Thursday, June 30, 2011

Russian Central Bank Holds Refinancing Rate at 8.25%

The Central Bank of Russia held the benchmark refinancing rate unchanged at 8.25%, the fixed overnight deposit rate at 3.50%, and the overnight auction-based repurchase rate at 5.50%, while also leaving reserve requirements unchanged.  The Bank said: "The decision was made following an assessment of inflation risks and risks for sustainable economic growth, including risks posed by the continued uncertainty over foreign market developments."

Previously Russia's central bank increased the fixed overnight deposit rate by 25 basis points to 3.50% at its May meeting this year.  The Bank also said: "Annual inflation totaled 9.4 percent as of June 27 (9.6 percent in May).  Consumer price growth decelerated in June, month-on-month, due to a slower growth and a fall in food prices."  Bank Chairman Sergey Ignatiev is trying to keep inflation between 6% and 7%.

www.CentralBankNews.info

Taiwan Central Bank Raises Discount Rate 12.5bps to 1.875%

The Central Bank of the Republic of China (Taiwan) raised its discount rate 12.5 basis points to 1.875% from 1.750%, continuing its normalization of monetary policy settings.  The Bank also raised the collateralized loan rate 12.5 basis points to 2.250% from 2.125% and the unsecured loans rate 12.5 basis points to 4.125% from 4.000%.  Bank Governor, Perng Fai-nan, said: "Although the nation's inflation remains more stable than in most other countries, we have decided to maintain the pace in rate hikes to help control the public's prospective attitude toward consumer prices,".

Taiwan's central bank also raised the discount rate 12.5 basis points to 1.75% at its March meeting this year.  Taiwan reported annual consumer price inflation of 1.7% in May, up slightly from 1.3% in April this year, meanwhile the government is forecasting 2011 inflation of 2.1%.  The Taiwan economy grew 6.6%, year on year, in Q1 2011; slower than 2010's 10.9% economic growth rate, according to the Directorate General of Budget, Accounting and Statistics.

Wednesday, June 29, 2011

Romania Central Bank Holds Interest Rate at 6.25%

The Banca Nationala a Romaniei maintained its policy rate unchanged at 6.25%.  The Bank also "decided to maintain the existing levels of minimum reserve requirement ratios on both leu- and foreign currency-denominated liabilities of credit institutions".  The Bank noted: "The inflation outlook continues to feature significant risks", pointing to commodity prices, administered price adjustments, global financial market reactions to the ongoing sovereign debt crisis in Europe, and possible second round effects from supply shocks.

Previously the Bank also held the interest rate unchanged at 6.25%, its last move was a 25 basis point cut in May 2010.  Romania reported annual consumer price inflation of 8.4% in May, up from 8.3% in April, and 7.6% in February 2011, and above the Bank's inflation target of 3% plus or minus 1%.  The Bank expects energy sector reforms and prices rises to keep inflation elevated this year. 

www.CentralBankNews.info

Kenya Central Bank Boosts Interest Rate 175bps to 8.00%

The Central Bank of Kenya boosted the benchmark lending rate by a surprise 175 basis points to 8.00% from 6.25% previously, in a move designed to crackdown on double digit inflation and currency speculation.  The Bank said: "This further tightening of the monetary policy stance will curtail second-round effects arising from fuel and maize prices and exchange-rate volatility that have been fueling inflationary expectations,".

Previously Kenya's central bank also increased the benchmark interest rate by 25 basis points at the end of last month to 6.25%.  Kenya experienced inflation of 14.49% in June, up from 12.95% in May, compared to 12.05% in April and 9.19% in March, according to inflation data from the Kenya National Bureau of Statistics.  The Central Bank of Kenya has an inflation target of 5 percent.

Bank of Albania Holds Interest Rate at 5.25%

The Bank of Albania held its main monetary policy interest rate unchanged at 5.25%, noting monetary conditions will likely see inflation return to target in the medium term.  The Bank noted that: "inflation will continue to be under the pressure of foreign prices in the coming period,"..."but, barring unexpected developments, the effect of the shocks of foreign prices will wane while the effect of administered prices will cease in the third quarter".

The Bank of Albania previously raised the interest rate by 25 basis points to 5.25% at its March meeting this year.  Albania reported annual inflation of 4.2% in May this year, down slightly from 4.5% in February this year, but still above the Bank's 3% inflation target.  The IMF sees Albania's economy growing 2.7% this year, while the government sees 5% GDP growth; Albanian economic growth was 2.3% in 2010.

www.CentralBankNews.info

Monday, June 27, 2011

Bank of Israel Holds Benchmark Rate at 3.25%

The Bank of Israel held its benchmark interest rate unchanged at 3.25%.  The Bank noted: "In the first half of the year the Bank of Israel raised the interest rate markedly.  At the same time, steps were taken by the Bank of Israel and the Ministry of Finance in the housing market.  In addition, the shekel appreciated over recent months and there was a decline in commodity prices.  The impact on inflation of these items is expected to be felt in the future.  In light of these issues, and the marked increase of risks in the global economy, it was decided to leave the interest rate at its current level at this time."

