Sunday, November 29, 2015

This week in monetary policy: Angola, Fiji, Kyrgyzstan, Bulgaria, Australia, India, Canada, Poland and ECB

    This week (November 30 through December 5) central banks from 9 countries or jurisdictions are scheduled to decide on monetary policy: Angola, Fiji, Kyrgyz Republic, Bulgaria, Australia, India, Canada, Poland and the European Central Bank.
    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, the rate one year ago, and the country’s MSCI classification.
    The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.

NOV 30-DEC 5, 2015:
COUNTRY       DATE           RATE      LATEST        YTD     1 YR AGO    MSCI
ANGOLA 30-Nov 10.50% 0 150 9.00%
FIJI 30-Nov 0.50% 0 0 0.50%
KYRGYZSTAN 30-Nov 10.00% 0 -50 10.00%
BULGARIA 30-Nov 0.01% 0 -1 0.02%       FM
AUSTRALIA 1-Dec 2.00% 0 -50 2.50%       DM
INDIA 1-Dec 6.75% -50 -125 8.00%       EM
CANADA 2-Dec 0.50% 0 -50 1.00%       DM
POLAND 2-Dec 1.50% 0 -50 2.00%       EM
EURO AREA 3-Dec 0.05% 0 0 0.05%       DM

Central Bank News Link List - Nov 29, 2015: IMF poised to put Chinese yuan in elite currency basket

    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.

Friday, November 27, 2015

Colombia raises rate 3rd month in a row as inflation rises

     Colombia's central bank raised its policy rate for the third month in a row as "inflation expectations have increased and the risk of a slowdown in domestic demand, beyond that which is consistent with the decline registered in national income, has moderated."
    The Central Bank of Colombia raised its benchmark intervention rate by a further 25 basis points to 5.50 percent, a move that was largely expected, and has now raised the rate by a total of 100 points this year following increases in September and October.
     The central bank's board, which also confirmed its inflation target of 3.0 percent, plus/minus 1 percentage point, noted that inflation in October had exceeded its projections and inflationary expectations had also risen.
    Colombia's headline inflation rate rose to 5.89 percent in October from 5.35 percent in September and inflation expectations for one and two years were 4.4 percent and 3.6 percent, respectively, while those reflected in public bonds with maturities of 2, 3 and 5-years are over 4.0 percent, the bank said.
    The acceleration in inflation is mainly due to the pass-through to consumer prices from the depreciation of the peso and high food prices while the central bank said data shows that domestic demand, particularly for retail sales, indicates a more "dynamic domestic demand than expected."
    Industrial production is also showing a positive trend, the bank said, adding that the monthly indicator of economic activity suggests growth of around 4.0 percent for the third quarter.
    The central bank's staff maintained its forecast for 2015 growth of between 2.4 percent and 3.4 percent, with 3.0 percent the most likely outcome. Last month the bank raised its growth forecast.
    Colombia's Gross Domestic Product expanded by an annual 3.0 percent in the second quarter, up from 2.8 percent in the first quarter.
    The peso started depreciating in July 2014, in line with the decline in crude oil prices, and fell to a low around 3,239 to the U.S. dollar in mid-August. Since then, the peso has firmed slightly, trading at 3,108 today, but still down 23.5 percent since the start of the year.

Thursday, November 26, 2015

Moldova holds rate, impact of past hikes still taking effect

    Moldova's central bank kept its key policy rates unchanged, including the base rate at 19.5 percent,  saying this year's rate increases are still working their way through the economy and today's decision is aimed at anchoring inflation expectations and restoring inflation close to the target.
    The National Bank of Moldova (NBM), which has raised its rate by 13 percentage points this year, added that it will continue to offer banks liquidity through 14-day repurchase operations at a fixed rate equal to the base rate plus a margin of 0.25 percentage points.
    Moldova's headline inflation rate rose to a 2015-high of 13.2 percent in October from 12.6 percent in September with risks to inflation mainly from a depreciation of the leu currency with the effect that inflation is "temporarily"breaching the bank's upper limit of 6.5 percent.
    The NBM, which targets inflation of 5.0 percent plus/minus 1.5 percentage points, expects the pressure on inflation to persistent in future quarters due to unfavorable weather and the comparison with low inflation last year.
    Last month the central bank said it first expects inflation to return to its target range by the third quarter of 2017, but omitted this forecast in today's statement.
    Moldova, a former Soviet state located between Romania and the Ukraine, has seen its currency depreciate since mid-2011 and tumbled in January this year. But since late September the leu has been relatively stable and was trading at 20.09 to the U.S. dollar today, down 22.4 percent this year.

