Australia holds rate, says lower A$ would assist growth

    Australia's central bank held its benchmark cash rate steady at 2.5 percent, as expected, saying this was appropriate and the full effects of rate cuts since late 2011 "are still coming through, and will be for a while yet."
    The Reserve Bank of Australia (RBA), which has cut its cash rates by 2.25 percentage points since November 2011, including cuts of 50 points this year, said the pace of borrowing remains subdued though there have been recent signs of increased demand for finance by households and evidence of a shift in savers' behavior in response to the declining returns on low-risk assets.
    While the RBA repeated that it would "continue to assess the outlook and adjust policy as needed," the bank softened its description of the Australian dollar, saying that it is still about 10 percent below its level in April despite a recent rise.
    "A lower level of the currency than seen at present would assist in rebalancing growth in the economy," the RBA said, no longer describing the exchange rate of the A$ as high, as it has in recent months.
    From January through April, the A$ traded above parity to the U.S. dollar but it started to weaken in early May in response to the RBA's first rate cut and fell to a year-low of 89 cents to the U.S. dollar on Sept. 1. Since then it has rebounded, trading at 93 cents to the U.S. dollar today.

Zambia holds rate, higher FX to moderate inflation

    Zambia's central bank held its policy rate steady at 9.75 percent after two recent rate rises, saying the recent appreciation of the kwacha currency following a better supply of foreign exchange "will moderate inflationary pressures going forward."
    The Bank of Zambia, which raised rates by a total of 50 basis points in June and July, said inflationary pressures are expected from higher liquidity levels in the banking system in connection with the recently-implemented public sector wages.
    In addition, higher prices of some food items, particularly maize grain and maize products, due to a regional maize deficit, may lead to higher inflationary pressures.
    Zambia's inflation rate eased slightly to 7.0 percent in September from 7.1 percent in August but is still above the central bank's 6.0 percent target for the end of the year.
    Like many other emerging market currencies, Zambia's kwacha fell in late May through through early July, but since then it has appreciated. From late May through early July, the kwacha fell over 5 percent, hitting a year-low of 5.54 to the U.S. dollar on July 10. Since then it has bounced back, trading at 5.31 to the U.S. dollar today, down only 2 percent from the start of the year.

    www.CentralBankNews.info

Angola holds rate steady as inflation falls, credit rises

    Angola's central bank held its policy rate steady at 9.75 percent, citing a lower inflation rate, an upward trend in credit to the economy and a slight appreciation of the kwanza in the last month.
    The National Bank of Angola (BNA) has cut its rate by 50 basis points this year, most recently by 25 points in August in sync with falling inflation.
    Angola's inflation rate eased to 8.97 percent in August, down from 9.04 percent in July, as inflation continues to remain below 10 percent, a central goal of the BNA.
    The LUIBOR overnight rate was 5.51 percent with maturities of 3 and 12 months at 8.46 percent and 10.03 percent, respectively, "thus confirming the downward trend in interest rates practiced in the interbank money market," the central bank said.
    Credit to the economy maintained its upward trend in August, rising 4.3 percent since the start of the year while the average reference exchange rate for the kwanza against the U.S. dollar was 95.91 at the end of August, an appreciation of 0.04 percent compared to the end of July.
   
    www.CentralBankNews.info

Mauritius holds repo rate on contained inflation

    The central bank of Mauritius held its key repo rate steady at 4.65 percent as a majority of the members of the monetary policy committee agreed that rates could remain at its current level "to continue to provide support to the economy against the backdrop of contained inflation, which they expected to remain below the staff forecast."
    The Bank of Mauritius, which cut its rate by 25 basis points in June, said other members on the committee argued that upside inflation risks were still present and considered it important to normalize the repo rate to address vulnerabilities in the banking sector from prolonged negative real interest rates and offer rates that would help change savings and consumption behaviour.
    "The MPC maintains strong vigilance in monitoring economic and financial developments and stands ready to meet in between its regular meetings, if the need arises," the bank said.
    When the central bank cut its rate in June, the governor told Bloomberg that he had voted for an increase in the rate to help contain inflation.
    Mauritius' inflation rate fell to 3.1 percent in August from 3.6 percent in July. Since January it has fluctuated between 3.6 and 3.7 percent and the central bank's staff projects inflation remaining in a range of 4.5-4.9 percent by December before rising to 4.9-5.5 percent by June 2014.

