Saturday, September 20, 2014

Pakistan holds rate, subsidy cut may hit inflation outlook

    Pakistan's central bank held its policy rate steady at 10 percent, as expected, saying the current outlook for inflation of around average 8 percent inflation in the 2015 financial year might change adversely if the subsidy to to electricity is cut and a gas infrastructure development cess is levied
    The State Bank of Pakistan (SBP), which has maintained its policy rate since raising it by 100 basis points in 2013, added that today's decision required a balancing of the tradeoffs between ensuring the continuation of macroeconomic stability and assuaging the fallout from potential damages due to floods.

    The SBP issued the following statement:

"The State Bank of Pakistan has decided to keep the policy rate unchanged at 10.0 percent. The decision was taken by the Central Board of Directors of SBP at its meeting held under the chairmanship of Governor Mr. Ashraf Mahmood Wathra in Karachi today.
The complete text of the decision is as follows:

Central Bank News Link List - Sep 20, 2014 - Pakistan stocks down ahead of Saturday central bank meeting

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.

Nigeria holds rate but worried over inflation, FX rate

    Nigeria's central bank maintained its policy rate at 12.0 percent but said it was concerned about the potential impact on inflation and the exchange rate from banks' high level of liquidity that was not being used for productive and profitable lending to the real sector of the economy.
    The Central Bank of Nigeria (CBN), which has kept its rate steady since October 2011, encouraged banks to lend excess reserves to the real economy but noted their "apathy to lending" and their inclination to place an additional 866 billion naira in the banking system from maturing bonds in October into the Standing Deposit Facility or use it to increase pressure on the exchange rate.
   The central bank's Monetary Policy Committee was split between further tightening the monetary policy stance but a majority voted to retain the Monetary Policy Rate (MPR) at 12 percent with a corridor of plus/minus 200 basis points, the public sector Cash Reserve Requirement (CRR) at 75.0 percent and the private sector CRR at 15.0 percent.
    CBN issued the following statement:

Thursday, September 18, 2014

South Africa maintains rate on improved inflation outlook

    South Africa's central bank maintained its benchmark repurchase rate at 5.75 percent due to a slightly improved outlook for inflation and the downside risks to the economic outlook.
    But the South African Reserve Bank (SARB), which has raised its rate by 75 basis points so far this year, said its monetary policy stance remains accommodative and it still expects that interest rates will have to normalize over time.

    SARB issued the following statement:

"STATEMENT OF THE MONETARY POLICY COMMITTEE Issued by Gill Marcus, Governor of the South African Reserve Bank
Since the previous meeting of the Monetary Policy Committee the domestic inflation forecast has improved slightly, but the inflation trajectory remains uncomfortably close to the upper end of the target range. At the same time the domestic economic growth outlook has deteriorated further, with declining growth in both consumption expenditure and gross fixed capital formation, as confidence remains low. The combination of stubborn inflation and a sluggish growth outlook continues to pose a difficult dilemma for monetary policy.

Malaysia maintains rate, but warns it may raise again

    Malaysia's central bank maintained its Overnight Policy Rate (OPR) at 3.25 percent but signaled that it is ready to raise rates again to ensure sustainable growth by saying a "further adjustment to the degree of monetary accommodation may be taken depending on how new information will affect the assessment of the balance of risks."
    Bank Negara Malaysia (BNM), which raised its rate by 25 basis points in July for the first time since May 2011, said its current policy stance remains supportive of growth and it would continue to assess the balance of risks surrounding the outlook for growth and inflation along with the risks of destabilizing financial imbalances.
    Although Malaysia's inflation rate has stabilized with the diminishing impact of higher utility and energy costs, the central bank expects inflation to edge higher in 2015 - after remaining stable for the rest of 2014 - and to be above its long-term average of 3.2 percent due to domestic costs.
    Mitigating these upward pressures are an absence of external price pressure and moderate demand.
    Malaysia's inflation rate rose to 3.3 percent in August from 3.2 percent in July and 3.3 percent in June.