Wednesday, November 25, 2015

Brazil holds rate, but 2 Copom members want 50 bps hike

    Brazil's central bank left its benchmark Selic rate steady at 14.25 percent but two members of the eight-member policy committee Copom voted to raise the rate by 50 basis points, a sign the rate may be raised at the next meeting in January 2016.
    The Central Bank of Brazil, which halted its tightening campaign in July after raising the rate by 700 basis points since April 2013, said Copom members Sidnei Correa Marques and Tony Volpon had voted to raise the rate to 14.75 percent while the other six members, including Chairman Alexandre Tombini, voted to retain the rate.
    In a brief statement, the central bank said Copom had decided to maintain the rate in light of the "macroeconomic scenario and the outlook for inflation," omitting last month's reference to maintaining the rate for "a sufficiently long period" to reach its inflation goal.
     However, in its October statement, the central bank said that it would be "vigilant" in achieving its inflation goal.
    Since halting its tightening campaign in July, Brazil's inflation rate has continued to accelerate, hitting 10.28 percent in mid-November - a 12-year high - from 9.93 in October and 9.56 percent in July.
    The central bank's Nov. 16 survey of economists showed that they expect inflation to end this year at 10.04 percent before easing to 6.5 percent next year, up from the previous survey of 9.99 percent inflation for this year and 6.47 percent for 2016.
    But while inflation has risen, Brazil's economy is in recession with Gross Domestic Product in the second quarter contracting by 1.9 percent following a 0.7 percent fall in the first quarter. On an annual basis, GDP shrank by 2.6 percent, the fifth quarter in a row of declining output.
    The central bank targets inflation at a midpoint of 4.50 percent, within a 2.50 percent to 6.50 percent range, and has pledged to reach its inflation goal by late 2016.
    Brazil's real has been depreciating since September 2014 but has firmed since late September. Today the real was trading at 3.74 to the U.S. dollar, down 28.9 percent this year.

Tuesday, November 24, 2015

Nigeria cuts rate 200 bps, CRR 500 bps to boost growth

    Nigeria's central bank cut its Monetary Policy Rate (MPR) by 200 basis points to 11.0 percent and the Cash Reserve Requirement (CRR) by 500 basis points to 20.0 percent in light of "the weakening fundamentals of the economy, particularly the low output growth, rising unemployment and the uncertainty of the global economic environment."
    It is the first rate cut by the Central Bank of Nigeria (CBN) this year and 8 of 10 members of the monetary policy committee voted for the rate cut while two voted to keep it steady. Seven members voted to cut the CRR while three voted to retain it.
    Eight MPC members also voted to change the interest rate corridor to an assymetric plus 2 percent/minus 7 percent while 2 members wanted to retain the symmetric corridor of plus/minus 2 percentage points around the policy rate.
    Concerned about a rise in Nigeria's unemployment rate to 8.2 percent in the second quarter from 7.5 percent in the first quarter, the central bank evaluated various options for funneling credit to growth sectors and emphasized that the liquidity released by a reduction in the reserve requirement "will only be released to the banks that are willing to channel it to employment generating activities in the economy, such as agriculture, infrastructure development, solid minerals and industry."
    A drop in Nigeria's inflation rate in October to 9.3 percent from 9.4 percent in September "provided some room for monetary easing to support output in the short to medium term," CBN said.
    However, the central bank added that it would continue to monitor developments around the naira's exchange rate, interest rates and consumer prices, underscoring that close coordination between monetary and fiscal policy was imperative to improve growth in a sustainable manner.
    The naira tumbled from November last year to March when the central bank imposed foreign currency controls on Africa's leading crude oil producer to preserve foreign reserves.
     Since early March, the central bank has adjusted its exchange rate peg several times with the naira quoted at 199 to the U.S. dollar today compared with 182.5 at the end of 2014 for a depreciation this year of 8.3 percent.
    Nigeria's official reserves rose to US$30.31 billion as of Nov. 20 from $29.85 billion end-September, the central bank said.