Previously the Bank increased the interest rate by 25 basis points to 3.25% at its May meeting this year.  Israel recorded annual inflation of 4.1% in May, compared to 4.0% in April, and 4.3% in March; above the Bank's inflation target range of 1-3%.  Israel reported GDP growth of 4.8% (annualised) in the March quarter.

www.CentralBankNews.info

Saturday, June 25, 2011

BIS Agrees on Additional Capital Requirements for "G-SIBs"

The Bank for International Settlements announced it had agreed on proposed capital requirement rules for G-SIBs (Globally Systemically Important Banks), in effort to mitigate the risks of future banking system and financial crises.  The new rules would require that G-SIBs' Common Tier 1 (CET1) capital ratios be increased by 1% to 2.5% (on top of Basel/local regulatory required capital ratios) "depending on a bank's systemic importance".  Jean-Claude Trichet, ECB president, said of the proposed rules: "the agreements reached today will help address the negative externalities and moral hazard posed by global systemically important banks."

The timeframe for the introduction of these rules would run in parallel with the Basel III capital conservation and countercyclical buffers (between 1 Jan 2016, and the end of 2018).  Also announced was the development of an assessment methodology for G-SIBs, which considers variables such as "size, interconnectedness, lack of substitutability, global (cross-jurisdictional) activity and complexity".  Banking system supervision, including details such as setting minimum capital ratios, is a key activity for many of the world's central banks, and can provide important opportunities for macro-prudential monetary policy tools e.g. counter-cyclical capital requirements (i.e. raising requirements during credit booms).

Friday, June 24, 2011

Monetary Policy Week in Review - 25 June 2011

The past week in monetary policy saw interest rate decisions from 9 central banks around the world.  Of those reviewing policy settings, only Uruguay adjusted its interest rate, +50bps to 8.00%.  The other 8 banks held their interest rates unchanged, those were: Hungary 6.00%, the US 0.25%, Namibia 6.00%, Norway 2.25%, Hong Kong 0.50%, Turkey 6.25%, Czech Republic 0.75%, and Sierra Leone 23.00%.  Also of note was the US FOMC statement which referred to the completion of QEII (the second round of quantitative easing), and an intention to keep reinvesting principal payments.  Meanwhile the Bank of Uganda said it would start inflation targeting, and would shift focus to using interest rates rather than money supply to influence inflation.

So it was very much a week of policy inaction, as central banks continued to monitor their respective unfolding growth and inflation mixes. Most of the banks that released statements on monetary policy pointed to future action, and noted upside risks to inflation and downside risks to growth e.g. in the form of external shocks such as sovereign debt crises.

Following is some of the key soundbites from central banks that reviewed monetary policy settings over the past week:

  • Hungary central bank (held interest rate at 6.00%): "Inflation is likely to be above target in the short term, due to cost-push pressures stemming from the rise in commodity prices. However, owing to the disciplining effect on price and wage-setting of the persistent weakness in domestic demand and high unemployment, the 3% inflation target can be achieved at the end of 2012 by maintaining interest rates at their current level over a sustained period."
  • The US FOMC (held interest rate at 0-0.25%):  "The Committee continues to anticipate that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate for an extended period."
  • Bank of Namibia (held interest rate at 6.00%): "It is the view of the EC [Executive Committee] that the observed growth momentum at the beginning of the year that created an impression that [the] recovery was consolidating, was not firmly entrenched,"... "The EC also observed that inflation has increased, but still remains in tolerable levels, especially the underlying inflation,"
  • Norway (held interest rate at 2.25%): "Overall, the Executive Board is of the view that the key policy rate should gradually be raised through the latter half of 2011, against the background of the current outlook and balance of risks."
  • Czech National Bank (held interest rate at 0.75%): "Headline and monetary-policy relevant inflation will be close to the inflation target over the monetary policy horizon.  Consistent with the forecast is broad stability of market interest rates in the near future and a gradual rise in rates starting in 2011 Q4.  Risks to the forecast are balanced for monetary-policy relevant inflation."
  • Sierra Leone (held interest rate at 23.00%): "The underlying challenges remain containing the increase in consumer price inflation recently driven by food and fuel price increases,"... "recent improvements in the fiscal position underscore the need to maintain a neutral monetary policy stance."

Next week is set to be a relatively quiet week on the monetary policy front.  The Bank of Israel meets on the 27th of June (expected to increase 25bps to 3.25%), The National Bank of Romania meets on the 29th of June (expected to hold at 6.25%), and the Central Bank of the Republic of China (Taiwan) meets on the 30th of June (expected to increase 12.5bps to 1.875%).

Source: www.CentralBankNews.info


Article source: http://www.centralbanknews.info/2011/06/monetary-policy-week-in-review-25-june.html

Uruguay Central Bank Increases Interest Rate 50bps to 8.00%

The Banco Central del Uruguay increased its benchmark interest rate by 50 basis points to 8.00% from 7.50% previously.  The Bank said: "This decision is necessary to promote a convergence of inflation and expectations with the target range, a process that will contribute to giving more solid fundamentals to the growth and competitiveness of the Uruguayan economy,".

Previously the Bank raised reserve requirements for banks on peso deposits by 300 basis points to 15% and 300 basis points on foreign currency deposits to 18% during its May meeting.  The Bank also increased its interest rate by 100 basis points to 7.50% at its March meeting.  Uruguay reported inflation of 8.53% in May, up from 8.34% in April, and above the Bank's 4%-6% inflation target range (as set by the Macroeconomic Coordination Committee).

www.CentralBankNews.info

Bank of Sierra Leone Holds Monetary Policy Rate at 23%

The Bank of Sierra Leone held its monetary policy rate unchanged at 23%, but increased the standing facility rate by 200 basis points to 30% from 28%.  The reverse repo rate was announced as 25%, and the rediscount rate at 27%.  The Bank said: "The underlying challenges remain containing the increase in consumer price inflation recently driven by food and fuel price increases,"... "recent improvements in the fiscal position underscore the need to maintain a neutral monetary policy stance."

