Friday, October 31, 2014

Central Bank News Link List - Oct 31, 2014 - Kuroda's easing in Japan seen adding to pressure on Korea's Lee

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.

Mexico holds rate on unchanged inflation, growth outlook

    Mexico's central bank maintained its benchmark target for its interbank overnight rate at 3.0 percent, as expected, saying the balance of risks for inflation and economic activity were unchanged from its previous monetary policy decision in September.
    The Bank of Mexico, which surprised markets by cutting its rate by 50 basis points in June, said it still expects annual headline inflation to end this year around 4 percent and converge toward its 3.0 percent target by the middle of 2015.
    Although the downside risks to global growth had intensified, the central bank said the balance of risks to Mexico's economy remained unchanged due to the prospects for the U.S. economy and the effects of the country's structural reforms that have recently been carried out.
    And while global financial markets have been volatile recently, the bank said changes in Mexican financial markets had been of lower magnitude than in other emerging market, with only marginal increases in Mexican interest rates and orderly price movements.
    However, the central bank said it would not rule out possible higher volatility in the future.
    Mexico's headline inflation rate rose to 4.22 percent in September form 4.15 percent in August but the central bank said this was mainly due to higher prices for livestock products and some processed foods that use this as inputs.
    Core inflation, however, has remained close to the 3 percent level, the bank said, and inflation expectations remain very close to 3 percent. Mexico's core inflation rate eased to 3.34 percent in September from 3.37 percent in August.

Russia raises rate 150 bps to curb inflation expectations

    Russia's central bank raised its key policy rate by a sharp 150 basis points to 9.50 percent, larger than expected by economists, to curb rising inflationary expectations after a fall in the value of the ruble and import restrictions due to international sanctions over Ukraine boosted inflation.
    The Bank of Russia, which has now raised rates by 400 basis points this year, also said the expected decline inflation would be slower than it had expected and it would "continue to take measures aimed at stabilizing inflation expectations and slowing down consumer prices growth" to its target of 4.0 percent.
    Russia's headline inflation rate was estimated to have risen by 8.4 percent as of Oct. 27, up from 8 percent in September and 7.6 percent in August due to an acceleration in food prices.
    The central bank said it expects inflation to remain above 8 percent until the end of 2014 and in the first quarter of 2015, up from its September forecast that inflation would remain above 7 percent.
    Russia's economy has been hit by growing external political uncertainty and lower oil prices with consumer demand cooling along with real wage growth and retail lending.
    Russia's Gross Domestic Product expanded by only 0.2 percent in the third quarter from the same 2013 quarter, down from a rate of 0.8 percent in the second quarter, and the central bank estimates growth of close to zero in the fourth quarter of this year and the first quarter of 2015.
    The Bank of Russia issued the following statement:

Thursday, October 30, 2014

BOJ boosts QE to 80 trln yen to avoid deflation mindset

    Japan's central bank raised its target for boosting the country's monetary base by 10-20 trillion yen to about 80 trillion yen to prevent growing deflationary expectations from taking root.
    The Bank of Japan (BOJ), which embarked on quantitative and qualitative easing (QQE) in April 2013 by pledging to double the monetary base by buying 60-70 trillion yen of assets a year, said it would now purchase an additional 30 trillion yen worth of government bonds (JGBs) compared with the past "with a view to encouraging a decline in interest rates across the entire yield curve."
    The BOJ will also triple its purchase of exchange-traded funds so the amount outstanding rises to an annual pace of about 3 trillion yen and triple the purchase of Japanese real estate trusts (J-REITs) so the amount outstanding rises by about 90 billion yen. In addition, the BOJ will make ETFs that track the Nikkei index eligible for purchase.
    The central bank's target for purchasing commercial paper and corporate bonds will remain  about 2.2 trillion yen and about 3.2 trillion yen, respectively.
    In its statement, the BOJ said the expansion of QEE was decided by a 5-4 majority vote.
     As in its previous statement from Oct.7, the BOJ said the country's economy was continuing to "recover moderately as a trend" but today it added that the economy was expected to continue growing at a pace that was above the economy's potential.
    "However, on the price front, somewhat weak developments in demand following the consumption tax hike and a substantial decline in crude oil prices have been exerting downward pressure recently," the BOJ said.

Central Bank News Link List - Oct 31, 2014 - Russia seen raising interest rates despite weak economy

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.

Colombia holds rate, next move depends on data

    Colombia's central bank maintained its benchmark intervention rate at 4.5 percent, as expected, and said its monetary policy stance would depend on new data while demand continues to show strong growth and inflation expectations remain around 3 percent.
    But the Central Bank of Colombia, which has raised its rate by 125 basis points from April through August, added that the terms of trade were declining and there was increased uncertainty about the global economy, including the cost of external financing, which could impact aggregate demand and the exchange rate.
    The central bank issued the following statement:

 "The Board of the Central Bank in its meeting today decided to keep interest rates at 4.5% intervention. For this decision, the Board took into consideration mainly the following aspects:

  • New projections for world economic activity for the remainder of 2014 and 2015 suggest that the average growth of our business partners will be less than estimated earlier. External demand would be driven mainly by the US economy, while the euro area for low dynamism expected. China would have a slowdown, and some countries partners in the region will grow at less than their average rates of recent years.

