.50%	EM
BULGARIA	31-Mar	0.00%		0	0	0.00%
DOMINICAN REP	31-Mar	3.00%		0	0	3.50%

 

    www.CentralBankNews.info

Seychelles holds rate, sees gradual recovery of tourism

     The central bank for the Indian Ocean archipelago of the Seychelles kept its monetary policy rate steady for the second quarter of 2021 to continue the accommodative policy stance and support economic activity which remains weak due to the impact of the COVID-19 pandemic.

     The Central Bank of Seychelles (CBS) left its monetary policy rate at 3.0 percent, unchanged since it was cut in June last year as the central bank lowered the rate for the second time following a similar-sized cut in March.

     In 2020 CBS cut its key rate by a total of 200 basis points and has cut it 250 points since the start of 2019.

     The Republic of Seychelles, which comprises 115 islands off the coast of Africa in the Indian Ocean, relies heavily on tourism that was devastated by the closure of borders in most countries as the pandemic swept the globe.

     Although the country's tourism industry remains subdued and overall growth dependent on fisheries and manufacturing - which can't make up for tourism - CBS said it expects a gradual recovery of tourism activity in coming months as the rollout of vaccines in some of its key markets and interest by airlines in resuming flights, has "heightened hopes of a potential recovery, albeit at a slow but promising pace."

     The economy of Seychelles contracted 18.5 percent year-on-year in the third quarter of 2020 after a 19.8 percent contraction in the second quarter, with revenue from tourism plunging 78 percent in the January-November 2020 period from the same 2019 period, CBS said in January.

     Tourism is also the main contributor of foreign exchange to the Seychelles and a decline in foreign exchange has hit the exchange rate of the Sechellois Rupee, which then raises import prices and inflation.

     The rupee was hit hard twice in the last year. First after the outbreak of the pandemic, with the rupee falling 13 percent in April, and then by another bout of weakness in late 2020.

     This year the rupee has been steady and was trading at 21.15 to the U.S. dollar today but down 35 percent since the start of 2020.

     The impact of currency depreciation and higher global commodity prices has pushed up inflation in recent months to 8.68 percent in February - the highest since June 2012 - from 7.62 percent in January.

      "The weakened domestic currency and the rise in external commodity prices are expected to lead to higher inflationary pressures in the short to medium term," the central bank said, adding labour market frictions and challenges faced by the private sector pose an increasing threat to financial stability.

     "Despite the short-term inflationary risks, CBS foresees the need to support the economy and aliviate the financial challenges that may result from the above developments," the bank said.

Mongolia holds rate steady 2nd time but boosts loans

      Mongolia's central bank left its policy rate steady for the second time but provided a further 350 billion tughrik in longer-term refinancing to "continue to soften the financial conditions," by taking into account the current and future state of the economy and conditions in financial markets and banks.
     The Bank of Mongolia (Mongolbank) kept its policy rate at 6.0 percent, unchanged since November 2020 when it was lowered for the fourth time last year as the country's economy plunged into recession due to measures to contain the COVID-19 pandemic.
     Last year Mongolbank undertook a major easing of its policy, including cutting the policy rate by a total of 500 basis points, lowering banks' reserve requirements by a total of 450 points, suspending debt-service-to-income ceilings on consumer loans and providing longer-term financing to the banking sector.

      In addition to the monetary easing, Mongolia's finance ministry introduced fiscal stimulus equivalent to 7.2 percent of gross domestic product with a deficit in the budget passed by the parliament of an estimated 12.5 percent of GDP in 2020 and a 5.1 percent deficit in 2021.

     At its previous meeting in December, the bank's monetary policy committee allocated up to 250 billion tughrik in longer-term refinancing for the first quarter of this year and today the bank allocated up to 350 billion for the second quarter and expanded the list of eligible businesses to processing, service and trade sectors with more than 200 employees.

