Brazil's central bank lowered its benchmark Selic rate by another 25 basis points to 13.75 percent, saying "the magnitude of monetary easing and a possible speeding up of its pace will depend on inflation forecasts and expectations."
The Central Bank of Brazil, which has now cut its rate by 50 basis points following last month's cut - the bank's first rate cut since August 2012 - added the policy decision was unanimous by the members of its Copom committee and no bias was indicated.
In its guidance, the central bank also said the pace of disinflation may intensify if the country's economic recovery is delayed further and is more gradual than anticipated.
"The Committee judges that convergence of inflation to the 4.5% target over the relevant horizon for the conduct of monetary policy, which includes 2017 and 2018, is compatible with a gradual easing of monetary conditions," the central bank said.
Brazil's inflation rate fell to 7.87 percent in October from 8.48 percent in September to the lowest rate since February 2015, with the central bank saying the drop was better than expected and partly due to lower food prices but also signs of more widespread disinflation.
The central bank said 2016 inflation forecasts in the reference and market scenarios had dropped to around 6.6 percent from around 7 percent seen last month.
Forecasts for 2017 show inflation around 4.4 percent and 4.7 percent, respectively, while
forecasts for 2018 for the two scenarios were around 3.6 percent and 4.6 percent, respectively.
Brazil's economy shrank by 0.8 percent in the third quarter from the second quarter for the seventh quarter of contraction in a row. On an annual basis, Gross Domestic Product shrank by 2.9 percent compared with a decline of 3.6 percent in the second quarter.
"The set of indicators released since the last Copom meeting suggests weaker-than-expected economic activity in the short run," the central bank said, adding forecast for growth this year and next year had been revised downward.
The exchange rate of Brazil's real fell from August 2014 until it hit a record low of around 4.15 to the U.S. dollar in January this year. The real then firmed to around 3.12 in late October before again weakening in the last six weeks.
The real was trading at 3.39 to the dollar today, still almost 17 percent higher than at the start of this year.
Wednesday, November 30, 2016
Angola holds rate and rules out devaluation of kwanza
Angola's central bank maintained its benchmark BNA rate at 16.00 percent and said it was committed to preserve the value of the national currency, "which is why there will be no devaluation of the kwanza."
The National Bank of Angola (BNA), which has raised its rate by 500 basis points this year to curb inflation, said it would continue to exchange 165.8 kwanza per U.S. dollar "so there is no need for market operators to change the prices of goods and services."
The BNA also said it taken note of a deceleration in inflation due to its control of liquidity and an increases in the supply of goods and services.
Angola's inflation rate rose to 40.4 percent in October, the highest rate since July 2004, from 39.4 percent in September, continuing the upward trend since 2015.
The fall in crude oil prices from mid-2014 has lead to a shortage of foreign exchange in Angola, undermined government revenue and hit the exchange rate of the kwanza.
The central bank, which has devalued the kwanza several times in the last year, said commercial banks had purchased US$1.268 billion in October, a decrease of 9.24 percent.
In October credit to the economy rose by 0.42 percent while gross credit to the central government rose 0.82 percent.
In September the International Monetary Fund (IMF) forecast 1.25 percent output growth in 2017, up from zero growth this year, due to a recovery in the non-oil sector from higher public spending.
Inflation was forecast to reach 45 percent by the end of the year before declining to 20 percent next year as tight monetary conditions and a stable kwanza supports disinflation.
The IMF also said monthly inflation had started to subside and while sales of foreign exchange had helped ease pressures on the market, it added that greater exchange rate flexibility, along with supporting macroeconomic policies, would be essential to maintain the exchange rate, prevent a misallocation of resources and accelerate growth.
www.CentralBankNews.info
The National Bank of Angola (BNA), which has raised its rate by 500 basis points this year to curb inflation, said it would continue to exchange 165.8 kwanza per U.S. dollar "so there is no need for market operators to change the prices of goods and services."
The BNA also said it taken note of a deceleration in inflation due to its control of liquidity and an increases in the supply of goods and services.
Angola's inflation rate rose to 40.4 percent in October, the highest rate since July 2004, from 39.4 percent in September, continuing the upward trend since 2015.
The fall in crude oil prices from mid-2014 has lead to a shortage of foreign exchange in Angola, undermined government revenue and hit the exchange rate of the kwanza.
The central bank, which has devalued the kwanza several times in the last year, said commercial banks had purchased US$1.268 billion in October, a decrease of 9.24 percent.
In October credit to the economy rose by 0.42 percent while gross credit to the central government rose 0.82 percent.
In September the International Monetary Fund (IMF) forecast 1.25 percent output growth in 2017, up from zero growth this year, due to a recovery in the non-oil sector from higher public spending.
Inflation was forecast to reach 45 percent by the end of the year before declining to 20 percent next year as tight monetary conditions and a stable kwanza supports disinflation.
The IMF also said monthly inflation had started to subside and while sales of foreign exchange had helped ease pressures on the market, it added that greater exchange rate flexibility, along with supporting macroeconomic policies, would be essential to maintain the exchange rate, prevent a misallocation of resources and accelerate growth.
www.CentralBankNews.info
Monday, November 28, 2016
Sri Lanka maintains rates as credit growth decelerates
Sri Lanka's central bank maintained its key policy rates, saying the growth of credit had decelerated as it had expected and demand pressures are expected to remain well contained so "inflation is expected to remain stable in mid-single digit level in the period ahead."
The Central Bank of Sri Lanka has raised its two key rates by 100 basis points this year to slow the growth in private sector credit from commercial banks, which eased to annual growth of 25.6 percent in September from 27.3 percent in August and 28.5 percent in July.
Nevertheless, broad money grew by an annual rate of 18.4 percent in September, up from 17.3 percent in August, as public sector borrowing expanded.
Liquidity in the domestic money markets, however, have returned to a balanced level, the central bank said, adding this will help stabilize market rates at current levels.
Sri Lanka's inflation rate rose to 4.2 percent in October from 3.9 percent in September, with changes in taxes - Value-Added Tax has been raised to 15 percent and a Nation Building Tax began on Nov. 1 - expected to have a one-off impact while the overall impact of the 2017 budget on inflation is seen as favorable.
The central bank noted the trade deficit had contracted by 12 percent in September from the same month last year as export earnings grew for the second consecutive month while import expenditure declined.
Gross official reserves were estimated at US$6.1 billion at the end of October, down from $6.5 billion end-September while the exchange rate of the Sri Lankan rupee was trading at 148.4 to the U.S. dollar today, down almost 3 percent since the start of this year.
Economic activity in Sri Lanka in the second quarter of this year was hit by adverse weather, with growth decelerating to an annual rate of 2.6 percent from 5.2 percent in the first quarter.
The central bank raised its two key rates, the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) in February and July. SLFR now stands at 7.0 percent and the SDRF at 8.50 percent.