Central Bank News Link List - Sep 30, 2013: Australia central bank may send clearer easing bias as it holds rates

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.

• Australia central bank may send clearer easing bias even as it holds rates (Reuters)
• China central bank to keep policy stead, push reforms (Reuters)
• ECB ready to offer liquidity to market, says Slovak central banker Makuch (WSJ)
• BOE's Miles says MPC mustn't raise rates too soon - report (Dow Jones)
• BOE Broadbent: Forward guidance is right policy for UK economy (MNI)
• Brazil cenbank sees stubborn inflation despite weak growth (Reuters)
• China central bank signs 3.5 billion yuan currency swap deal with Iceland (Reuters)
• Central banks intensify their love affair with the loonie (WSJ)
• Banks regulator may ease rules on securitized debt: source (Reuters)
• Fed too familiar with lost labor seeking new message for policy (Bloomberg)
• Taiwan central bank: Economy less vulnerable than most to Fed's tapering (WSJ)
• Tunisia c.bank chief says ready to intervene vs inflation (Reuters)
• New Zealand central bank takes gamble to cool housing market (Reuters)
• Norges Bank can buy $500 mln more of mainland China securities (WSJ)
• Ghana central bank governor sees inflation ending year at 11.5% (Bloomberg)
• Could be a long time between QE taper and rate rise - US Fed's Dudley (Reuters)
• New methodology in place: SBP links minimum deposit rate to repo rate (Express Tribune)
• Judge says Argentine central bank reserves seizable (FINalternatives)
  

Romania cuts rate third time in row on lower inflation

    Romania's central bank cut its policy rate by a further 25 basis points to 4.25 percent, as expected, saying a resumption of disinflation has allowed the central bank to continue easing its policy.
    It is the third rate cut in a row by the National Bank of Romania (NBR), which has cut rates by a 100 basis points this year following last year's cuts totaling 75 basis points.
    Romania's inflation rate fell to 3.67 percent in August from 4.41 percent in July due to lower food prices and the effect of the negative output gap, the NBR said.
    "This trend, in line with the central bank's forecast in the latest inflation report, strengthens the favourable outlook for the annual inflation rate to fall below the 2.5 percent target in the forthcoming period," the central bank said, adding it expects disinflation to continue until the first half of 2014.
    Last month the central bank lowered its inflation forecast for this year to 3.1 percent from 3.2 percent and economists expect the NBR to continue to cut rates further this year.
    The pass-through of the central bank's rate cuts to lending rates to companies and households is still moderate and taking place with a certain lag, but the ongoing adjustment of monetary conditions is aimed at preserving medium-term price stability while also paving the way for the sustainable recovery of lending to the private sector and thus restore confidence and lasting economic growth, the NBR said.

Monetary Policy Week in Review – Sep 23-27, 2013: Israel, Hungary cut, Fed move sparks criticism of communication

    Last week the central banks of Israel and Hungary cut their policy rates while 10 other banks maintained rates as the U.S. Federal Reserve’s surprise decision to delay tapering its asset purchases reverberated through global markets amid criticism of its communication skills and forward guidance.
    The Bank of Israel, which surprised financial markets by cutting its policy rate for the third time this year, cited the Fed’s decision as a sign of a possible slowdown in advanced economies while the National Bank of Hungary again trimmed its rate, taking advantage of a relief rally and rebound in emerging market currencies.
    Although the Central Bank of Nigeria saw reduced risks of currency instability from the Fed’s decision, both it and Taiwan’s central bank acknowledged that an eventual reduction in asset purchases remains a major risk for the global economy.
    In addition to Nigeria and Taiwan, the central banks of Armenia, Morocco, Georgia, the Czech Republic, Trinidad & Tobago, Colombia, Rwanda and Malawi maintained their policy rates last week.