     Mongolia's economy shrank 5.3 percent in 2020 but a bounce back in the mining sector in the second half of last year as coal deliveries to China and higher gold production helped cushion the decline. 

     Although an outbreak of the pandemic in November last year delayed the recovery, Mongolbank said it expects economic activity to rise and business to return to normal if vaccinations continue successfully.

     It noted exports had risen 73 percent in the first two months of 2021.

     Inflation in Mongolia rose slightly to 2.6 percent in February from 2.4 percent in January and the central bank said it expects the impact of demand on inflation to gradually increase in coming quarters as economic activity intensifies while supply-side inflation will also rise to the impact of fuel prices.

     But it still forecasts that inflation this year will remain around its target of around 6.0 percent, plus/minus 2 percentage points. 

     After depreciating from late 2019 to August 2020, Mongolia's tughrik has been relatively stable in recent months and was trading at 2.86 to the U.S. dollar today, unchanged this year but down 4 percent since the start of 2020.

     www.CentralBankNews.info

This week in monetary policy: China, Ghana, Paraguay, Hungary, Morocco, Nigeria, Thailand, Iceland, Czech Rep., Guatemala, Philippines, Switzerland, South Africa, Mexico, Zimbabwe, Trinidad & Tobago, Colombia & Uruguay

     This week - March 22 through March 27 - central banks from 18 countries or jurisdictions are scheduled to decide on monetary policy: China, Ghana, Paraguay, Hungary, Morocco, Nigeria, Thailand, Iceland, Czech Republic, Guatemala, Philippines, Switzerland, South Africa, Mexico, Zimbabwe, Trinidad & Tobago, Colombia and Uruguay.

     Following table includes the name of the country, the date of the next policy decision, the current policy rate, the local time a policy decision is announced, 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 be accessed by clicking on This Week.

WEEK 12
MAR 22 - MAR 27, 2021:
CHINA	22-Mar	3.85%		0	0	4.05%	EM
GHANA	22-Mar	14.50%		0	0	14.50%	FM
PARAGUAY	22-Mar	0.75%		0	0	2.25%
HUNGARY	23-Mar	0.60%		0	0	0.90%	EM
MOROCCO	23-Mar	1.50%		0	0	2.00%	FM
NIGERIA	23-Mar	11.50%		0	0	13.50%
THAILAND	24-Mar	0.50%		0	0	0.75%	EM
ICELAND	24-Mar	0.75%		0	0	1.75%
CZECH REPUBLIC	24-Mar	0.25%	14:30	0	0	1.00%	EM
GUATEMALA	24-Mar	1.75%		0	0	2.00%
PHILIPPINES	25-Mar	2.00%		0	0	3.25%	EM
SWITZERLAND	25-Mar	-0.75%	9:30	0	0	-0.75%	DM
SOUTH AFRICA	25-Mar	3.50%		0	0	5.25%	EM
MEXICO	25-Mar	4.00%	13:00	-25	-25	6.50%	EM
ZIMBABWE	26-Mar	40.00%		500	500	25.00%
TRINIDAD & TOBAGO	26-Mar	3.50%		0	0	3.50%
COLOMBIA	26-Mar	1.75%		0	0	3.75%	EM
URUGUAY	26-Mar	4.50%	15:00	0	0	n/a

 

    www.CentralBankNews.info

                                                        

 

Russia raises rate and is open to further hikes

     Russia's central bank became the third emerging market central bank to raise its key interest rate this week, saying a faster-than-expected recovery of economic activity and rising inflation called for a return to neutral monetary policy and it was open to further rate hikes.
     The Bank of Russia raised its key interest rate by 25 basis points to 4.50 percent, the first rate hike since December 2018 when the bank raised its rate for the second time that year to stamp out the risk of a rise in inflation from a fall in the ruble that had been hit by fresh sanctions by the United States.

     But this brief period of tightening gave way to a return to an easing path in June 2019 after which the Russian central bank cut its rate 9 times and by a total of 350 basis points - including four cuts last year in response to the COVID-19 pandemic - as inflation declined.