Fiji holds rate, to mull change after 2015 govt budget

    Fiji's central bank maintained its benchmark Overnight Policy Rate (OPR) at 0.5 percent and said its monetary policy stance would be "re-aligned if needed" after the government announces the 2015 fiscal budget.
    The guidance by the Reserve Bank of Fiji (RBF), which has held the OPR steady since November 2011, compares with its guidance from its board meeting in September when it said its policy stance could remain accommodative for now to support growth.
    The RBF also said that both its objectives of inflation and foreign reserves would remain within the bank's comfortable range over the medium term while the economy is poised for its fifth year of consecutive growth, driven largely by tourism, sugar, construction and financial services.
    Fiji's economy expanded by 4.6 percent in 2013, above expected growth of 3.6 percent, and the RBF said in its September report that the economy is on track to achieve the forecast 3.8 percent growth this year.
    The RBF issued the following statement:

"The Reserve Bank of Fiji (RBF) Board in its monthly meeting on 31 October decided to leave the Overnight Policy Rate (OPR) unchanged at 0.5 percent.

Wednesday, October 29, 2014

New Zealand holds rate in pause before next change

    New Zealand's central bank maintained its policy rate at 3.50 percent, as widely expected, but said inflation is expected to rise as economic activity improves and a "period of assessment remains appropriate before considering further policy adjustment." 
    Although the Reserve Bank of New Zealand (RBNZ) still appears to be leaning towards raising rates, its guidance is considerably more dovish than in September when it said it expected "further policy tightening will be necessary to keep future average inflation near the 2 percent mid-point."
    The RBNZ raised its rate by 100 basis points since March to curb inflationary pressures but paused in July to assess the impact of its rate rises on the economy.
    The RBNZ also sharpened its language about the exchange rate of the New Zealand dollar - known as the kiwi - saying it's "current level remains unjustified and unsustainable and continues to contain growth in the tradables sector. We expect a further significant depreciation."
    New Zealand's headline inflation rate rose to 1.6 percent in September from 1.5 percent in August while the exchange rate of the kiwi has eased against the strong U.S. dollar this year, trading at 1.28 to the dollar today from around 1.22 at the start of the year 
    The RBNZ issued the following statement:
"Statement issued by Reserve Bank Governor Graeme Wheeler:
The Reserve Bank today left the Official Cash Rate unchanged at 3.5 percent.

Brazil surprises markets, raises rate 25 bps to 11.25%

    Brazil's central bank surprised financial markets and raised its benchmark Selic rate by 25 basis points to 11.25 percent to ensure that inflation starts to decline next year and 2016.
    The Central Bank of Brazil, which last raised its rate in May after nine rate rises, added that six of the members of its policy committee, known as Copom, had voted for the increase - including Chairman Alexandre Tombini - while three had voted to maintain rates.
    Economists had widely expected the central bank to keep rates steady until President Dilma Rousseff had time to announce her new key appointments following her narrow re-election.
    But the central bank has also been under pressure to raise rates soon to slow consumption that has helped pushed inflation, along with the declining real currency, to 6.75 percent in September from 6.51 percent in August, above the central bank's upper limit of its 2.5 to 6.5 percent target.

    The Central Bank of Brazil issued the following statement:

Fed ends QE3, to hold key rate for "considerable time"

    The Federal Reserve wrapped up its third program of asset purchases since the global financial crises due to "a substantial improvement in the outlook for the labor market," but repeated that it expected to maintain its fed funds rate at zero to 0.25 percent "for a considerable time" following the end of the quantitative easing (QE) program, especially if inflation remains below its target.
    The Federal Reserve, the U.S. central bank, began its third installment of asset purchases, known as QE 3 in September 2012, purchasing $85 billion of U.S. Treasuries and housing-related debt, but began whittling down the purchases in January by $10 billion each month in light of the improving U.S. economy and falling unemployment.
    The remaining purchases of $15 billion worth of Treasuries and mortgage-backed securities will be concluded by the end of October, marking the conclusion of three rounds of asset purchases that have tripled the Fed's balance sheet to $4.482 trillion as of Oct. 22 from $1.504 on Oct. 1, 2008, just prior to the launch of QE1 when the Fed starting buying housing related debt.
    In its statement, the Federal Open Market Committee (FOMC), the Fed's policy-making body, acknowledged the improvement in U.S. labor markets, saying job gains had been "solid" and the "underutilization of labour resources is gradually diminishing," a strong shift in language since September when it said that the "remains significant underutilization of labor resources."
    In September the U.S. unemployment rate dropped to a six-year low of 5.9 percent from 6.1 percent but growth in wages and thus inflationary pressures remains subdued, reducing the need for the Fed to hike its rates to curb headline inflation, which was stable in September at 1.7 percent, below the Fed's target of 2.0 percent.
    The Fed, which has a dual mandate of maximum employment and price stability, issued the following statement:

Central Bank News Link List - Oct 29, 2014 - Fed set to end one crises chapter even as global risks rise

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.