    The Fed’s surprise decision to postpone tapering may have consequences for the future conduct of monetary policy.
    Although the Fed’s policy-making body, the Federal Open Market Committee (FOMC), never said September would herald the start of winding down asset purchases, there had been enough winks and nods in that direction from governors and Fed bank presidents to convince financial markets.
    The point of forward guidance as an additional communication tool is to help reduce investors’ uncertainty about the path of monetary policy, whether this guidance is open-ended, time-contingent or state-dependent, as in the case of the Fed.
    While no one is arguing the merits of the Fed’s decision to postpone tapering due to lackluster employment growth or the impact of a potential U.S. government shutdown, serious questions are being raised about forward guidance if investors’ expectations turn out to be so wrong, as brutally witnessed on Sept. 18.
    Ever since May, when Federal Reserve Chairman Ben Bernanke first raised the issue of tapering, global financial markets have been volatile as they adjust to a change in the flow of global capital, higher long-term interest rates, a depreciation of emerging market currencies and better economic prospects for advanced economies.
    The process of exiting from extraordinary accommodative monetary policy was always going to be tricky and forward guidance was intended to help central banks keep long-term interest rates low as the economy heals from the scars from the financial crises.
    But instead, long-term rates in most countries have shot up, threatening economic recovery and raising doubts over the efficacy of central bank’s communication via forward guidance, whether this was implemented by the Fed, the European Central Bank or the Bank of England.
    By adding more predictability and transparency to central banks’ policy, forward guidance was supposed to reduce market volatility, not confuse investors and make them even more nervous as they scratch their heads, wondering how they could have misread the Fed.
    So far, much of the criticism directed toward the Fed – even that by its own governors and presidents – has focused on its ability to communicate and not the basic concept of forward guidance.
    But the consequence of the Fed’s deliberate policy of vagueness and uncertainty about winding down quantitative easing may have serious consequences, as witnessed by Richard Fisher, president of the Dallas Fed, who said last week’s decision called into question the credibility of the Fed’s communications.
    Hopefully central banks and the Fed will learn from this error and look back at their notes from this year’s Jackson Hole conference where economists Arvind Krishnamurthy and Annette Vissing-Jorgensen called on the Fed to spell out the exact conditions for winding down quantitative easing to avoid a further damaging rise in long-term interest rates.
    “Since the prices of long maturity assets are much more sensitive to expectations about future policy than short maturity assets, controlling those expectations is of central importance in the transmission mechanism of QE. Therefore, how an exit is communicated to investors matter greatly,” the economists wrote in their paper, “The Ins and Outs of LSAPs.”
   
    Through the first 39 weeks of this year, the global trend toward lower policy rates appears to be bottoming out as emerging markets raise rates to limit the inflationary follow-through from currency depreciation.
    Policy rates have been cut 88 times so far this year, or 23.3 percent of this year’s 377 policy decisions that by the 90 central banks followed by Central Bank News. This is down from 23.6 percent the previous week, 23.9 percent two weeks ago and 25.3 percent after the first half of 2013.
    Meanwhile, the percentage of rate rises is slowing creeping up.
Central banks have raised rates 21 times, or 5.6 percent of this year’s policy decisions, down from 5.8 percent the previous week but unchanged from 5.6 percent two weeks ago and up from 4.7 percent at then end of June.
    Emerging markets account for 43 percent of the 21 rate rises, with Brazil, Indonesia and India accounting for eight of those rate rises.