     Russia has weathered the pandemic better than many economies and today's rate hike comes after the central bank at its last meeting in February said the room for further monetary easing had been exhausted.

     Not only did the central bank last month raise its forecast for inflation but also its expectation for how quickly the economy would return to its pre-pandemic level.

     "The pace of economic recovery is higher than expected," the central bank said today, adding inflation in the first quarter of this year was higher than it had expected and the balance of risks had now shifted toward pro-inflationary factors.

     Russia's rate hike follows that of its fellow emerging market economies of Turkey and Brazil, which also raised their rates this week in response to growing inflationary pressures, boosting the number of central banks that have raised key rates this year to 12.

     Russia's inflation rate has accelerated in the last 9 months and hit 5.67 percent in February from 5.18 percent in January, reflecting the recovery of demand and some supply constraints.

     But the central bank expects inflation to peak in March and then decline and gradually return to close to its 4.0 percent target in the first half of 2022 and remaining at that level.

     "That said, the Bank of Russia holds open the prospect of further increases in the key rate at its upcoming meetings," the bank said, adding it would continue to determine the timeline and pace of a return to a neutral policy stance by taking into account inflation along with economic and financial market developments.

     This year and onwards, the central bank expects Russia's economy to gain support from an improved outlook for the global economy and further fiscal support measures around the world, which will accelerate demand for Russia's export of commodities.

     But the central bank also cautioned of volatility in financial markets as the faster-than-expected recovery of the global economy, along with continued extremely accommodative policies in advanced economies, may lead to an earlier normalization of monetary policy.

     

Norway holds rate but pulls forward hike to H2 2021

     Norway's central bank left its monetary policy rate steady, as widely expected, but pulled forward a rate hike for the second time in three months to the second half of this year from the first half of 2022 as inflation is now seen higher than previously forecast.
     The Norske Bank (NB), which slashed its policy rate three times last year by a total of 1.50 percentage points to 0.0 percent, said the overall outlook and balance of risks imply a continued expansionary monetary policy but when there are clear signs economic conditions are normalizing, it will be appropriate to raise the policy rate gradually from today's level.
     "The policy rate forecast implies a gradual rise from the latter half of 2021," NB Governor Oeystein Olsen said, adding this implies a "somewhat" faster rate rise than forecast in the December monetary policy report when the rate was forecast to be raised in the first half of 2022, up from an earlier forecast of late 2022.

     The March policy report forecast the policy rate will average 0.0 percent in 2021 but then rise to 0.5 percent in 2022, up from December's forecast of 0.3 percent, and then rise further to 1.0 percent in 2023, up from 0.8 percent. 

     For 2024 the policy rate is seen averaging 1.3 percent.

     Despite the lingering uncertainty around the COVID-19 pandemic and the impact of vaccinations on the economic recovery, NB expects economic activity to approach a normal level earlier than previously expected, with the economy expanding 3.8 percent this year, up from a contraction of 1.3 percent in 2020.

     Although this is below December's forecast of 4.0 percent growth due the impact of continued containment measures, the economy is seen growing 3.4 percent in 2022, up from December's forecast of 3.1 percent before slowing to 1.2 percent in 2023.

     Inflation in Norway has risen sharply in the last three months to a higher-than-expected 3.3 percent in February from 2.5 percent in January but NB said the rise in the krone's exchange rate and moderate wage growth suggest inflation will ease.

     Headline inflation is now seen averaging 2.8 percent this year, up from a previous forecast of 2.2 percent, but then decelerating to 1.1 percent in 2022 and 1.5 percent in 2023, below the bank's target of inflation close to 2.0 percent over time.

     Reflecting the rise in crude oil prices, Norway's krone has firmed steadily since tumbling in March last year and was trading at 8.52 to the U.S. dollar today, little changed this year but up 38 percent since a low hit on March 23, 2020 and up 3.5 percent since the start of 2020.