Friday, December 19, 2014

Colombia holds rate, no new dollar buying program

    Colombia's central bank maintained its benchmark intervention rate at 4.5 percent, as expected, and did not renew its program of buying U.S. dollars in light of adequate international reserves and "recent changes in the exchange market conditions."
    The Central Bank of Colombia, which raised its rate by 125 basis points from April thorough August, added that the drop in oil and rising international prices of some relevant foods had led to a deterioration in the country's terms of trade with a negative impact on the growth of national income.
    Oil accounts for about half of Colombia's exports. The central bank has been buying U.S. dollars since 2012, including more than $4 billion this year and $6.8 billion in 2013.
    Colombia's peso currency has depreciated since July and this has pushed up inflation but the central bank said it did not expect "significant effects on inflation expectations" as long as the depreciation is moderate.
    The peso has been declining since July with the depreciation picking up speed in November. But part of the decline was reversed in the last two days. Today the peso was quoted at 2,300 to the U.S. dollar, a depreciation of 16 percent since the start of this year.
    Colombia's headline inflation rate rose to 3.65 percent in November from 3.29 percent in October, but the central bank said the deviation from its 3.0 percent midpoint target was temporary and mainly due to temporary factors. It added that core inflation was below 3.0 percent and headline inflation is expected to converge to that level.

Albania maintains rate, may cut further if risks worsen

    Albania's central bank maintained its key interest rate at 2.25 percent and expects to maintain an expansionary monetary policy as the balance of risks remain to the downside and said any worsening of risk scenarios "may require further revisions of the monetary policy stance."
    The Bank of Albania, which has cut its rate by 75 basis points this year, most recently in November, said the rise in November inflation was in line with expectations and inflation should rise gradually in coming months despite weak inflationary pressures.
   Albania's headline inflation rate rose to 1.7 percent in November from October's 1.4 percent due to higher prices of unprocessed food, medicine and rentals.

    The Bank of Albania issued the following statement:

Thursday, December 18, 2014

Central Bank News Link List - Dec 19, 2014 - Coeure says ECB weighing how best to act, France wants policy shift

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.

BOJ maintains stance but strikes optimistic tone

    Japan's central bank maintained its aggressive easing stance with the aim of boosting the monetary base by an annual 80 trillion yen but sounded optimistic about the recovery of demand following the recent slump in reaction to a tax increase in April.
    The Bank of Japan (BOJ), which in October raised its target for the monetary base by 10-20 trillion yen to prevent deflationary expectations from taking root, said the decline in demand following front-loaded increases prior to the tax rise had been "waning on the whole" - a more optimistic view in comparison to November when the bank merely said demand remained weak.
    Describing Japan's exports, the BOJ was clearly more upbeat, saying exports "have show signs of picking up," compared with November's statement when it said exports were flat.
   Addressing housing investment, the BOJ was also more optimistic, saying the decline following the front-loaded increase prior to April "has recently started to bottom out," a slightly more optimistic view than in November when its had there were "signs of bottoming out."

    The Bank of Japan issued the following statement:

Swiss impose negative deposit rate, cut Libor target

    The Swiss central bank imposed a negative interest rate of minus 0.25 percent on large bank deposits with the aim of pushing its benchmark three-month Libor interest rate on Swiss francs into a negative range of -0.75 to 0.25 percent.
    The Swiss National Bank (SNB) said the introduction of negative rates, which makes it less attractive for banks and major investors to hold Swiss franc investments, should help it support its exchange rate target of a maximum 1.20 francs to the euro.
    The negative interest rate would be imposed on banks' sight deposit balances at the SNB that exceed 10 million Swiss francs.
    The SNB said the cap on the franc's exchange rate, which was imposed at the height of the euro area's sovereign debt crises in September 2011, remained its main instrument to avoid a "undesirable tightening of monetary conditions resulting from a Swiss franc appreciation."
    The SNB reaffirmed its commitment to this exchange rate cap and repeated that it would "continue to enforce it with the utmost determination" and was prepared to purchase foreign currency in unlimited quantities and to take further measures, if needed.
    "Over the past few days, a number of factors have prompted increased demand for safe investments," the SNB.
    Since mid-November the Swiss franc has been trading marginally above 1.20 to the euro, quoted at 1.2009 on Wednesday. Following the SNB's decision to introduce negative rates, it immediately weakened to 1.208 before settling around 1.204.