LAST WEEK’S (WEEK 39) MONETARY POLICY DECISIONS:

COUNTRY	MSCI	NEW RATE	OLD RATE	1 YEAR AGO
ISRAEL	DM	1.00%	1.25%	2.25%
NIGERIA	FM	12.00%	12.00%	12.00%
ARMENIA		8.50%	8.50%	8.00%
HUNGARY	EM	3.60%	3.80%	6.50%
MOROCCO	EM	3.00%	3.00%	3.00%
GEORGIA		3.75%	3.75%	5.75%
CZECH REPUBLIC	EM	0.05%	0.05%	0.25%
TAIWAN	EM	1.88%	1.88%	1.88%
TRINIDAD & TOBAGO		2.75%	2.75%	2.75%
COLOMBIA	EM	3.25%	3.25%	4.75%
RWANDA		7.00%	7.00%	7.50%
MALAWI		25.00%	25.00%	21.00%

    This week (week 40) eight central banks are scheduled to hold policy meetings, including those from Angola, Romania, Mauritius, Australia, Poland, Iceland, the euro area and Japan.

COUNTRY	MSCI	DATE	CURRENT  RATE	1 YEAR AGO
ROMANIA	FM	30-Sep	4.50%	5.25%
ANGOLA		30-Sep	9.75%	10.25%
MAURITIUS	FM	30-Sep	4.65%	4.90%
AUSTRALIA	DM	1-Oct	2.50%	3.50%
POLAND	EM	2-Oct	2.50%	4.75%
ICELAND		2-Oct	6.00%	5.75%
EURO AREA	DM	2-Oct	0.50%	0.75%
JAPAN	DM	4-Oct	N/A	0.10%

   
     www.CentralBankNews.info

Trinidad & Tobago holds rate to support economy

     Trinidad and Tobago's central bank held its benchmark repo rate steady at 2.75 percent in the inaugural meeting of its expanded Monetary Policy Committee (MPC), saying it would "continue to nurture financial conditions supportive of the recovery."
    The Central Bank of Trinidad and Tobago, which recently added two external members to its MPC, said inflationary pressures were contained, the domestic economy appears to be on a path of recovery but it was concerned over the eight successive month of lower business lending in July and elevated liquidity conditions that reflect continued caution by the private sector.
    Economic growth has mainly been driven by the non-energy sector and the central bank expects this to continue in the second half of the year. Gross Domestic Product expanded by an average annual 1.7 percent for four successive quarters to June 2013, up from a contraction of an average 1.6 percent in the preceding four quarters, the bank said.
    Trinidad and Tobago's headline inflation rose to 5.1 percent in August from 3.8 percent in July due to higher food prices
    As part of its new policy framework, the central banks will supplement its monetary policy announcement every two months with a biannual monetary policy report and an economic bulletin.
    The central bank cut its rate by 25 basis points last year.

    www.CentralBankNews.info

Colombia holds rate, extends FX, sees higher Q3 growth

    Colombia's central bank held its benchmark interest rate steady at 3.25 percent, as expected, and extended its program to purchase foreign exchange worth $1.0 billion from October through December.
    The Central Bank of Colombia, which has held rates steady since April after cutting them by 200 basis points since July last year to boost growth, said the decision to purchase foreign exchange takes into account, among other factors "the recent evolution of the exchange rate and the existence of an expansionary monetary stance."
    Colombia's peso has appreciated this month following the U.S. Federal Reserve's decision to delay tapering asset purchases after easing through August. It was trading at 1,914 to the U.S. dollar today, down 7.7 percent from 1,767 end-2012.
    "Economic indicators and projections show a level of output that is converging to its potential," the central bank said, adding that its recent policy stance and fiscal policy should consolidate this trend although "downside risks are not negligible."