The Central Bank of Sri Lanka has raised its two key rates by 100 basis points this year to slow the growth in private sector credit from commercial banks, which eased to annual growth of 25.6 percent in September from 27.3 percent in August and 28.5 percent in July.
Nevertheless, broad money grew by an annual rate of 18.4 percent in September, up from 17.3 percent in August, as public sector borrowing expanded.
Liquidity in the domestic money markets, however, have returned to a balanced level, the central bank said, adding this will help stabilize market rates at current levels.
Sri Lanka's inflation rate rose to 4.2 percent in October from 3.9 percent in September, with changes in taxes - Value-Added Tax has been raised to 15 percent and a Nation Building Tax began on Nov. 1 - expected to have a one-off impact while the overall impact of the 2017 budget on inflation is seen as favorable.
The central bank noted the trade deficit had contracted by 12 percent in September from the same month last year as export earnings grew for the second consecutive month while import expenditure declined.
Gross official reserves were estimated at US$6.1 billion at the end of October, down from $6.5 billion end-September while the exchange rate of the Sri Lankan rupee was trading at 148.4 to the U.S. dollar today, down almost 3 percent since the start of this year.
Economic activity in Sri Lanka in the second quarter of this year was hit by adverse weather, with growth decelerating to an annual rate of 2.6 percent from 5.2 percent in the first quarter.
The central bank raised its two key rates, the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) in February and July. SLFR now stands at 7.0 percent and the SDRF at 8.50 percent.
Kyrgyz cuts rate another 50 bps, further easing expected
The central bank of the Kyrgyz Republic cut its policy rate by a further 50 basis points to 5.50 percent in light of low inflation and said it intends to continue with its stimulative monetary policy in the absence of external shocks to help neutralize deflationary forces.
The National Bank of the Kyrgyz Republic (NBKR) has now cut its rate by 450 basis points this year following cuts of 200 points in both March and May.
Inflation in Kyrgyzstan fell to minus 0.2 percent in October from 0.3 percent in September, just above the record low of minus 0.60 percent seen in April this year.
The NBKR said it expects inflation to be close to zero at the end of this year with the low inflation environment continuing in coming months but in the medium term inflation is still expected to return to its target range of 5-7 percent.
Kyrgyzstan's economy is continuing to improve, with economic activity turning positive in the third quarter and real Gross Domestic Product up by 2.7 percent in the first 10 months, the bank said.
Excluding output from the Kumtor gold mine, the country's economy grew by 3.3 percent as domestic consumption recovered, it added.
Domestic financial markets remain stable, the central bank said, adding that the exchange rate of the som had appreciated by 9.0 percent from the beginning of the year to Nov. 28, with intervention in the foreign exchange market only carried out to smooth short-term fluctuations.
The som, which fell swiftly from early 2014 until December 2015, has firmed since February this year and was trading at 69.0 to the U.S. dollar today, up from 75.9 at the start of the year.
Last month the International Monetary Fund said the NBKR had "done a good job steering the economy through the recent period of volatility" and could relax its policy given the decline in inflation while still remaining vigilant for signs of fiscal and exchange rate pressures.
www.CentralBankNews.info
The National Bank of the Kyrgyz Republic (NBKR) has now cut its rate by 450 basis points this year following cuts of 200 points in both March and May.
Inflation in Kyrgyzstan fell to minus 0.2 percent in October from 0.3 percent in September, just above the record low of minus 0.60 percent seen in April this year.
The NBKR said it expects inflation to be close to zero at the end of this year with the low inflation environment continuing in coming months but in the medium term inflation is still expected to return to its target range of 5-7 percent.
Kyrgyzstan's economy is continuing to improve, with economic activity turning positive in the third quarter and real Gross Domestic Product up by 2.7 percent in the first 10 months, the bank said.
Excluding output from the Kumtor gold mine, the country's economy grew by 3.3 percent as domestic consumption recovered, it added.
Domestic financial markets remain stable, the central bank said, adding that the exchange rate of the som had appreciated by 9.0 percent from the beginning of the year to Nov. 28, with intervention in the foreign exchange market only carried out to smooth short-term fluctuations.
The som, which fell swiftly from early 2014 until December 2015, has firmed since February this year and was trading at 69.0 to the U.S. dollar today, up from 75.9 at the start of the year.
Last month the International Monetary Fund said the NBKR had "done a good job steering the economy through the recent period of volatility" and could relax its policy given the decline in inflation while still remaining vigilant for signs of fiscal and exchange rate pressures.
www.CentralBankNews.info
Kenya holds rate on mild inflation, rate cap uncertainty
Kenya's central bank left its Central Bank Rate (CBR) at 10.0 percent, citing mild inflationary pressures, and the need for more "conclusive information" on prevailing domestic and global economic uncertainties.
The Central Bank of Kenya (CBK), which has cut its rate by 150 basis points following cuts in May and September, said global growth prospects remain fragile in the wake of the U.K. Brexit decision and political developments in the U.S. and "uncertainty relating to the tightening of U.S. monetary policy and its implications for global capital flows remain a concern."
The CBK said there still wasn't enough data on the impact of the decision by Kenya's government to impose a cap on banks' lending and deposit rates for form a "conclusive analysis," and it was closely monitoring developments.
As of Sept. 14, lending and deposit rates at Kenya's banks were capped at 4 percentage points above the central bank's CBK rate.
The exchange rate of Kenya's shilling has weakened only slightly in recent months despite speculation that it could take a hit from the government's decision to impose a cap on banks' rates.
The shilling was trading at 101.9 to the U.S. dollar today, up 0.4 percent this year, with the central bank saying the foreign exchange market had remained relatively stable despite global volatility following the U.S. Presidential elections and the seasonal rise in demand for foreign exchange by corporates to finance dividend payments.
While the government imposed the limit in an effort to boost local lending, there were fears that it could unnerve investors and lead to a shift into foreign currencies.
Local banks criticized the limit, saying credit may dry up if they can't price loans according to risks, and the International Monetary Fund (IMF) expressed its concern over the measure, saying experience from other countries shows rate controls are ineffective, give rise to unintended negative consequences and can lead to lower economic growth and undermine efforts to reduce poverty.
"In addition, interest rates limits undermine the effectiveness of monetary policy aimed at ensuring price stability and supporting sustainable economic growth," the IMF said on Nov. 4.
The central bank's stock of foreign exchange reserves of US$7.305 billion - down from $7.803.6 billion in September - along with the precautionary arrangements with the IMF of $1.5 billion "have continued to provide adequate buffers against short-term shocks," the CBK said.
Kenya's inflation rate rose slightly to 6.47 percent in October from 6.34 percent in September, but remains within the government's target range of 2.5 to 7.5 percent.