Sierra Leone reported an annual inflation rate of 15.4% in April, up from the 12.5% rate experienced during 2010.  Finance Minister, Samura Kamara, said GDP growth is expected around 5.5% during 2011, compared to IMF statistics which reported the Sierra Leone economy as growing 4.77% last year.

Thursday, June 23, 2011

Uganda Central Bank to Start Inflation Targeting

The Bank of Uganda announced that it would commence inflation targeting in the fiscal year through June 2012, with an annual inflation target of 7% during the first 3 years.  The Bank also said it would begin using the 7-day repo rate to influence inflation, rather than adjusting money supply.  The Bank commented: "We are making a shift from using quantities to inflation targeting,".

The new initiative will commence in full in July this year, with the bank commencing repurchase operations and announcing interest rates.  On the 22nd of June the Bank's rediscount rate was 15.03%, and the bank rate was 16.03% according to the Bank's website.  Uganda reported annual headline inflation of 16% in May this year, up from 14.1% in April, while core inflation was 11.3% in May and 9.7% in April.

Czech National Bank Holds Interest Rate at 0.75%

The Ceska Narodni Banka (CNB) held the two-week repurchase rate unchanged at 0.75%.  The Bank also maintained the the discount rate unchanged at 0.25% and the Lombard rate at 1.75%. The Bank said: "Headline and monetary-policy relevant inflation will be close to the inflation target over the monetary policy horizon.  Consistent with the forecast is broad stability of market interest rates in the near future and a gradual rise in rates starting in 2011 Q4.  Risks to the forecast are balanced for monetary-policy relevant inflation."

The Czech central bank also held the repurchase rate unchanged at its May meeting this year, its last change was a 25 basis point cut in May 2010.  The Czech Republic reported annual inflation of 2% in May, up from 1.6% in April, and 1.7% in March this year, and above the Bank's official inflation target of 2%.  

www.CentralBankNews.info

Turkish Central Bank Holds Interest Rate at 6.25%

The Monetary Policy Committee of the Central Bank of the Republic of Turkey held its 1-week repo rate steady at 6.25%.  The Bank also held the overnight borrowing and lending rates unchanged at 1.50% and 9.00% respectively.  The Bank said: "Overall, in order to contain the risks towards price stability and financial stability, the Committee has decided to monitor the tightening impact of the existing policy mix and take additional measures along the same lines, if needed,"

The central bank also held the interest rate unchanged during its May meeting this year. Turkey recorded a surge in annual consumer price inflation of 7.2% in May, up from 4.26% in April, and 3.99% in March, and above the Bank's full year inflation target of 5.5%.

www.CentralBankNews.info

HKMA Holds Base Rate at 0.50% Following US FOMC

The Hong Kong Monetary Authority maintained its base interest rate unchanged at 0.50% following the decision of the US Federal Reserve to leave the fed funds rate unchanged at 0-0.25%.  In a statement to the media the HKMA said: "We understand that QE2 will end in June as scheduled,"..."We have noticed that there is strong demand in Hong Kong dollar credit loans and therefore, Hong Kong dollar lending and deposit rates have some upward pressure."

The HKMA also maintained its base interest rate unchanged at 0.50% in April this year.  The Hong Kong Monetary Authority generally tends to follow the monetary policy decisions of the US Federal Reserve's Federal Open Market Committee as the Hong Kong Dollar is fixed against the United States Dollar.  Hong Kong reported consumer price inflation of 4.6% in April this year, up from 4.4% the previous month.

www.CentralBankNews.info

Wednesday, June 22, 2011

Norway Central Bank Holds Interest Rate at 2.25%

Norway's central bank, Norges Bank, maintained its key policy rate at 2.25%, and signaled further rate increases.  The Bank said: "Overall, the Executive Board is of the view that the key policy rate should gradually be raised through the latter half of 2011, against the background of the current outlook and balance of risks.  An unexpected jump in activity or in price and cost inflation may lead to a more pronounced upward shift in the key policy rate than currently projected.  Should the turbulence in financial markets lead to considerably weaker growth or a marked krone appreciation, the increase in the interest rate may be deferred further ahead."

At its previous meeting the Bank increased the interest rate by 25 basis points to 2.25%.  The Bank expects inflation to remain relatively low, but to progress towards the 2.5 percent inflation target (but with due upside inflation risks); Norway reported annual inflation of 1.6% in May, up from 1.3% in April this year.

www.CentralBankNews.info

Namibia Central Bank Holds Interest Rate at 6.00%

The Bank of Namibia held its benchmark interest rate, the repurchase rate, at 6.00%.  The Bank said: "It is the view of the EC [Executive Committee] that the observed growth momentum at the beginning of the year that created an impression that recovery was consolidating was not firmly entrenched,"... "The EC also observed that inflation has increased, but still remains in tolerable levels, especially the underlying inflation,"

The Namibian central bank also held its interest rate unchanged at its April meeting, after dropping the rate 75 basis points in December last year.  Namibia reported annual inflation of 5.2% in May, up from 4.8% in April.

www.CentralBankNews.info

US Federal Reserve Holds Monetary Policy Settings Unchanged

The US Federal Open Market Committee held the fed funds rate unchanged at 0 to 0.25 percent, and announced that it would finish the $600 billion asset purchase program or "Quantitative Easing II".  On quantitative easing the statement noted: "The Committee will complete its purchases of $600 billion of longer-term Treasury securities by the end of this month and will maintain its existing policy of reinvesting principal payments from its securities holdings.  The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate."

The Fed previously held the same monetary policy settings unchanged at its April meeting.  The US reported inflation of 3.6% in May, up from 3.2% in April, as high commodity prices caused a broader increase in prices.  Also kept in the statement was: "The Committee continues to anticipate that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate for an extended period."

www.CentralBankNews.info

Monday, June 20, 2011

Hungary Central Bank Holds Interest Rate at 6.00%

The Magyar Nemzeti Bank held its benchmark base rate unchanged at 6.00% despite inflation rising above its target.  The Bank said: "Inflation is likely to be above target in the short term, due to cost-push pressures stemming from the rise in commodity prices. However, owing to the disciplining effect on price and wage-setting of the persistent weakness in domestic demand and high unemployment, the 3% inflation target can be achieved at the end of 2012 by maintaining interest rates at their current level over a sustained period."

Previously the Bank also held the interest rate at 6.00% in May, after raising it 25 basis points in January this year.  Hungary reported annual inflation of 3.9% in May, down slightly from 4.7% in April, and 4.5% in March.  Hungary's Central Bank has a medium term inflation target of 3%.

www.CentralBankNews.info

Friday, June 17, 2011

Monetary Policy Week in Review - 18 June 2011

The past week in monetary policy saw a range of tightening measures announce by emerging market central banks.  Of those that increased interest rates were: Mauritius +25bps to 5.50%, Chile +25bps to 5.25%, India +25bps to 7.50%, and Colombia +25bps to 4.25%.  Meanwhile those that reviewed policy but held rates unchanged were: Japan 0.10%, Sri Lanka 7.00%, Morocco 3.25%, Iceland 4.25%, Philippines 4.50%, Switzerland 0.25%, and Botswana 9.50%.  Aside from interest rates the People's Bank of China raised its required reserve ratio by another 50 basis points to an average 21.5%, likewise the Philippines central bank raised its reserve requirements by 100 basis points.




So in total the week saw 6 monetary policy tightening measures from emerging market economies (Mauritius, China, Chile, India, Philippines, and Colombia).  The common themes among those that tightened were comments around upside inflation risks, with still high commodity prices, low or no excess capacity (output gaps), and still relatively high levels of economic growth (aggregate demand).  But another common theme was the balance between economic growth and inflation, with most of the central banks (emerging markets) viewing inflation as the greater challenge, tempered against almost universally recognized global risks to domestic growth, e.g. Euro Zone debt issues. 


Next week the following Central Banks meet to review monetary policy settings: Hungary: Magyar Nemzeti Bank - 20 June (expected to hold at 6.00%), Norway: Norges Bank - 22 June (expected to hold at 2.25%), US Federal Reserve's FOMC - 22 June (expected to hold at 0.25%), Czech National Bank - 23 June (expected to hold at 0.75%), and the Central Bank of the Republic of Turkey - 23 June (expected to hold at 6.25%).  Aside from those monetary policy meetings, the Reserve Bank of Australia (21 June) and the Bank of England (22 June) will release the minutes of their most recent monetary policy committee meetings.

Source: www.CentralBankNews.info

Article source: http://www.centralbanknews.info/2011/06/monetary-policy-week-in-review-18-june.html

Colombia Central Bank Lifts Interest Rate 25bps to 4.25%

The Central Bank of Colombia increased its benchmark monetary policy interest rate by 25 basis points to 4.25% from 4.00% previously.  The Bank said (translated): "Credit growth continued to accelerate. Both business and household lending real growth rates are tracking significantly higher than GDP growth. This situation occurs in a context where much of real interest rates are at historically low levels." and that "The increase in the rate of intervention aims to maintain inflation within the target range this year and next and help prevent future financial imbalances."

Previously the Central Bank of Colombia also increased its interest rate by 25 basis points to 4.00% at its May meeting this year.  Colombia reported annual inflation of 3.02% in May, compared to 2.84% in April, and 3.19% in March, this compares to the Bank's inflation target of 3%.  Goldman Sachs is forecasting 2011 GDP growth at 5.5%, while Morgan Stanley is forecasting 4.9% growth for the Colombian economy.

www.CentralBankNews.info

Bank of Botswana Holds Rate at 9.50%

The Monetary Policy Committee of the Bank of Botswana held its benchmark interest rate unchanged at 9.50%.  The Bank said: "Maintaining the prevailing level of interest rates is consistent with the achievement of the bank's 3-6 percent inflation objective in the medium-term," also noting the "Upside risks to the inflation outlook include any unanticipated large increase in administered prices and government levies, as well as an increase in international oil and food prices beyond current forecasts."

Previously the Bank also maintained the bank rate unchanged at 9.50% during its April meeting.  Botswana recorded inflation of 8.2% in April, compared to 8.5% in both March and February, up from 7.9% in January, and above the central bank's target range of 3-6%, according to the Bank.

Thursday, June 16, 2011

Swiss National Bank Holds Interest Rate at 0.25%

The Swiss National Bank held its target for the 3-month franc LIBOR unchanged at 0.25 percent, with exchange rate concerns taking focus.  The Bank said: "Should the exchange rate again be subject to significant changes, a reassessment of the inflation outlook would be required,".

At its March meeting this year the Swiss National Bank also maintained the interest rate at 0.25%.  The Bank is forecasting inflation of 0.9% during 2011, while 2012 inflation is expected at 1% and 1.7% in 2013.

Philippine Central Bank Holds Interest Rate at 4.50%

The Bangko Sentral ng Pilipinas held its overnight borrowing rate unchanged at 4.50% and the overnight lending rate at 6.50%.  However the Bank did increase its required reserve ratio by 100 basis points, effective June 24.  The Bank said: "In deciding to maintain policy rates, the Monetary Board noted that the latest baseline forecasts show a lower path and that inflation expectations have shown some signs of leveling off." ... "Meanwhile, the Monetary Board's decision to raise the reserve requirement is a preemptive move to counter any additional inflationary pressures from excess liquidity. "

Previously the Bank raised its interest rate in May this year by 25 basis points to 4.50%.  The Philippines reported annual consumer price inflation of 4.5% in May, up from 4.3% in April, while core inflation was measured as 3.7%.  Inflation is currently tracking inside the Bank's inflation target range of 3%-5%.

Reserve Bank of India Raises Repo Rate 25bps to 7.50%

The Reserve Bank of India increased its repo rate by 25 basis points to 7.50% from 7.25% and raised the reverse repo rate to 6.50% by the same margin.  The Bank said: "while the Reserve Bank needs to continue with its anti-inflationary stance, the extent of policy action needs to balance the adverse movements in inflation with recent global developments and their likely impact on the domestic growth trajectory."

The Reserve Bank of India increased the repo rate by 50 basis points at its previous meeting.  India's key inflation measure, the wholesale price index, increased 9.06% in May, after rising 8.66% in April, and 8.98% year on year in March, exceeding the Bank's previous estimate of 8%.

Iceland Central Bank Holds Rate at 4.25%

Iceland's Sedlabanki maintained its seven-day collateral lending rate unchanged at 4.25%, and kept the deposit rate at 3.25% and overnight lending rate at 5.25%.  The Bank said: "Given recent announcements, the outlook is for a more expansionary fiscal stance than previously forecast," and that "tighter monetary policy may become warranted in the near term".

At its April meeting the Sedlabanki also held the 7-day collateral lending rate unchanged at 4.25%.  Iceland reported headline inflation of 3.4% in May, up from 2.3% in March; inflation is forecast to peak just above 3.0% around the middle of this year, meanwhile the Bank's inflation target is 2.5%.

www.CentralBankNews.info

Wednesday, June 15, 2011

Central Bank of Chile Raises Interest Rate 25bps to 5.25%

The Banco Central de Chile raised its monetary policy interest rate by 25 basis points to 5.25% from 5.00% previously.  The Bank said: "The Board estimates that, in the most likely scenario, additional increases in the monetary policy rate will be necessary, the timing of which will depend on the unfolding of domestic and external macroeconomic conditions. Accordingly, it will continue to use its policies with flexibility so that projected inflation stands at 3% over the policy horizon."

The Bank raised its monetary policy interest rate by 50 basis points to 5.00% in May this year.  The Bank said core inflation is holding around 3%, which is in the middle of the Bank's 2-4% inflation target.  Chile reported annual consumer price inflation of 3.3% in May 2011, up from 3.2% in April this year.

Tuesday, June 14, 2011

Morocco Central Bank Holds Policy Rate at 3.25%

The Bank al-Maghrib of Morocco maintained its main policy rate unchanged at 3.25% in the face of steady inflation.  The Bank said: "In this context where the central inflation forecast remains consistent with the price stability objective and the balance of risks is slightly tilted to the upside, the Board decided to keep the key rate unchanged at 3.25 percent."

Previously the Bank also held interest rates unchanged in March this year; it last changed its interest rate in March 2009 when it reduced the rate 25bps to 3.25%.  The Bank said in its statement that it is forecasting inflation of 1.4% in 2011 (previous forecast 2.1%), and that it expects bank lending to grow by 8% for 2011 (compared to 6.8% growth in April), and total GDP growth is forecast at 4.5-5.5% this year. 

www.CentralBankNews.info

People's Bank of China Raises Reserve Requirement 50bps to 21.5%

The People's Bank of China raised the required reserve ratio by 50 basis points, taking the average rate to 21.5% for large banks (and 19.5% for smaller banks), effective 20 June 2011.  The Bank said in a separate statment: "The Chinese economy is suffering some long-term and short-term problems that are interweaved, and co-existing systemic and structural problems,".  The Bank also noted: "The loose global monetary conditions have pushed up inflation expectations and the prices of commodities which thus exacerbated China's imported inflationary pressure,".

The People's Bank of China also raised the reserve requirements by 50 basis points in May this year to 21%.  China reported inflation of 5.5% in May, up slightly from 5.3% in April, and 5.4% in March this year, and above the government's target of 4%.  The move is expected to drain around 300-400 billion Yuan from the banking system.  The People's Bank of China last raised the benchmark interest rate 25bps on the 5th of April this year.

www.CentralBankNews.info

Central Bank of Sri Lanka Holds Repo Rate at 7.00%

The Central Bank of Sri Lanka kept the repurchase rate unchanged at 7.00%, and left the reverse repurchase rate at 8.50%, and the reserve ratio at 8%.  The Bank said: "The Monetary Board...decided to maintain policy interest rates of the central bank at their current levels,".  On inflation the bank noted: "With the continuous supply of vegetables and other field crops after the floods, domestic food prices have started to decline, thereby easing pressure on inflation."

The Central Bank of Sri Lanka also held the monetary policy rates unchanged in May this year.  Sri Lanka's Colombo Consumer's Price Index (CCPI) rose at an annual pace of 8.8% in May, after rising 9.8% in April 2011, and up from 8.6% in March this year.

www.CentralBankNews.info

Bank of Japan Holds Rate at 0.10%, Extends Loan Program

The Bank of Japan maintained its uncollateralized overnight call rate at a range of 0 to 0.1% by a unanimous vote.  The Bank of Japan also extended its loan program, offering a new 500 billion yen lending facility to boost lending to businesses identified as being in growth industries.  The Bank said: "With a view to further encourage financial institutions' efforts, the bank deems it appropriate to focus on supporting their provision of equity-like funds and loans without conventional collateral or guarantees,".

The Bank of Japan also maintained its monetary policy interest rate unchanged in May this year.  Japan reported annual and monthly headline inflation of 0.3% in April, meanwhile core inflation rose 0.6%, as Japan finally begins to see some positive inflation figures.

Monday, June 13, 2011

Mauritius Central Bank Raises Interest Rate 25bps to 5.50%

The Bank of Mauritius raised its repo rate by 25 basis points to 5.50% from 5.25% due to rising inflation.  The bank said: "MPC members felt that, with the output gap nearing zero and underlying inflationary pressure not showing signs of abating, the process of normalizing the key repo rate should be continued," ..."The MPC considered it important to prevent the high consumer price inflation from generating second-round effects."

Previously the Bank of Mauritius raised its repo rate by 50 basis points in March this year to 5.25%.  Mauritius reported inflation of 7.2% in March this year, and 6.8% in February, compared to the Bank's previous forecast that inflation will rise to 7% in June.  The Bank expects the economy to grow 4.6% this year, having recorded annual GDP growth of 4.4% in 2010.

Saturday, June 11, 2011

Central Bank News Inflation Targets Table

Central Bank News has launched an inflation targets table as a complement to the Global Monetary Policy Interest Rate Monitor.  The initial launch of the table features the inflation targets of 25 countries.  The inflation targets table has been added as part of building Central Bank News into a key resource on monetary policy and central banking.

As a background, central banks are often assigned policy targets in the implementation of monetary policy, for example GDP growth, maximum employment, and price stability.  Inflation targets slot into the price stability goal, and some banks will be obliged to achieve certain inflation targets, e.g. the Bank of England has an inflation target of 2%.  Meanwhile other banks may not have official targets but they will conduct monetary policy in the context of e.g. a government inflation target.

The inflation targets table can be found here: http://www.centralbanknews.info/p/inflation-targets.html

www.CentralBankNews.info

Friday, June 10, 2011

Monetary Policy Week in Review - 11 June 2011

The past week in central banking saw monetary policy decisions announced by 14 central banks around the world.  Those that increased interest rates were:  Poland +25bps to 4.50%, Brazil +25bps to 12.25%, and South Korea +25bps to 3.25%.  While those that decreased interest rates were: The Bahamas -75bps to 4.50%, and Serbia -50bps to 12.00%.  Meanwhile those that held rates unchanged were: Australia 4.75%, Armenia 8.50%, Croatia 6.00%, New Zealand 2.50%, Indonesia 6.75%, the European Union 1.25%, the United Kingdom 0.50%, Egypt 8.25%, and Peru 4.25%.  While Croatia held its main policy rate at 6.00%, it also cut its discount rate -200bps to 7.00%.




The week saw more watching and waiting from developed markets, with Australia, New Zealand, the EU and UK all holding on to relatively stimulatory monetary policy settings as the macroeconomic situation continues to unfold.  Meanwhile in emerging markets two themes were present: 1. the existing theme of emerging market tightening e.g. the BRIC economy, Brazil, driven by rising inflation from strong aggregate demand and economic activity but also rising commodity prices; and 2. the emerging theme of peaking inflation in certain emerging market economies, this theme was behind the rate cuts in Serbia and the Bahamas, as well as the pause in rate rises in Peru and Indonesia.


The following central banks are due to announce monetary policy decisions next week: Bank of Japan - 14 June (expected to hold at 0.10%), Central Bank of Chile - 14 June (expected to raise 25bps from current 5.00%), Central Bank of Iceland - 15 June (expected to hold at 4.25%), Central Bank of Philippines - 16 June (expected to raise 25bps from current 4.50%), Reserve Bank of India - 16 June (expected to raise 25bps from current 7.25%), and The Swiss National bank - 16 June (expected to hold at 0.25%).  Also on the radar, China announces its inflation figures next week (14th), which are expected to show 5.5% inflation in May, compared to 5.3% in April; this may coincide with a monetary policy action from the People's Bank of China.