Norway holds rate, drops warning of possible rate cuts

    Norway's central bank maintained its policy rate at 1.5 percent, as expected, and confirmed its guidance from June that it expects the rate to remain at the current level until the end of 2015 before it starts to gradually increase.
    But Norges Bank, which last cut its rate in March 2012, dropped its warning from June that a further weakening of the outlook for the country's economy could warrant a rate cut.
    "The outlook for inflation and output is little change since June," Norges Bank Governor Oeystein Olsen in a statement, adding that growth prospects were a bit weaker than previously expected and an expected increase in policy rates abroad had been pushed further out.
    But in Norway, inflation and output had risen further than forecast in June, though some of this reflects temporary conditions, Olsen added.
    Capacity utilization may edge further down in the coming year but then slowly rise to a more normal level and inflation is projected to run below, but close to the bank's 2.5 percent target.
    "At its meeting, the Executive Board decided that the key policy rate should be in the interval 1%-2% in the period to the publication of the next Report on 11 December 2014, unless the Norwegian economy is exposed to new major shocks," the bank said.

Swiss maintain franc cap, see higher deflation risk

   The Swiss National Bank (SNB) maintained its upper limit on the Swiss franc's exchange rate and the target range for three-month Libor at zero to 0.25 percent, and reduced its inflation forecast due to "the deterioration in the global economic outlook and slower growth in Switzerland."
    The SNB, which imposed a cap on the Swiss franc of 1.20 euros in September 2011, also repeated that it still views the franc's exchange rate as high and it would continue to enforce its exchange rate target "with utmost determination" and is "prepared to purchase foreign currency in unlimited quantities."
    "If necessary, it will take further measures immediately," the SNB said, concerned that rising geopolitical risks are putting upward pressure on the franc from investors seeking safe haven.
    The Swiss franc was trading at 1.208 to the euro today, up from 1.23 at the start of the year. The last time the SNB intervened in currency markets was in September 2012.
    The SNB maintained its forecast for inflation this year of 0.1 percent but cut its 2015 forecast to 0.2 percent from 0.3 percent forecast in June. For 2016 the inflation forecast was slashed to 0.5 percent from 0.9 percent.
    "For Switzerland, the risk of deflation has thus increased again," the SNB said, adding its forecast was based on three-month Libor of zero over the next three years and a weakening Swiss franc.
    The SNB was downbeat about the global economy, saying growth will be weaker in coming quarters than it had expected and it remains vulnerable to setbacks, with the possibility that geopolitical tensions may weigh on confidence.

Wednesday, September 17, 2014

Central Bank News Link List - Sep 18, 2014 - Draghi loan plan missing estimates hampers ECB stimulus

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.

Ghana maintains rate, inflation seen peaking soon

    Ghana's central bank maintained its monetary policy rate at 19 percent, saying inflation was expected to peak in the near term and return to the bank's target range in the second half of 2015 after remaining slightly above the upper limit of the target during the rest of this year.
    The Bank of Ghana, which has tightened its policy this year by raising the policy rate by 300 basis points and the cash reserve ratio by 200 points, said the outlook for economic growth was generally positive based on expected higher output of cocoa and oil while gas production that is expected to come on stream later this year will help address some of the energy challenges.
    Ghana's inflation rate rose to 15.9 percent in August from 15.3 percent in July, with non-food inflation up to 24 percent from 20 percent in May, mainly driven by the impact of the depreciation of the cedi currency. Food inflation eased to 5.1 percent in August from 8 percent in May.
    The Bank of Ghana currently targets inflation of 13 percent, plus/minus 2 percentage points.
    Despite the generally positive growth outlook, the central bank took note of softened business confidence and heightened inflation expectations and said it was facing challenges from fiscal pressures and the volatile exchange rate though there had been "some stability" in the foreign exchange market following its policy tightening.

Fed trims QE, still sees low rates for considerable time

    The U.S. Federal Reserve will reduce its purchases of Treasury bonds and mortgage backed securities by another $10 billion to a total of $15 billion next month and expects to conclude its asset purchase program at its next meeting.
    However, the Fed repeated its guidance that it still expects to maintain its current federal funds rate of zero to 0.25 percent for "a considerable time after the asset purchase program ends," a statement that will surprise financial markets and economists that were expecting the Fed to alter its language.
    Since December 2012, the Fed has used the phrase of maintaining its current rate for "considerable time" after its quantitative easing program ends, and speculation in financial markets reached fever pitch in recent weeks over how the Fed would alter its guidance.
    But the Fed said the economy had been expanding "at a moderate pace" since July and repeated that there remains "significant underutilization of labour resources" despite an improvement in labor market conditions - a clear signal to markets that it does not seen any real price pressure from wages.
    "Inflation has been running below the Committee's longer-run objective," the Fed's policy making body, the Federal Open Market Committee (FOMC), said in its statement after a two-day meeting.
    "The Committee sees the risks to the outlook for economic activity and the labor market as nearly balanced and judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat since early last year," the Fed said.