Kenya's economy grew by an annual rate of 6.2 percent in the second quarter of this year, up from 5.9 percent in the same 2015 quarter and the first quarter, and while the non-bank private sector remains optimistic for higher growth this year, the central bank said "banks were cautious as they continue to monitor the potential impact of the capping of interest rates."
www.CentralBankNews.info
The Central Bank of Kenya (CBK), which has cut its rate by 150 basis points following cuts in May and September, said global growth prospects remain fragile in the wake of the U.K. Brexit decision and political developments in the U.S. and "uncertainty relating to the tightening of U.S. monetary policy and its implications for global capital flows remain a concern."
The CBK said there still wasn't enough data on the impact of the decision by Kenya's government to impose a cap on banks' lending and deposit rates for form a "conclusive analysis," and it was closely monitoring developments.
As of Sept. 14, lending and deposit rates at Kenya's banks were capped at 4 percentage points above the central bank's CBK rate.
The exchange rate of Kenya's shilling has weakened only slightly in recent months despite speculation that it could take a hit from the government's decision to impose a cap on banks' rates.
The shilling was trading at 101.9 to the U.S. dollar today, up 0.4 percent this year, with the central bank saying the foreign exchange market had remained relatively stable despite global volatility following the U.S. Presidential elections and the seasonal rise in demand for foreign exchange by corporates to finance dividend payments.
While the government imposed the limit in an effort to boost local lending, there were fears that it could unnerve investors and lead to a shift into foreign currencies.
Local banks criticized the limit, saying credit may dry up if they can't price loans according to risks, and the International Monetary Fund (IMF) expressed its concern over the measure, saying experience from other countries shows rate controls are ineffective, give rise to unintended negative consequences and can lead to lower economic growth and undermine efforts to reduce poverty.
"In addition, interest rates limits undermine the effectiveness of monetary policy aimed at ensuring price stability and supporting sustainable economic growth," the IMF said on Nov. 4.
The central bank's stock of foreign exchange reserves of US$7.305 billion - down from $7.803.6 billion in September - along with the precautionary arrangements with the IMF of $1.5 billion "have continued to provide adequate buffers against short-term shocks," the CBK said.
Kenya's inflation rate rose slightly to 6.47 percent in October from 6.34 percent in September, but remains within the government's target range of 2.5 to 7.5 percent.
Kenya's economy grew by an annual rate of 6.2 percent in the second quarter of this year, up from 5.9 percent in the same 2015 quarter and the first quarter, and while the non-bank private sector remains optimistic for higher growth this year, the central bank said "banks were cautious as they continue to monitor the potential impact of the capping of interest rates."
www.CentralBankNews.info
Israel maintains rate and to keep policy accommodative
Israel's central bank left its benchmark interest rate at 0.10 percent, as expected, and confirmed that it will keep its monetary policy "accommodative for a considerable time," in light of inflation, the global economy, the exchange rate and the monetary policy of major central banks.
The Bank of Israel (BOI), which has maintained the rate since its last cut in February 2015, also reiterated that the risks of achieving its inflation target "remain high."
Israel's remains in the grip of deflation, with consumer prices falling by 0.3 percent in October, the smallest decline since February, and well below the BOI's target of 1-3 percent.
But the BOI said the inflation rate has been rising for several months as the effect of lower energy prices and other price reductions abates, and medium and long-term expectations moved up this month following the U.S. Presidential election while short-term expectations were steady.
Third-year forward inflation expectations rose to 1.36 percent from 1.0 percent last month while 3-5 year forward expectations rose to 1.45 percent from 1.2 percent. Longer-term expectations (5-10 years) rose to 2.37 percent from 2.25 percent.
The central bank added that economic activity remains "positive," noting that first estimates of third quarter Gross Domestic Product show an annual increase of 3.2 percent, driven by investment and private consumption while exports declined.
The exchange rate of the shekel "continues to weigh on the growth of exports and of the tradable sector," the BOI said, adding that it appreciated by 1.6 percent in terms of the nominal effective exchange rate from the previous policy discussion through Nov. 25.
The shekel, which fell sharply from August 2014 to March 2015, has risen slightly this year and was trading at 3.86 to the U.S. dollar today, up 0.8 percent this year.
The Bank of Israel (BOI), which has maintained the rate since its last cut in February 2015, also reiterated that the risks of achieving its inflation target "remain high."
Israel's remains in the grip of deflation, with consumer prices falling by 0.3 percent in October, the smallest decline since February, and well below the BOI's target of 1-3 percent.
But the BOI said the inflation rate has been rising for several months as the effect of lower energy prices and other price reductions abates, and medium and long-term expectations moved up this month following the U.S. Presidential election while short-term expectations were steady.
Third-year forward inflation expectations rose to 1.36 percent from 1.0 percent last month while 3-5 year forward expectations rose to 1.45 percent from 1.2 percent. Longer-term expectations (5-10 years) rose to 2.37 percent from 2.25 percent.
The central bank added that economic activity remains "positive," noting that first estimates of third quarter Gross Domestic Product show an annual increase of 3.2 percent, driven by investment and private consumption while exports declined.
The exchange rate of the shekel "continues to weigh on the growth of exports and of the tradable sector," the BOI said, adding that it appreciated by 1.6 percent in terms of the nominal effective exchange rate from the previous policy discussion through Nov. 25.
The shekel, which fell sharply from August 2014 to March 2015, has risen slightly this year and was trading at 3.86 to the U.S. dollar today, up 0.8 percent this year.
Saturday, November 26, 2016
This week in monetary policy: Israel, Kyrgyzstan, Kenya, Angola, Sri Lanka, Argentina, Brazil, Dominican Rep. and Bulgaria
This week (November 27 through December 3) central banks from 9 countries or
jurisdictions are scheduled to decide on monetary policy: Israel, Kyrgyz Republic, Kenya, Angola, Sri Lanka, Argentina, Brazil, Dominican Republic and Bulgaria.
Following table includes the name of the country, the date of the next policy
decision, the current policy rate, the result of the last policy decision, the
change in the policy rate year to date, the rate one year ago, and the
country’s MSCI classification.
The
table is updated when the latest decisions are announced and can always
accessed by clicking on This Week.
| WEEK 48 | ||||||
| NOV 27 - DEC 3, 2016: | ||||||
| COUNTRY | DATE | RATE | LATEST | YTD | 1 YR AGO | MSCI |
| ISRAEL | 28-Nov | 0.10% | 0 | 0 | 0.10% | DM |
| KYRGYZSTAN | 28-Nov | 6.00% | 0 | -400 | 10.00% | |
| KENYA | 28-Nov | 10.00% | -50 | -150 | 11.50% | FM |
| ANGOLA | 28-Nov | 16.00% | 0 | 500 | 10.50% | |
| SRI LANKA | 29-Nov | 7.00% | 0 | 100 | 6.00% | FM |
| ARGENTINA | 29-Nov | 25.25% | -50 | -1,150 | N/A | FM |
| BRAZIL | 30-Nov | 14.00% | -25 | -25 | 14.25% | EM |
| DOMINICAN REP. | 30-Nov | 5.50% | 50 | 50 | 5.00% | |
| BULGARIA | 30-Nov | 0.00% | 0 | -1 | 0.01% | FM |
Friday, November 25, 2016
Trinidad & Tobago holds rate on weak inflation pressure
Trinidad and Tobago's central bank left its benchmark repo rate at 4.75 percent, taking note of "the overall economic conditions, the weak inflationary pressures and the current anticipated trajectory of external interest rates."