Wednesday, December 17, 2014

U.S. Fed holds rate, will be "patient" in normalizing policy

    The U.S. Federal Reserve maintained its benchmark federal funds rate at zero to 0.25 percent, as widely expected, and said it "can be patient in beginning to normalize the stance of monetary policy," a new guidance that is consistent with its previous statement that its policy rate would be maintained for "a considerable time" following the conclusion of quantitative easing in October.
    The Federal Reserve, the central bank of the United States, has held its fed funds rate at the current level since December 2008 but is slowly taking steps toward its first rate rise - expected around the middle of 2015 - in light of the continuing strengthening of the U.S. economy.
     Along with cutting its rate to essentially zero, the Fed has undertaken three major installments of asset purchases to hold down long term interest rates. The third installment, which included purchases of U.S. Treasuries and housing-related debt and known as QE 3, started in September 2012 and concluded in October with the final asset purchases of $15 billion.
    The next step for the Fed in normalizing its policy is to prepare financial markets for its first rate hike by adjusting the language in its guidance. Since September the Fed has been considering replacing the phrase "considerable time" - which it began to use in September 2012 - with another description that conveys the message that the Fed will not jeopardize the economic recovery and yet respond appropriately to the improving economy.
    Financial markets have recently turned volatile in response to the near 50 percent fall in crude oil prices since June and economists have questioned whether the Fed would be worried over whether this would have a lasting impact on its inflation projections.

Central Bank News Link List - Dec 17, 2014 - Fed likely to signal rate hike on track despite global woes

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.

Thailand holds rate but 2 members vote to cut by 25 bps

    The Thai central bank maintained its policy rate of 2.0 percent, as expected, but said two of the members of its policy committee voted to cut the rate by 25 basis points to provide further support to the economy, which is expected to expand at slower pace in 2015 than projected.
    The Bank of Thailand (BOT), which cut its rate by 25 basis points in March, said headline inflation had trended downward due to energy prices and was projected to remain subdued for some period while core inflation decelerated due to lower demand.
    Thailand's Gross Domestic Product expanded by 1.1 percent in the third quarter from the second quarter for annual growth of 0.6 percent, slightly up from 0.4 percent in the second quarter.
    The BOT said domestic private spending was the main driver of growth while less-than-expected government spending was weighing on private investment as most businesses were waiting for public investment plans to proceed. In addition, exports are held back by the uncertain global outlook.
    "Going forward, members agreed that monetary policy should remain accommodative in order to reinforce the momentum of economic recovery," the BOT said.
    Thailand's headline inflation rate fell to 1.26 percent in November from 1.48 percent in October  while core inflation eased to 1.6 percent from 1.67 percent. The BOT targets core inflation of 0.5-3.0 percent.

Georgia maintains rate, sees inflation at target H2 2015

    Georgia's central bank maintained its policy rate at 4.0 percent, saying it was still considering a gradual withdrawal of its expansionary monetary policy while assessing the negative impact on foreign demand from the "complicated situation in the region" and its impact on economic growth.
    The National Bank of Georgia (NBG), which started tightening policy is February but then stopped the process due to the increase in geopolitical risks, said it was still expecting a "significant strengthening of inflationary pressure" and to reach its target of 5 percent inflation in the second half of 2015.
    Georgia's headline inflation rate eased to 2.8 percent in November from 3.4 percent in October.

Czech may move FX target lower on deflation risk

    The central bank of the Czech Republic maintained its benchmark two-week repo rate at technically zero - 0.05 percent - along with its commitment to intervene in foreign exchange markets  to keep the koruna currency below 27 to the euro.
    But the Czech National Bank (CNB), which has been using the exchange rate as an additional tool to ease monetary conditions since November 2013, also said it would consider "moving the exchange rate commitment to a weaker level" if there were a renewed risk of deflation and a systematic decrease in inflation expectations that were capable of causing a slump in domestic demand due to deflationary pressures from abroad.
    The Czech headline inflation rate eased to 0.6 percent in November from 0.7 percent in October, 0.2 percentage points lower than the CNB's forecast, mainly because this year's rise in excise duties will feed into cigarette prices lower than expected while food and fuel prices were also lower.
    The CNB said the data confirms that its decision to use the exchange rate as a monetary policy tool helped to avert the threat of deflation and it currently forecasts that headline and monetary-policy relevant inflation will return to the 2.0 percent target in early 2016.
    The Czech economy expanded by 0.2 percentage points less than expected by the CNB in the third quarter of this year, with Gross Domestic Product up by an annual 2.4 percent, down from 2.5 percent in the second quarter. On quarterly terms GDP rose by 0.4 percent, up from 0.3 percent in the second quarter.

Tuesday, December 16, 2014

Hungary holds rate, loose policy for extended period

    Hungary's central bank maintained its base rate at 2.10 percent, as expected, and confirmed its guidance that it expects to maintain the current loose monetary conditions "for an extended period" in order to reach its inflation target in the medium term.
    The National Bank of Hungary (MNB), which ended a two-year easing cycle in July after cutting rates by 490 basis points, repeated inflationary pressures are likely to remain moderate in the medium term, helped by unused capacity in the economy, with inflation remaining significantly below the 3.0 percent target next year before rising to around 3 percent in the second half of the forecast period.
    The MNB added that downside risks to inflation had increased since its September projection but the negative output gap is expected to close gradually and the disinflationary impact of the real economy is likely to diminish.
    "With current monetary conditions maintained, inflation is likely to move into line with the target in the second half of the forecast period, despite disinflationary trends in external markets," MNB said.

   The National Bank of Hungary issued the following statement: