The past week in monetary policy saw 5 central banks adjusting interest rates, with increases from: Colombia +25bps to 5.00%, and Sri Lanka +50bps to 7.50%; and decreases from: The Gambia -100bps to 13.00%, Uganda -100bps to 22.00%, and Romania -25bps to 5.50%. Meanwhile those that held rates unchanged were: Russia 8.00%, Malaysia 3.00%, Kenya 18.00%, the Czech Republic 0.75%, Egypt 9.25%, and Nigeria 12.00%.
Following are some of the key quotes and comments from central bankers on their monetary policy decisions over the past week:
- Romania (cut 25bps to 5.50%): "Looking at domestic developments, statistical indicators reveal the persistence of negative output gap despite positive dynamics in exports, industrial and farming outputs, the current account deficit staying at sustainable levels, but also a gradual recovery of credit to the private sector. The external environment shows that uncertainties remain regarding the resolution of the Eurozone sovereign debt crisis, with impact on investors' risk aversion, capital flow volatility, as well as on global economic developments."
- Sri Lanka (raised 50bps to 7.50%): "Taking into consideration these macroeconomic developments, the Monetary Board of the Central Bank of Sri Lanka is of the view that the continuous increase in credit extended to the private sector by commercial banks needs to be addressed for two main reasons: First, to curtail import related credit, thereby reducing the trade deficit and the current account deficit, and second, to effectively ensure that inflation remains at the mid-single digit levels in the second half of 2012 as well, notwithstanding the sharp build up of credit in 2011."
- Russia (held at 8.00%): "The dynamics of the main macroeconomic indicators in December showed persistent firmness of consumption beside the moderate production growth figures. Further decrease in unemployment rate, high real income growth rate and the continued expansion in consumer credit contributed to the acceleration of retail sales growth. The growth rate of investment in production capacity increased in December. However, industrial production growth rate in year-over-year terms decreased sharply compared to November, which was partly explained by the decline in particular components of the index due to weather-related factors. Production growth rates and economic confidence indicators remained rather low in the recent months."
- Nigeria (held at 12.00%): "We are holding our first meeting of 2012 at a time that is possibly a turning point in the economic history of the country. The dark clouds in the global horizon remain present. Forecasts are for slower growth rates in the developed world and emerging markets. The violence and tragic bombings in northern Nigeria continue to pose a source of concern for investors, and efforts are underway to find a lasting solution. The recent demonstrations by citizens and opposition parties against fuel subsidy removal have also raised temperatures in the political space"
Looking at the central bank calendar, the main event in the week ahead, given the ongoing sovereign debt crisis in Europe, will be the ECB meeting - the key question on people's minds will be whether the ECB does anything further to assist or promote growth e.g. interest rate cuts, bond purchases. Meanwhile the Bank of England may increase its quantitative easing program. Elsewhere there is a diverse geography of banks meeting which will help provide insight into key economic developments around the globe.