The Central Bank of Trinidad and Tobago (CBTT), which has maintained its rate since January 2015, said price pressures were well contained while data showed continued softening of the non-energy sector in construction and distribution in the third quarter while there was curtailed energy sector output relative to the first three quarters of 2015.
Trinidad and Tobago's headline inflation rate declined slightly to 3.0 percent in September from 3.1 percent in August while core inflation, which excludes food prices, rose to 2.3 percent from 2.2 percent.
Trinidad and Tobago's economy remains in recession, with Gross Domestic Product shrinking by an annual rate of 8 percent in the second quarter, the seventh consecutive quarter of shrinkage.
Trinidad's dollar has dropped this year and was also caught up in the overall drop in emerging market currencies following the election of Donald Trump as U.S. president. The TTD was trading at 6.77 to the U.S. dollar today, down 5.2 percent since the star of this year.
The yield differential between TT and U.S. 10-year Treasury securities narrowed to 216 basis points as of Nov. 14 compared with 255 points at the end of October on a growing consensus that the U.S. Federal Reserve will raise rates in the near future, the CBTT said.
The Central Bank of Trinidad and Tobago (CBTT), which has maintained its rate since January 2015, said price pressures were well contained while data showed continued softening of the non-energy sector in construction and distribution in the third quarter while there was curtailed energy sector output relative to the first three quarters of 2015.
Trinidad and Tobago's headline inflation rate declined slightly to 3.0 percent in September from 3.1 percent in August while core inflation, which excludes food prices, rose to 2.3 percent from 2.2 percent.
Trinidad and Tobago's economy remains in recession, with Gross Domestic Product shrinking by an annual rate of 8 percent in the second quarter, the seventh consecutive quarter of shrinkage.
Trinidad's dollar has dropped this year and was also caught up in the overall drop in emerging market currencies following the election of Donald Trump as U.S. president. The TTD was trading at 6.77 to the U.S. dollar today, down 5.2 percent since the star of this year.
The yield differential between TT and U.S. 10-year Treasury securities narrowed to 216 basis points as of Nov. 14 compared with 255 points at the end of October on a growing consensus that the U.S. Federal Reserve will raise rates in the near future, the CBTT said.
Colombia holds rate but 2 members vote to cut by 25 bps
Colombia's central bank left its key policy rate at 7.75 percent but took note of decelerating inflation and weak economic growth, and said two of its board members had voted to cut the rate by 25 basis points while the other five voted to retain the rate.
The Central Bank of Colombia paused in its monetary tightening cycle in August after raising its rate by 325 basis points since September 2015, including 200 points this year.
In September all seven board members agreed to maintain the rate but earlier this month in London Colombia's finance minister, Mauricio Cardenas, said rates could start to fall in the near future as inflation was starting to ease.
Colombia's inflation rate delerated for the third month in October, easing to 6.48 percent from 7.27 percent in September and a 2016-high of 8.97 percent in July.
The central bank said the temporary supply shocks in 2014 that pushed inflation above its target were easing at a faster-than-expected pace, illustrated by the lowest annual change in consumer prices and the recent behavior of prices that were affected by the depreciation of the peso.
Inflation expectations one to two years ahead were 4.18 percent and 3.57 percent, respectively, the bank said, adding its board had confirmed the inflation target of 3.0 percent and reiterated that its policy is aimed at driving inflation down to this target, plus/minus 1 percentage points in 2017.
As with the currency of many other emerging market currencies, Colombia's peso has dropped since the U.S. Presidential election and was trading at 3,168 today, down 4.0 percent since the election but still up 0.2 percent since the start of this year.
Increased global uncertainty, and expected gradual tightening of U.S. rates, has pushed up long-term interest rates and lowered oil prices, raising the cost of external financing for Colombia and led to a depreciation of the currency, the central bank said.
From mid-2014 to February this year, Colombia's peso fell around 45 percent, reflecting the drop in global crude oil prices and the slowdown in China's economy, pushing up inflation.
Colombia's economic growth has also been decelerating, easing to a lower-than-expected annual growth rate of 1.2 percent in the third quarter of this year, the slowest growth since the second quarter of 2009, from 2.0 percent in the second quarter.
The central bank said data suggest that growth this year will be close to 2.0 percent, below September's forecast of 2.3 percent. In July the central bank lowered its forecast to 2.3 percent from 2.5 percent.
www.CentralBankNews.info
The Central Bank of Colombia paused in its monetary tightening cycle in August after raising its rate by 325 basis points since September 2015, including 200 points this year.
In September all seven board members agreed to maintain the rate but earlier this month in London Colombia's finance minister, Mauricio Cardenas, said rates could start to fall in the near future as inflation was starting to ease.
Colombia's inflation rate delerated for the third month in October, easing to 6.48 percent from 7.27 percent in September and a 2016-high of 8.97 percent in July.
The central bank said the temporary supply shocks in 2014 that pushed inflation above its target were easing at a faster-than-expected pace, illustrated by the lowest annual change in consumer prices and the recent behavior of prices that were affected by the depreciation of the peso.
Inflation expectations one to two years ahead were 4.18 percent and 3.57 percent, respectively, the bank said, adding its board had confirmed the inflation target of 3.0 percent and reiterated that its policy is aimed at driving inflation down to this target, plus/minus 1 percentage points in 2017.
As with the currency of many other emerging market currencies, Colombia's peso has dropped since the U.S. Presidential election and was trading at 3,168 today, down 4.0 percent since the election but still up 0.2 percent since the start of this year.
Increased global uncertainty, and expected gradual tightening of U.S. rates, has pushed up long-term interest rates and lowered oil prices, raising the cost of external financing for Colombia and led to a depreciation of the currency, the central bank said.
From mid-2014 to February this year, Colombia's peso fell around 45 percent, reflecting the drop in global crude oil prices and the slowdown in China's economy, pushing up inflation.
Colombia's economic growth has also been decelerating, easing to a lower-than-expected annual growth rate of 1.2 percent in the third quarter of this year, the slowest growth since the second quarter of 2009, from 2.0 percent in the second quarter.
The central bank said data suggest that growth this year will be close to 2.0 percent, below September's forecast of 2.3 percent. In July the central bank lowered its forecast to 2.3 percent from 2.5 percent.
www.CentralBankNews.info
Thursday, November 24, 2016
Turkey hikes key rate 50 bps on inflation risk from lira
Turkey's central bank raised its benchmark one-week repo rate by 50 basis points to 8.0 percent, saying the depreciation of the lira due to heightened global uncertainty and volatility posed an upside risks to inflation and it "decided to implement monetary tightening contain the adverse impact of these developments on expectations and the pricing behavior.
The Central Bank of the Republic of Turkey (CBRT) also raised its overnight lending rate by 25 basis points to 8.50 percent while the borrowing rate was maintained at 7.25 percent. The lending rate in the central bank's late liquidity window was also raised 25 points to 10.0 percent.
At the same time, the CBRT lowered the reserve requirement for foreign exchange liabilities by 50 basis points for all maturities, freeing up an approximate US$1.5 billion of liquidity to the financial system.
It is the CBRT's first change to its base rate since February 2015 and the first rate hike since a 550 point emergency rate hike in January 2014 after the lira tumbled as investors started to move funds out many emerging market currencies, especially those coined the "Fragile Five:" Turkey, India, Indonesia, South Africa and Brazil.
Many emerging market currencies have witnessed a sell-off since the election of Donald Trump in the U.S. In addition, the lira has been hit as investors are unnerved by the government's purges of state employees and others in the wage of a failed coup and doubts the CBRT would be able to act independently in the face of pressure from politicians to keep rates low.
Prior to the election of Trump on Nov. 8, the CBRT had been slowly lowering the overnight funding rate by 250 basis points since March as inflation had been decelerating amidst the bank's effort to simplify its rate structure.
Despite the central bank's rate hike, the lira dropped further today and was trading at 3.43 to the U.S. dollar, down 7.9 percent since the day prior to the U.S. Presidential election and down 14.7 percent since the start of this year.
Turkey's headline inflation rate eased to 7.16 percent in October from 7.28 percent in September and the CBRT said economic activity in the third quarter had decelerated but it expects activity to recover from the final quarter due to the government's supportive measures and incentives.
As in recent months, the CBRT said it was closely monitoring inflation and expectations and its cautious monetary policy stance would be maintained while future decisions would be conditional on the outlook for inflation.
The Central Bank of the Republic of Turkey (CBRT) also raised its overnight lending rate by 25 basis points to 8.50 percent while the borrowing rate was maintained at 7.25 percent. The lending rate in the central bank's late liquidity window was also raised 25 points to 10.0 percent.
At the same time, the CBRT lowered the reserve requirement for foreign exchange liabilities by 50 basis points for all maturities, freeing up an approximate US$1.5 billion of liquidity to the financial system.
It is the CBRT's first change to its base rate since February 2015 and the first rate hike since a 550 point emergency rate hike in January 2014 after the lira tumbled as investors started to move funds out many emerging market currencies, especially those coined the "Fragile Five:" Turkey, India, Indonesia, South Africa and Brazil.
Many emerging market currencies have witnessed a sell-off since the election of Donald Trump in the U.S. In addition, the lira has been hit as investors are unnerved by the government's purges of state employees and others in the wage of a failed coup and doubts the CBRT would be able to act independently in the face of pressure from politicians to keep rates low.
Prior to the election of Trump on Nov. 8, the CBRT had been slowly lowering the overnight funding rate by 250 basis points since March as inflation had been decelerating amidst the bank's effort to simplify its rate structure.
Despite the central bank's rate hike, the lira dropped further today and was trading at 3.43 to the U.S. dollar, down 7.9 percent since the day prior to the U.S. Presidential election and down 14.7 percent since the start of this year.
Turkey's headline inflation rate eased to 7.16 percent in October from 7.28 percent in September and the CBRT said economic activity in the third quarter had decelerated but it expects activity to recover from the final quarter due to the government's supportive measures and incentives.
As in recent months, the CBRT said it was closely monitoring inflation and expectations and its cautious monetary policy stance would be maintained while future decisions would be conditional on the outlook for inflation.
Wednesday, November 23, 2016
Malaysia holds rate, turns slightly optimistic on outlook
Malaysia's central bank left its benchmark Overnight Policy Rate (OPR) at 3.0 percent but struck a slightly more optimistic tone about the outlook for the country's exports based on an improved outlook for the global economy and comforted by better-than-expected third quarter growth.
Bank Negara Malaysia (BNM), which in July cut its rate for the first time since March 2009, said exports are expected to "expand" but still constrained by soft demand from Malaysia's key trading partners, a more optimistic view than in September when it said that "export growth is expected to remain weak following subdued demand" from its key trading partners.
BNM also said that the "risk of destabilizing financial imbalances has been contained" - an observation that was new in comparison to its September statement - and a reference to the shift in global financial markets since the U.S. Presidential election that triggered intervention in foreign currency markets by Malaysia and other Asian central banks.
On the global front, BNM said estimates for global growth in 2017 had improved, as the "prospect of a shift towards progressive use of fiscal policy in the developed economies could lead to a more balanced policy environment that would support growth going forward."
However, the central bank also cautioned of "uncertainty arising from risks of protectionism and financial market volatility," a clear reference to ideas by U.S. President-elect Donald Trump about changing global trade in favor of the U.S.
Malaysia's Gross Domestic Product grew by a better-than-expected annual rate of 4.3 percent in the third quarter of this year, up from 4.0 percent in the second quarter and reversing five quarters of decline.
Growth was supported by private sector activity and exports that grew 5.9 percent, up from a 7 percent drop in the second quarter.
BNM said the private sector will remain the driver of growth as consumption is sustained by wage and employment growth, along with support by government measures to raise income. Although investment is moderating, it will be supported by infrastructure investments and exports will expand but still be constrained by soft demand from trading partners.
Malaysia's inflation rate was steady at 1.5 percent in September from August and BNM expects it to be at the lower end of the 2.0-2.5 percent range forecast for this year, a slight change compared with its September statement when it forecast that it would be at the lower end of a 2-3 percent range.
Malaysia's ringgit, along with many other emerging market currencies, dropped sharply in the days following the election of Donald Trump, and the central bank said these "sharp adjustments and significant volatility" could result in periods of volatility in regional financial and foreign exchange markets.
"In this regard, Bank Negara Malaysia will continue to provide liquidity to ensure the orderly functioning of the domestic foreign exchange market," BNM said.
In the days following the U.S. election, the ringgit fell to levels against the U.S. dollar not seen in 12 years and remains weak. But it has been depreciating since mid-April and was trading at 4.44 to the dollar today, down from 4.18 on the day of the election but up from lows of 4.48 seen on Nov. 11.
Compared with the start of the year, the ringgit is down only 3.2 percent.
Bank Negara Malaysia (BNM), which in July cut its rate for the first time since March 2009, said exports are expected to "expand" but still constrained by soft demand from Malaysia's key trading partners, a more optimistic view than in September when it said that "export growth is expected to remain weak following subdued demand" from its key trading partners.
BNM also said that the "risk of destabilizing financial imbalances has been contained" - an observation that was new in comparison to its September statement - and a reference to the shift in global financial markets since the U.S. Presidential election that triggered intervention in foreign currency markets by Malaysia and other Asian central banks.
On the global front, BNM said estimates for global growth in 2017 had improved, as the "prospect of a shift towards progressive use of fiscal policy in the developed economies could lead to a more balanced policy environment that would support growth going forward."
However, the central bank also cautioned of "uncertainty arising from risks of protectionism and financial market volatility," a clear reference to ideas by U.S. President-elect Donald Trump about changing global trade in favor of the U.S.
Malaysia's Gross Domestic Product grew by a better-than-expected annual rate of 4.3 percent in the third quarter of this year, up from 4.0 percent in the second quarter and reversing five quarters of decline.
Growth was supported by private sector activity and exports that grew 5.9 percent, up from a 7 percent drop in the second quarter.
BNM said the private sector will remain the driver of growth as consumption is sustained by wage and employment growth, along with support by government measures to raise income. Although investment is moderating, it will be supported by infrastructure investments and exports will expand but still be constrained by soft demand from trading partners.
Malaysia's inflation rate was steady at 1.5 percent in September from August and BNM expects it to be at the lower end of the 2.0-2.5 percent range forecast for this year, a slight change compared with its September statement when it forecast that it would be at the lower end of a 2-3 percent range.
Malaysia's ringgit, along with many other emerging market currencies, dropped sharply in the days following the election of Donald Trump, and the central bank said these "sharp adjustments and significant volatility" could result in periods of volatility in regional financial and foreign exchange markets.
"In this regard, Bank Negara Malaysia will continue to provide liquidity to ensure the orderly functioning of the domestic foreign exchange market," BNM said.
In the days following the U.S. election, the ringgit fell to levels against the U.S. dollar not seen in 12 years and remains weak. But it has been depreciating since mid-April and was trading at 4.44 to the dollar today, down from 4.18 on the day of the election but up from lows of 4.48 seen on Nov. 11.
Compared with the start of the year, the ringgit is down only 3.2 percent.
Tuesday, November 22, 2016
Nigeria holds rate, notes importance of stable prices
Nigeria's central bank left its benchmark Monetary Policy Rate (MPR) at 14.0 percent, citing the importance of price stability and the limitations of monetary policy in influencing economic output and employment under conditions of stagflation.
The Central Bank of Nigeria (CBN), which has raised its rate by 300 basis points this year to restrain inflation, said economic growth is expected to remain "less robust" given the absence of fiscal space while there are signs that inflation is being contained from moderate price expectations in light of the tight monetary stance and an improved agricultural harvest.
Nigeria's inflation rate rose to 18.3 percent in October - the highest since October 2005 - from 17.9 percent in September on higher food prices, with the CBN saying the "incessant pressure on consumer prices continues to come from structural factors, including high cost of power and energy, transport, production factors, as well as rising prices of imports."
The average exchange rate of Nigeria's naira weakened from September 1 to October 27, with the central bank saying foreign exchange inflows had declined by 31.85 percent to US$957.37 million due to lower crude oil and other government revenues.
The naira was quoted at 316.5 to the U.S. dollar today, down 37 percent this year.
Total foreign exchange outflows had also fallen by 58.68 percent to US$1.015.08 billion during the same period despite the resumption of joint venture payments.
The central bank's policy committee "implored" the bank's management to continue to make foreign exchange available to agriculture and manufacturing sectors by enforcing the policy of allocating 60 percent of available foreign exchange to these sectors.
Nigeria's Gross Domestic Product contracted by an annual rate of 2.24 percent in the third quarter of this year, down from minus 2.06 percent in the second quarter and minus 0.36 percent in the first.
"The MPC noted that they key undercurrents - shortage of foreign exchange, low fiscal activity, high energy prices and the accumulation of salary arrears, especially at the sub-national levels of government, continued in the third quarter of the year," the CBN said.
It added that these conditions could not have been improved by monetary policy instruments directly and there is a need to engineer monetary policy in such as way that gives fiscal policy the space to improve public investment in infrastructure.
The Central Bank of Nigeria (CBN), which has raised its rate by 300 basis points this year to restrain inflation, said economic growth is expected to remain "less robust" given the absence of fiscal space while there are signs that inflation is being contained from moderate price expectations in light of the tight monetary stance and an improved agricultural harvest.
Nigeria's inflation rate rose to 18.3 percent in October - the highest since October 2005 - from 17.9 percent in September on higher food prices, with the CBN saying the "incessant pressure on consumer prices continues to come from structural factors, including high cost of power and energy, transport, production factors, as well as rising prices of imports."
The average exchange rate of Nigeria's naira weakened from September 1 to October 27, with the central bank saying foreign exchange inflows had declined by 31.85 percent to US$957.37 million due to lower crude oil and other government revenues.
The naira was quoted at 316.5 to the U.S. dollar today, down 37 percent this year.
Total foreign exchange outflows had also fallen by 58.68 percent to US$1.015.08 billion during the same period despite the resumption of joint venture payments.
The central bank's policy committee "implored" the bank's management to continue to make foreign exchange available to agriculture and manufacturing sectors by enforcing the policy of allocating 60 percent of available foreign exchange to these sectors.
Nigeria's Gross Domestic Product contracted by an annual rate of 2.24 percent in the third quarter of this year, down from minus 2.06 percent in the second quarter and minus 0.36 percent in the first.
"The MPC noted that they key undercurrents - shortage of foreign exchange, low fiscal activity, high energy prices and the accumulation of salary arrears, especially at the sub-national levels of government, continued in the third quarter of the year," the CBN said.
It added that these conditions could not have been improved by monetary policy instruments directly and there is a need to engineer monetary policy in such as way that gives fiscal policy the space to improve public investment in infrastructure.
Hungary holds base rate but cuts overnight rate again
Hungary's central bank left its benchmark base rate at 0.90 percent but eased monetary conditions further by lowering its overnight lending rate by another 15 basis points and confirmed its easing bias by saying it is "ready to ease monetary conditions further using unconventional, targeted instruments."
The National Bank of Hungary (NBH) last cut its base rate in May but has been easing its monetary policy by other means, including cutting the overnight lending rate and the required reserve ratio, and limiting the use of its main policy tool, the 3-month deposit facility, to encourage banks to buy government debt and offer cheaper loans to consumers and business.
Today's 15 basis point cut in the overnight lending rate follows last month's 10 point cut and a cut in the required reserve ratio by 100 points.
As the NBH left the overnight deposit rate at minus 0.05 percent, the interest rate corridor narrowed, resulting in a lowering of the rate on one-week loans by 10 basis points to 0.90 percent.
The central bank reiterated its view that maintaining the base rate "for an extended period" but loosening monetary conditions by changing other policy instruments is consistent with its efforts to reach its medium-term inflation target and supporting the economy.