Malawi holds rate to limit emerging risks to inflation

    Malawi's central bank held its bank rate steady at 25.0 percent, the world's highest policy rate, "to sustain the tight monetary policy stance against the backdrop of emerging risks to inflation."
    The Reserve Bank of Malawi (RBM), which raised rates by 12 percentage points last year to combat inflation, said the stability of the financial system had improved following a deceleration in inflation and the recent stability in the exchange rate but risks remain due to continuing high interest rates, which calls for tighter supervisory oversight.
    Malawi's inflation rate eased to 23.3 percent in August from 25.2 percent the previous month, the seventh month in a row with a slower rate since after hitting a recent high of  37.9 percent in February. The RBM said the fall in inflation was due to a sharp slowdown in food prices and an appreciation of the kwacha currency.
    "Looking ahead, inflation is expected to be higher than earlier forecast as prices of food, fuel and utility tariffs pick up," the central bank said.
    Malawi's kwacha fell from the start of the year through late May, then rose sharply but has declined in recent weeks. Today it was trading at 366 to the U.S. dollar, down some 11 percent from 324 at the end of 2012.

Central Bank News Link List - Sep 27, 2013: Russian central bank raises 2014 inflation target

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.

• Russian central bank raises 2014 inflation target (The Moscow Times)
• Colombia central bank likely to hold rates after strong GDP report (WSJ)
• Indonesia reserve policy change may curb lending, help rupiah (Jakarta Globe)
• Additional BOJ easing unlikely to coincide with tax hike (WSJ)
• Fed needs better way to signal policy, officials say (Reuters)
• Rajan seen switching main India inflation gauge at RBI (Bloomberg)
• China seen to wait until 2016 to scrap cap on bank deposit rates (Bloomberg)
• Slovenia PM says discussed bank aid, but rejects bailout speculation (Reuters)
• Argentina loses motion to dismiss suit over central bank (Bloomberg)
• Bank of Thailand: No shortage of liquidity (Bangkok Post)
• Central Bank of Nigeria decries politicians' use of dollars (Afriquejet)
• Easy central bank policy risks new crises - RBI's Rajan (Reuters)
• India, China for greater international coordination (Business Standard)
• www.CentralBankNews.info

Rwanda holds rate, outlook stable, inflation moderate

    Rwanda's central bank held its key repo rate steady at 7.0 percent to "maintain the current monetary policy stance to foster macroeconomic stability and to continue to stimulate financing of the economy in the coming fourth quarter of 2013."
    The National Bank of Rwanda (BNR), which cut its repo rate by 50 basis points in June, said the outlook for the economy remains stable, with moderate inflation and the financial sector is resilient with adequate capitalization as of June, liquid and profitable with satisfactory asset quality.
    Rwanda's Gross Domestic Product expanded by an annual 5.7 percent in the second quarter, down from 6.0 percent in the first quarter, and the inflation rate rose slightly to 4.04 percent in August from 3.59 percent in July due to higher prices for food, non-alcoholic beverages and eduction.
    Rwanda's currency, the Rwandan franc, has depreciated by 3.9 percent this year as of today,"but the situation is expected to stabilize by the end of 2013 on account of an increase in foreign exchange flows as well as regained confidence in the foreign exchange market," the BNR said.

    www.CentralBankNews.info
   
   

Central Bank News Link List - Sep 26, 2013: China unveils new steps to free up interest rates

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.

• China unveils new steps to free up interest rates (Reuters)
• ECB Asmussen: To early for exit; need for global CBk coordination (MNI)
• Lacker sees potential for October tapering as Fed in tough spot (Bloomberg)
• Fed's Lacker says public attention challenging central banks (Dow Jones)
• India central bank seeks to calm investors after rate rise (Dow Jones)
• Thai GDP to grow 4%, interest rates on hold (Reuters)
• New York Fed completes test of fixed-rate reverse repo facility (Bloomberg)
• Irish central bank still unhappy with arrears progress (Reuters)
• Singapore calls on Fed to expand mandate (Euromoney)
• N.Z. policy pioneer Wheeler set to raise rates in '14 (Bloomberg)
• Polish economic recovery not under threat - central bank head (WSJ)
• Turkish central bank head 'warns' Fed to keep promises (Trend)
• Romania could reduce the monetary policy interest at 4.25% (Actmedia)
• www.CentralBankNews.info