Sri Lanka holds rates, notes rising core inflation, credit

    Sri Lanka's central bank maintained its key interest rates, as expected, noting the continued increase in core inflation due to firmer demand and a further rise in credit to the private sector.
    The Central Bank of Sri Lanka, which cut rates by 50 basis points in April, also estimated that gross official reserves rose to around US$8.0 billion as of Nov. 3 from $6.8 billion at the end of September, boosted by the inflow of funds from the ninth sovereign bond of $1.5 billion.
    Meanwhile, the central bank noted that the Sri Lankan rupee had depreciated by 8.1 percent against the U.S. dollar so far in 2015. The rupee was trading at 142.6 to the dollar today, down 8.06 percent since 131.1 at the end of 2014.
    Sri Lanka's headline inflation rate rose to 1.7 percent in October from minus 0.3 percent in September. Negative inflation from July through September reflected the impact of the downward revision of administered prices in the latter part of 2014.
    Core inflation, however, rose further to a 2015-high of 4.4 percent in October, "reflecting the firming up of aggregate demand conditions in the economy," the central bank said.
    Earlier today the central bank governor, Arjun Mahendran, was quoted as saying there was no need to raise rates at the moment while India is reducing rates and the high growth in credit did not warrant higher rates.
    The central bank maintained its Standing Deposit Facility Rate (SDFR) at 6.0 percent and the Standing Lending Facility Rate (SLFR) at 7.50 percent.

Turkey maintains rates, changes conditional on inflation

   Turkey's central bank kept its benchmark one-week repo rate steady at 7.50 percent, once again defying fresh calls by the president for lower rates, and repeated its guidance that "future monetary policy decisions will be conditional on the inflation outlook."
    The Central Bank of the Republic of Turkey (CBRT) also confirmed its view from October that a tight monetary policy stance will be maintained in light of inflation expectations, the behavior of prices and "the course of other factors" affecting inflation, a likely reference to how the exchange rate of the lira may be affected by an expected change in U.S. monetary policy.
    On Nov. 15 Turkish President Tayyip Erdogan, whose party has regained its single-party majority, renewed his call for the central bank to cut rates but investors appeared to shrug off any jitters about the central bank's independence judging from the reaction of the lira.
   The lira has been depreciating since the so-called "taper tantrum" in May 2013 but has been relatively stable since late September and firmed slightly since the Nov. 1 elections, helping ease pressure on inflation.
    The lira was trading at 2.86 to the U.S. dollar today, up from below 3 in late September, but still down 18 percent since the beginning of the year.
    Turkey's headline inflation rate eased to 7.58 percent in October from 7.95 percent in September and the CBRT said energy prices had a favorable effect on inflation while "cumulative exchange rate movements delay the improvement in the core indicators."
    Core inflation, which excludes food prices, rose to 9.3 percent in October from 8.7 percent.
    Last month the central bank raised its inflation forecasts in its quarterly inflation report, and the central bank president was quoted as saying that it was not totally incorrect that the CBRT may raise rates if the U.S. Federal Reserve does to avoid capital outflows from investors seeking higher yield.
    The central bank raised its end-2015 inflation forecast to a midpoint of 7.9 percent from 6.9 percent in its previous report.
   For the end of 2016 the CBRT forecast inflation at a midpoint of 6.5 percent, up from 5.5 percent.

Monday, November 23, 2015

Israel holds rate, repeats on hold for considerable time

    Israel's central bank left its benchmark interest rate unchanged at 0.10 percent, as expected, and confirmed its recent guidance that "monetary policy will remain accommodative for a considerable time" in view of the inflationary environment, economic growth, the exchange rate of the shekel and the monetary policies of major central banks.
    The Bank of Israel (BOI), which cut its rate by 15 basis points in February to counter the negative impact on exports and inflation from a rise in the shekel, first issued the guidance of keeping its policy accommodative for considerable time in its October statement.
    The BOI's monetary committee also repeated that the risks to achieving its inflation target of 1- 3 percent and to growth "remain high" and it will examine the need to use "various tools" to reach its objective and will continue to keep a close eye on asset markets, including the housing market.
    Israel's consumer price inflation rate fell by minus 0.7 percent in October from minus 0.5 percent in September though the BOI added that the monthly change amounted to plus 0.1 percent compared with expectations for a decline of 0.1 percent.
    Excluding energy and the administrative reduction in water and electricity rates, consumer prices rose by an annual rate of 0.9 percent in October, with the reduction in Value Added Tax and lower fuel prices expected to contribute to a drop in consumer price index in November, BOI said.
    Expectations for inflation over the next year remain low, the BOI said, and private forecasters expect the BOI to keep the policy rate at the current level in the next few months and then to raise it in about a year.
    Over the last month the shekel has traded in a relatively narrow range and was trading at 3.88 to the U.S. dollar today, up 0.5 percent since the start of the year.
     The impact on Israel's economy from recent violence "is moderate," the BOI said, with first estimates of Gross Domestic Product in the third quarter showing a return to the rate of growth seen in the past two years.
     Growth was helped by an acceleration in public consumption and a recovery in exports, but the BOI cautioned that recent data indicate that the improvement in exports may have been transitory while the picture presented by the labor market continues to be positive.
    Israel's GDP expanded by 0.62 percent in the third quarter from the second quarter for annual growth of 2.52 percent, up from 2.13 percent in the first quarter.