Although Hungary's inflation rate is rising and the downward drag on prices from unused capacity in the country's economy is declining, the central bank expects inflation to remain "moderate for an extended period."
Headline inflation accelerated to a higher-than-expected 1.0 percent in October, the highest rate since September 2013, from 0.6 percent in September.
But the NBH said the persistence of low global inflation and historically-low inflation expectations is holding back consumer prices and inflation will first get close to its 3.0 percent target by mid-2018.
Hungary's economy is also picking up speed, with growth in the third quarter of this year up by an annual rate of 2.0 percent, down from 2.8 percent in the second quarter, helped by robust retail sales in September.
The central bank expects household consumption to grow further in coming quarters and demand for labour remains strong, helping the unemployment rate decline further.
After dropping from 2008 until January 2015, Hungary's forint has been more stable against the euro since June 2015 and firming in the last four months.
The forint was trading at 307.9 against the euro today, up 2.2 percent this year.
The National Bank of Hungary (NBH) last cut its base rate in May but has been easing its monetary policy by other means, including cutting the overnight lending rate and the required reserve ratio, and limiting the use of its main policy tool, the 3-month deposit facility, to encourage banks to buy government debt and offer cheaper loans to consumers and business.
Today's 15 basis point cut in the overnight lending rate follows last month's 10 point cut and a cut in the required reserve ratio by 100 points.
As the NBH left the overnight deposit rate at minus 0.05 percent, the interest rate corridor narrowed, resulting in a lowering of the rate on one-week loans by 10 basis points to 0.90 percent.
The central bank reiterated its view that maintaining the base rate "for an extended period" but loosening monetary conditions by changing other policy instruments is consistent with its efforts to reach its medium-term inflation target and supporting the economy.
Although Hungary's inflation rate is rising and the downward drag on prices from unused capacity in the country's economy is declining, the central bank expects inflation to remain "moderate for an extended period."
Headline inflation accelerated to a higher-than-expected 1.0 percent in October, the highest rate since September 2013, from 0.6 percent in September.
But the NBH said the persistence of low global inflation and historically-low inflation expectations is holding back consumer prices and inflation will first get close to its 3.0 percent target by mid-2018.
Hungary's economy is also picking up speed, with growth in the third quarter of this year up by an annual rate of 2.0 percent, down from 2.8 percent in the second quarter, helped by robust retail sales in September.
The central bank expects household consumption to grow further in coming quarters and demand for labour remains strong, helping the unemployment rate decline further.
After dropping from 2008 until January 2015, Hungary's forint has been more stable against the euro since June 2015 and firming in the last four months.
The forint was trading at 307.9 against the euro today, up 2.2 percent this year.
Monday, November 21, 2016
Ghana cuts rate 50 bps in first easing since July 2011
Ghana's central bank cut its policy rate by 50 basis points to 25.50 percent, saying the downside risks to economic growth now outweighed the risks of high inflation.
It is the first change in policy by the Bank of Ghana (BOG) since the last rate hike in November 2015 and the first rate cut since July 2011.
Between February 2012 and November last year the central bank raised its policy rate by 13.50 percentage points as it sought to curb inflation and depreciation of the cedi's exchange rate.
But Ghana's inflation rate has trended downward since hitting 19.2 percent in March and eased to 15.8 percent in October from 17.2 percent in September due to lower non-food inflation.
"Policy tightness and continued stability of the exchange rate largely accounted for the declining trends," the bank said, describing the inflation outlook as "positive."
The central bank added that it expects inflation to return to its medium-term target band in 2017, supported by continued tight monetary policy and stability in the exchange rate. The central bank targets inflation of 8.0 percent, plus/minus 2 percentage points.
The cedi started to slowly depreciate in 2013 and fell faster in 2014 and most of 2015. But since October 2015 the exchange rate has been less volatile and depreciated 4.3 percent against the U.S. dollar between January and October compared with a fall of 15.5 percent in the same 2015 period.
Today the cedi was trading at 4.07 to the dollar, down from 3.82 at the start of the year for a decline of 6.1 percent.
"The outlook for the exchange rate remains positive and the Committee is optimistic that the cedi stability would be sustained," the bank said.
But Ghana's economic growth remains "weak and below trend," the bank said, due to weak global demand, lower commodity prices, disruptions in the production of oil and gas, and weak private sector credit growth due to the central bank's tight policy and fiscal consolidation.
"These tight conditions are expected to prevail in the outlook," the bank said.
Ghana's Gross Domestic Product grew by an annual rate of 2.5 percent in the second quarter of this year, down from 4.8 percent in the first quarter.
In September the International Monetary Fund (IMF) approved a disbursement of US$116.2 million to Ghana as part of 3-year arrangement agreed in 2015 that aimed to restore debt sustainability and macroeconomic stability to help the country's economy.
The IMF called on the central bank to maintain a tight policy stance to help bring inflation back to its target and although there have been some improvements to central bank governance, it welcomed further amendments so there is zero central bank financing of government finances.
The IMF added that Ghana had made progress in stabilizing the macroeconomy and reducing fiscal imbalances but there are still risks and called on further efforts to address revenue shortfalls while spending should be fully controlled to contain wages and other spending.
"The government is projected to run a primary surplus this year, which, along with the stability of the cedi, should contribute to a marked decline in the debt-to-GDP ratio," the IMF said.
It is the first change in policy by the Bank of Ghana (BOG) since the last rate hike in November 2015 and the first rate cut since July 2011.
Between February 2012 and November last year the central bank raised its policy rate by 13.50 percentage points as it sought to curb inflation and depreciation of the cedi's exchange rate.
But Ghana's inflation rate has trended downward since hitting 19.2 percent in March and eased to 15.8 percent in October from 17.2 percent in September due to lower non-food inflation.
"Policy tightness and continued stability of the exchange rate largely accounted for the declining trends," the bank said, describing the inflation outlook as "positive."
The central bank added that it expects inflation to return to its medium-term target band in 2017, supported by continued tight monetary policy and stability in the exchange rate. The central bank targets inflation of 8.0 percent, plus/minus 2 percentage points.
The cedi started to slowly depreciate in 2013 and fell faster in 2014 and most of 2015. But since October 2015 the exchange rate has been less volatile and depreciated 4.3 percent against the U.S. dollar between January and October compared with a fall of 15.5 percent in the same 2015 period.
Today the cedi was trading at 4.07 to the dollar, down from 3.82 at the start of the year for a decline of 6.1 percent.
"The outlook for the exchange rate remains positive and the Committee is optimistic that the cedi stability would be sustained," the bank said.
But Ghana's economic growth remains "weak and below trend," the bank said, due to weak global demand, lower commodity prices, disruptions in the production of oil and gas, and weak private sector credit growth due to the central bank's tight policy and fiscal consolidation.
"These tight conditions are expected to prevail in the outlook," the bank said.