Source: www.CentralBankNews.info

Article source: http://www.centralbanknews.info/2011/06/monetary-policy-week-in-review-11-june.html

South Korea Central Bank Raises Rate 25bps to 3.25%

The Bank of Korea increased the 7-day repurchase rate by 25 basis points to 3.25% from 3.00% previously.  On the decision the Bank of Korea said: "The committee expects inflationary pressures to continue in the coming months, driven largely by increased demand from the economic upswing and by inflation expectations,". 

In its May meeting the Bank of Korea maintained the 7-day repurchase rate unchanged at 3.00%.  South Korea reported consumer price inflation of 4.1% in May, down slightly from  4.2% in April, and 4.7% in march, yet above the Bank's inflation target of 2%-4% through 2012.  

www.CentralBankNews.info

Peru Central Bank Pauses Monetary Policy Rate at 4.25%

The Central Reserve Bank of Peru maintained its monetary policy reference rate unchanged at 4.25%.  According to a Reuters translation the bank said: "This measure takes into account the moderation in consumer price increases and some indicators of production. Future adjustments in the benchmark interest rate are conditional on new information on inflation and its determinants."

The Bank last raised the monetary policy reference rate by 25 basis points to 4.25% in May this year.  Peru reported annual inflation of 3.07% in May (with core inflation of 2.8%) 3.34% in April, above the Bank's 1-3% inflation target.  The Bank's next Monetary Policy meeting will be held on the 7th of July 2011.

www.CentralBankNews.info

Serbia Central Bank Drops Rate 50bps to 12.00%

The National Bank of Serbia dropped its 2-week repo rate by 50 basis points to 12.00% from 12.50% previously, as the Belgrade based bank sees a peak in inflation.  The Bank said: "The cut in the benchmark interest rate was necessary to stabilize inflation around the target over the medium term,".

In its May meeting the Bank held the 2-week repo rate unchanged at 12.50%.  Serbia reported inflation of 14.7% in April, up from 14.1% in March, and above the bank's inflation target range of 3-6%.  However it is expected that inflation will reduce in the near term due to a good harvest, weak aggregate demand and monetary policy measures taken to date.

Egypt Central Bank Holds Rate at 8.25%

The Central Bank of Egypt held the overnight deposit rate unchanged at 8.25%, the overnight lending rate at 9.75%, the discount rate at 8.50% and the 7-day repo rate at 9.25%.  The Bank said: "It is important to note that while a marked decline in economic activity was expected, the magnitude is larger than anticipated at the outset of the revolution,"... "The slowdown in economic growth should limit upside risks to the inflation outlook."

Previously the Bank also held the interest rate when it announced policy settings in April this year.  Egypt reported annual inflation of 11.8% in May, down slightly from 12.1% in April,but up from 11.4% in March.  The toll of the revolution was seen as Egypt's gross national product contracted by 4.2% year-on-year in the third quarter of the 2011/2012 fiscal year.

Bank of England Holds Bank Rate at 0.50%

The Bank of England (BoE) maintained the Bank Rate at 0.50% and made no changes to the GBP 200 billion asset purchase program.  The Bank does not supply commentary with its monetary policy decisions, however the minutes of the monetary policy committee meeting will be published at 9.30am on Wednesday 22 June.

Previously the Bank also held the Bank Rate unchanged at 0.50% when it met in May this year.  The United Kingdom reported annual consumer price inflation of 4.50% in April, up from 4.00% in March, and above the Bank's inflation target of 2.00%.  The UK saw quarterly GDP growth of 0.5% in Q1 this year, while annual economic growth was reported at 1.8%.

European Central Bank Holds Rate at 1.25%

The European Central Bank maintained the Main refinancing operations rate at 1.25% and the Marginal lending facility at 2.00% and Deposit facility at 0.50%.  The Bank said: "recent economic data confirm the positive underlying momentum of economic activity in the euro area, with uncertainty continuing to be elevated.  All in all, it is essential that recent price developments do not give rise to broad-based inflationary pressures.  Inflation expectations in the euro area must remain firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2% over the medium term.  Such anchoring is a prerequisite for monetary policy to make an ongoing contribution towards supporting economic growth and job creation in the euro area."

The ECB previously also maintained the rate unchanged at 1.25% in May, after raising the rate by 25 basis points to 1.25% in April this year.  The Euro Area reported annual HICP inflation of 2.8% in April, up from 2.7% in March, and above the Bank's inflation target of maintaining inflation below, but close to, 2% over the medium term.

Thursday, June 9, 2011

Bank Indonesia Holds Interest Rate at 6.75%

Indonesia's central bank, Bank Indonesia, held the BI reference rate unchanged at 6.75%.  The Bank said: "Bank Indonesia will strengthen the policy mix of monetary and followed-up macroprudential measures, with a focus on managing capital inflows and domestic liquidity, along with exchange rate appreciation in line with exchange rate appreciation in the Asian region.  Bank Indonesia is strongly confident that the implementation of these monetary and macroprudential policy mix can secure macroeconomic stability and keep inflation within the targets".

At its most recent meeting, the Bank also maintained the BI rate unchanged at 6.75% in May this year.  Previously the Bank raised the rate by 25 basis points to the current 6.75% in February 2011.  Indonesia reported annual inflation of 5.98% in May, compared to 6.16% in April, and 6.65% in March, and just inside the inflation target of 5% +/-1% in 2011 (which changes to 4.5% +/-1% in 2012).