Sunday, November 22, 2015

UPDATE-This week in monetary policy: Israel, Turkey, Sri Lanka, Nigeria, Brazil, Fiji, Moldova, Colombia and Trinidad & Tobago

    (The following item has been updated with the Central Bank of Sri Lanka's monetary policy review on Nov. 24.)
   This week (November 23 through August 28) central banks from 9 countries or jurisdictions are scheduled to decide on monetary policy: Israel, Turkey, Sri Lanka, Nigeria, Brazil, Fiji, Moldova, Colombia and Trinidad and Tobago.
    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, the rate one year ago, and the country’s MSCI classification.
    The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.

NOV 23-NOV 28, 2015:
COUNTRY       DATE           RATE      LATEST        YTD     1 YR AGO    MSCI
ISRAEL 23-Nov 0.10% 0 -15 0.25%       DM
TURKEY 24-Nov 7.50% 0 -75 8.25%       EM
SRI LANKA  24-Nov 6.00% 0 -50 6.50%       FM
NIGERIA 24-Nov 13.00% 0 0 13.00%       FM
BRAZIL 25-Nov 14.25% 0 250 11.25%       EM
FIJI 26-Nov 0.50% 0 0 0.50%
MOLDOVA 26-Nov 19.50% 25 1300 3.50%
COLOMBIA 27-Nov 5.25% 50 75 4.50%       EM
TRINIDAD & TOBAGO 27-Nov 4.50% 25 125 3.00%

Thursday, November 19, 2015

South Africa raises rate 25 bps on higher risks to inflation

    South Africa's central bank raised its benchmark repurchase rate by a further 25 basis points to 6.25 percent to prevent a rise in inflation expectations and more generalised inflation in light of growing downside risks from persistent exchange rate depreciation, higher electricity tariffs and a rise in food prices from drought.
    The South African Reserve Bank (SARB) has now raised its rate by 50 basis points this year and said four members of its monetary policy committee had voted to raise the rate while two members had preferred to retain the policy stance.
    "Complicating the decision was the deteriorating economic outlook," SARB Governor Lesetja Kganyago said, adding that the risks to the outlook were now considered to be on the downside while they were more of less balanced at the previous meeting in September.
    While changes to SARB's forecast for inflation was only minor, Kganyago underlined that the upside risks were now more pronounced and expected to outweigh the possible downside risks from lower global oil prices and a subdued pass-through of changes to the exchange rate.
    "While these factors cannot be dealt with directly through monetary policy, the concern of the Committee is that failure to act could cause inflation expectations to become unanchored and generate second-round effects and more generalized inflation," he said.
    Despite the rate rise, SARB still considers its policy stance to be accommodative and future actions will continue to focus on anchoring inflation within the bank's 3-6 percent range while remaining sensitive to the fragile state of the country's economy.
    The forecast for headline inflation this year was trimmed to 4.6 percent from a previous forecast of 4.7 percent and the forecast for core inflation was unchanged at 5.5 percent.
    For 2016 inflation was seen at 6.0 percent, down from 6.2 percent and core inflation at 5.5 percent, up from 5.4 percent. For 2017 headline inflation was forecast at an unchanged 5.8 percent and core inflation at 5.4 percent, up from 5.3 percent.
    Headline inflation in October was 4.7 percent, up from 4.6 percent in September.
    The forecast for Gross Domestic Product growth in 2015 was trimmed to 1.4 percent from 1.5 percent and 1.5 percent for 2016 from 1.6 percent. For 2017 GDP was forecast to expand by an unchanged 2.1 percent.
    In the second quarter of this year, South African's GDP grew by an annual rate of 1.2 percent, down from 2.1 percent in the first quarter.
    The Rand has been on a weakening trend since mid-2011 when it was above 7 to the U.S. dollar. The rand has experienced volatile trading in recent years, not only due to expectations about U.S. monetary policy but also domestic factors, such as labor unrest.
    Since the last meeting by the central bank's monetary policy committee in September, the rand has depreciated 3 percent against the dollar and today it was trading at 14.12 to the dollar,  down 17.8 percent this year alone.
    "As before, the extent to which Fed tightening has been priced into the exchange rate remains uncertain," SARB said, adding that volatility and overshooting of the exchange rate is likely ahead of and in the immediate aftermath of any change to U.S. rates.