Ghana's Gross Domestic Product grew by an annual rate of 2.5 percent in the second quarter of this year, down from 4.8 percent in the first quarter.
In September the International Monetary Fund (IMF) approved a disbursement of US$116.2 million to Ghana as part of 3-year arrangement agreed in 2015 that aimed to restore debt sustainability and macroeconomic stability to help the country's economy.
The IMF called on the central bank to maintain a tight policy stance to help bring inflation back to its target and although there have been some improvements to central bank governance, it welcomed further amendments so there is zero central bank financing of government finances.
The IMF added that Ghana had made progress in stabilizing the macroeconomy and reducing fiscal imbalances but there are still risks and called on further efforts to address revenue shortfalls while spending should be fully controlled to contain wages and other spending.
"The government is projected to run a primary surplus this year, which, along with the stability of the cedi, should contribute to a marked decline in the debt-to-GDP ratio," the IMF said.
Sunday, November 20, 2016
This week in monetary policy: Ghana, Hungary, Nigeria, Argentina, Malaysia, Paraguay, Turkey, South Africa, Moldova, Fiji, Colombia and Trinidad & Tobago
This week (November 20 through November 26) central banks from 12 countries or
jurisdictions are scheduled to decide on monetary policy: Ghana, Hungary, Nigeria, Argentina, Malaysia, Paraguay, Turkey, South Africa, Moldova, Fiji, Colombia and Trinidad and Tobago.
Following table includes the name of the country, the date of the next policy
decision, the current policy rate, the result of the last policy decision, the
change in the policy rate year to date, the rate one year ago, and the
country’s MSCI classification.
The
table is updated when the latest decisions are announced and can always
accessed by clicking on This Week.
| WEEK 47 | ||||||
| NOV 20 - NOV 26, 2016: | ||||||
| COUNTRY | DATE | RATE | LATEST | YTD | 1 YR AGO | MSCI |
| GHANA | 21-Nov | 26.00% | 0 | 0 | 26.00% | |
| HUNGARY | 22-Nov | 0.90% | 0 | -45 | 1.35% | EM |
| NIGERIA | 22-Nov | 14.00% | 0 | 300 | 11.00% | FM |
| ARGENTINA | 22-Nov | 25.75% | -50 | -1,100 | N/A | FM |
| MALAYSIA | 23-Nov | 3.00% | 0 | -25 | 3.25% | EM |
| PARAGUAY | 23-Nov | 5.50% | 0 | -25 | 5.75% | |
| TURKEY | 24-Nov | 7.50% | 0 | 0 | 7.50% | EM |
| SOUTH AFRICA | 24-Nov | 7.00% | 0 | 75 | 6.25% | EM |
| MOLDOVA | 24-Nov | 9.00% | -50 | -1,050 | 19.50% | |
| FIJI | 24-Nov | 0.50% | 0 | 0 | 0.50% | |
| COLOMBIA | 25-Nov | 7.75% | 0 | 200 | 5.50% | EM |
| TRINIDAD & TOBAGO | 25-Nov | 4.75% | 0 | 0 | 4.50% | |
Thursday, November 17, 2016
Mexico raises rate 50 bps to curb inflation from peso fall
Mexico's central bank raised its benchmark target for the interbank overnight rate by another 50 basis points to 5.25 percent to counter inflationary pressures and dampen inflation expectations and said it would continue to keep a close eye on the impact of the lower peso to consumer prices in order to take any necessary measures to keep inflation close to its 3.0 percent target.
The Bank of Mexico, which has now raised its rate by 225 basis points following the U.S. Federal Reserve's rate hike last December, said the possible implementation of measures that would hinder trade between the U.S. and Mexico had worsened the balance of risks facing Mexico's economy.
Also, there has been a clear rise in inflation expectations in response to an expected expansionary fiscal policy by the Trump administration, which has strengthened the arguments in favor of an increase in rates by the Federal Reserve in December and a more accelerated pace of rate hikes, and of a higher than anticipated size of rate hikes, the central bank said.
Mexico's inflation rate rose to 3.06 percent in October as underlying inflation is responding to the depreciation of the peso, with inflation expectations showing a moderate rise.
Although the central bank said financial markets were still pricing in inflation of around 3 percent - the central bank's target - for 2016, 2017 and by the end of 2018, it added that this forecast was subject to the risk that the deprecation of the peso would persist, generating second-order effects that have an adverse impact on prices.
The peso has been under pressure against the U.S. dollar since November 2014 and fell to record lows in the wake of the election victory of Donal Trump, who has threatened to renegotiate trade deals with Mexico and build a wall between the two countries.
The peso fell around 11 percent to 20.7 per U.S. dollar after Trump's victory and was trading slightly higher today at around 20.4 to the dollar following the central bank's rate hike.
www.CentralBankNews.info
The Bank of Mexico, which has now raised its rate by 225 basis points following the U.S. Federal Reserve's rate hike last December, said the possible implementation of measures that would hinder trade between the U.S. and Mexico had worsened the balance of risks facing Mexico's economy.
Also, there has been a clear rise in inflation expectations in response to an expected expansionary fiscal policy by the Trump administration, which has strengthened the arguments in favor of an increase in rates by the Federal Reserve in December and a more accelerated pace of rate hikes, and of a higher than anticipated size of rate hikes, the central bank said.
Mexico's inflation rate rose to 3.06 percent in October as underlying inflation is responding to the depreciation of the peso, with inflation expectations showing a moderate rise.
Although the central bank said financial markets were still pricing in inflation of around 3 percent - the central bank's target - for 2016, 2017 and by the end of 2018, it added that this forecast was subject to the risk that the deprecation of the peso would persist, generating second-order effects that have an adverse impact on prices.
The peso has been under pressure against the U.S. dollar since November 2014 and fell to record lows in the wake of the election victory of Donal Trump, who has threatened to renegotiate trade deals with Mexico and build a wall between the two countries.
The peso fell around 11 percent to 20.7 per U.S. dollar after Trump's victory and was trading slightly higher today at around 20.4 to the dollar following the central bank's rate hike.
www.CentralBankNews.info
Central Bank News Link List - Nov 17: U.S. inflation, labor market data bolster Fed December rate hike
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.
- U.S. inflation, labor market data bolster Fed December rate hike (Reuters)
- Bank Indonesia holds rate steady amid Trump-related uncertainty (Nikkei)
- BOJ acts to curb interest rate spikes following Trump victory (Kyodo)
- FDIC Hoenig urges tighter monetary policy, capital standards (MNI0
- Mexico may get a big rate hike after peso’s Trump tumble (Fortune)
- Malaysian central bank intervenes to support ringgit (Nikkei)
- PBOC advisers mull yuan intervention in rare public debate (MNI)
- Bank of Canada says does not need to move in step with Fed (Canadian Press)
- Carney growing tired of the global central bank blame game (Bloomberg)
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