Central Bank of Brazil Raises Selic Rate 25bps to 12.25%

The Banco Central Do Brasil increased the Selic interest rate by 25 basis points to 12.25% from 12.00% previously.  According to a Bloomberg report, the Bank said: "Taking into account the balance of inflation risks, the still uncertain rhythm of the moderation of domestic activity, as well as the complexity of the international environment, the committee understands that, at the moment, the implementation of adjustment in monetary conditions for a sufficiently long period continues to be the most adequate strategy to ensure the convergence of inflation to the target in 2012".

Previously the Bank raised the Selic rate by 25 basis points to 12.00% in April this year.  Brazil last reported an annual inflation rate of 6.55%, compared to the official inflation target of 4.50%.  The Brazilian government is forecasting economic growth this year of 4.5-5%, compared to GDP growth of 7.5% during 2010.

RBNZ Holds Official Cash Rate at 2.50%

The Reserve Bank of New Zealand maintained the Official Cash Rate (OCR) unchanged at 2.50%.  The Bank Said: "As GDP growth picks up, underlying inflation is expected to rise.  A gradual increase in the OCR over the next two years will be required to offset this, such that CPI inflation tracks close to the midpoint of the target band over the latter part of the projection.  The pace and timing of increases will be guided by the speed of recovery, but for now the OCR remains on hold."

Previously the Bank also maintained the OCR unchanged at 2.50%, the Bank cut the rate by 50 basis points in March this year, following the Canterbury earthquake.  The market is pricing in a rate hike in December this year.  New Zealand reported consumer price inflation of 4.5% in Q1, up from 4.0% in Q4 of 2010, and above the official inflation target of 1-3% as short term factors caused a spike in prices.

Wednesday, June 8, 2011

Croatian National Bank Cuts Discount Rate 200bps to 7.00%

The Croatian National Bank decreased its discount rate by 200 basis points to 7.00% from 9.00% previously.  The Bank's main monetary policy rate, the fixed repo rate, was kept unchanged at 6.00%.  The Bank said of the move: "Given the downward trend in interest rates on the money market and on loans, we cut the discount rate to seven from nine percent. Even though the discount rate does not directly affect monetary developments, this should further influence easing of interest rates,".

Previously the Croatian National Bank last raised the discount rate by 450 basis points to 9.00% from 4.50% in December 2007.  The discount rate is used for determining penalty rates and the highest possible interest rates applicable in business contracts.  According to IMF data, Croatia saw economic growth of 0.13% in 2010, while annual consumer price inflation was 2.6% for the year.

National Bank of Poland Raises Policy Rate 25bps to 4.50%

The Narodowy Bank Polski's Monetary Policy Council raised its benchmark 7-day interest rate by 25 basis points to 4.50% from 4.25% previously.  Folllowing the announcement the bank Governor, Marek Belka, said: "We plan to wait before making any more policy moves,"..."After four rate increases, it seems the time has come to see what effect they have on the Polish economy." 

The Bank also increased the following rates by 25 basis points: the rediscount rate to 4.75%, the Lombard rate to 6.00%, and the deposit rate to 3.00%.  Previously the Bank raised the 7-day intervention rate by 25 basis points to 4.25% in May this year. Poland reported inflation of 4.5% in April, up from 4.3% in March, and higher than the Bank's official inflation target of 2.5% +/- 1%. 

Tuesday, June 7, 2011

Bahamas Central Bank Cuts Rate 75bps to 4.50%

The Central Bank of The Bahamas reduced the discount rate by 75 basis points to 4.50%.  The central bank noted: "The existence of significant slack in the economy removes the near-term threat to the external position from an expansion in credit growth — which has been muted at some 0.7% for the six month period to end April 2011,".  The Prime Rate is expected to fall by 75bps to 4.75% from a current 5.50%.

The Bank previously reduced the discount rate by 50 basis points to 5.25% in February 2005, at which time the prime rate also fell from 6.00% to 5.50%.  The Bahamas saw annual consumer price inflation of 1.7% in 2010, meanwhile the economy contracted by -0.5% last year.

Central Bank of Armenia Holds Refinancing Rate at 8.50%

The Central Bank of Armenia maintained its key refinancing rate unchanged at 8.50%.  The Central Bank Board was cited as believing that the likelihood of an expanding inflationary environment is relatively low, noting that it can be curbed with the help of current interest rates to make it fluctuate within the target range of 4% (± 1.5%)

Previously the Bank raised the refi rate by 25 basis points to 8.50% in April this year.  Armenia reported annual consumer price inflation of 9% in May, down from 11.5% in March, and above the inflation target range of 2.5%-5.5%.  The Armenian economy is projected to grow by 4.6% this year.

Reserve Bank of Australia Holds Cash Rate at 4.75%

The Reserve Bank of Australia maintained the cash rate unchanged at 4.75%.  The Bank said: "the Board judged that the current mildly restrictive stance of monetary policy remained appropriate".  On inflation the Bank "expects that, as the temporary price shocks dissipate over the coming quarters, CPI inflation will be close to target over the next 12 months".

At its previous meeting the Bank also held the cash rate unchanged at 4.75% in May this year.  Australia reported annual consumer price inflation of 3.3% in Q1 this year, up from 2.7% in the December quarter of 2010.  Meanwhile, the Australian economy contracted -1.2% in the first quarter of this year due to the impact of natural disasters, placing annual GDP growth at a slower pace of 1.2% compared to 3.0% in the previous quarter.