Central Bank News: April 2017

Saturday, April 29, 2017

This week in monetary policy: Australia, Georgia, Albania, USA, Norway, Czech Republic and Romania

This week (April 30 through May 6) central banks from 7 countries or jurisdictions are scheduled to decide on monetary policy: Australia, Georgia, Albania, United States, Norway, the Czech Republic and Romania.

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 18
APR 30 - MAY 6, 2017:
COUNTRY	DATE	RATE	LATEST	YTD	1 YR AGO	MSCI
AUSTRALIA	2-May	1.50%	0	0	1.75%	DM
GEORGIA	2-May	6.50%	0	0	7.50%
ALBANIA	3-May	1.25%	0	0	1.25%
UNITED STATES	3-May	1.00%	25	25	0.50%	DM
NORWAY	4-May	0.50%	0	0	-0.50%	DM
CZECH REP.	4-May	0.05%	0	0	0.05%	EM
ROMANIA	5-May	1.75%	0	0	1.75%	FM

www.CentralBankNews.info

Angola maintains rate as inflation decelerates further

Angola's central bank maintained its benchmark BNA rate at 16.0 percent, along with its other key rates, and inflation is continuing to follow the downward trajectory that began in January.
The National Bank of Angola (BNA) has kept its key rate steady since June last year when it raised it to the current level to curb accelerating inflation. In 2016 the BNA rate was raised 500 basis points.
The BNA's monetary policy committee (CPM) met on April 28 and its next meeting is scheduled for May 30.
Angola's inflation rate, as measured by consumer prices in the province of Luanda, eased to 37.86 percent in March, down from 39.45 percent in February, according to the BNA.
Nationally, inflation eased to 36.52 percent in March, the third consecutive month of declining inflation since December 2016 when inflation hit 41.12 percent.
Angola's inflation rate began accelerating in early 2015 as the fall in crude oil prices dented government revenue and foreign exchange earnings, weakening the kwanza's exchange rate and pushing up import prices and inflation.
The BNA devalued the kwanza several times in recent years and has been quoting the kwanza at around 165 per U.S. dollar since mid-April 2016. In January last year the central bank let the kwanza ease to around 155 from around 135, the rate it had targeted since September 2015.
Today it said the average exchange rate of the kwanza was steady at 165.91 to the U.S. dollar.
The BNA sold US$2.193 billion to commercial agents through banks in March, up from $798 million in the previous month.

During the same period, the LUIBOR overnight rate was unchanged at 23.67 percent while 3 and 12-month rates were 21.05 percent and 25.75 percent, respectively.

Preliminary data also showed that credit issued to the economy in March fell by 0.75 percent from the previous month while gross credit to the central government rose by 0.98 percent and government deposits in the banking system declined by 2.59 percent.

www.CentralBankNews.info

Friday, April 28, 2017

Colombia cuts rate 50 bps and lowers growth forecast

Colombia's central bank cut its benchmark intervention rate by a further 50 basis points to 6.50 percent, a larger cut than expected by most analysts, and said further cuts would depend on how fast inflation falls to its 3.0 percent target and "excessive" economic slowdown.
It is the third rate cut this year by the Central Bank of Colombia, which has lowered the rate by a total of 100 basis points as inflation continues to decelerate amid a sluggish economy.
"In Colombia, recent indicators of economic activity, such as retail sales, industrial production and consumer confidence suggest a larger-than-expected weakening of the economy in the first quarter of of this year," the central bank said.
The bank's staff lowered its 2017 growth forecast to 1.8 percent from 2.0 percent, within a range of 0.8 to 2.6 percent.
In the last central bank survey, analysts lowered their 2017 growth forecasts to 2.02 percent from 2.3 percent, below the government's target of 2.5 percent. Forecasts for 2018 were cut to 2.8 percent from 3.0 percent.
Colombia's Gross Domestic Product grew by an annual rate of 1.6 percent in the fourth quarter of last year, up from 1.2 percent in the third quarter.
The bank's board, this time with only six instead of seven members, was split, with four members approving the 50 basis point cut while two wanted to cut the rate by 25 points.
Among the reasons for the rate cut, the central bank pointed to growing economic weakness and the risk of excessive deceleration from excess capacity in the economy along with uncertainty about how fast inflation will decelerate to the target of 3.0 percent, within a range of plus/minus 1 point.
"The current level of the real policy interest is contractive," the central bank said, adding that inflation expectations were also declining.
Colombia's inflation rate eased to 4.69 percent in March from 5.18 percent in February - the eight consecutive monthly decline - while inflation expectations for December 2017 and 2018 dropped to 4.4 percent and 3.5 percent, respectively.
Colombia's peso was trading at 2,941 to the U.S dollar today, up 2 percent this year.

Russia cuts rate 50 bps, inflation on target before end-'17

Russia's central bank cut its key policy rate by another 50 basis points to 9.25 percent, a move expected following its governor's statement last week, and said it now expects inflation to hit its 4.0 percent target before the end of this year.
The Bank of Russia has now cut its rate twice his year by a total of 75 basis points following cuts totaling 100 points last year and 600 points in 2015 as the central bank slowly lowers its key rate that hit 17.0 percent in December 2014.
Looking ahead, the central bank said it would consider the impact of oil prices on inflation and the economy but its overall assessment of the potential for further rate cuts before the end of this year was unchanged.
Last week Bank of Russia Governor Elvira Nabiullina said the country's economic situation looked reassuring and faster deceleration of inflation in April to close to the bank's target had opened up the possibility of a rate cut between 25 and 50 basis points.
Nabiullina's confident comments came as a surprise to many investors as the central bank in March - when it cut the rate by 25 points after a six month pause - had only said further cuts in the second and third quarters of this year were possible.
In February the central bank had dampened hopes of rate cuts in the first half of this year.
But Russia's inflation rate has been falling sharply, helped by a rise in the ruble's exchange rate, helping push down inflation expectations.
The central bank's confidence today that inflation would hit its target before the end of this year follows its view in March that inflation would first hit 4 percent by the end of 2017.
In March headline inflation fell to 4.3 percent from 4.6 percent in February and eased further to around 4.2 and 4.3 percent as of April 24, according to the central bank.
"Inflation slowdown was broadly facilitated by the ruble appreciation amid relatively higher oil prices, persistent interest in investment in Russian assets among external investors, and a drop in the sovereign risk premium," the central bank said.
Sluggish demand in Russia continues to keep a lid on prices as real incomes are still only showing weak growth. But the central bank said there were signs of a recovery in consumer activity and spending should gradually rise. There are no inflation risks from consumer lending, it added.
But overall, the central bank expects Russia's economy to continue to recover in the first quarter of this year as investments rise, with unemployment showing a downward trend and the recovery become more even throughout the country.
The central bank reiterated that it expects economic output to grow through 2019 even if oil prices drop back below $40 a barrel.
Russia's economy shrank by 0.2 percent last year following a contraction of 2.8 percent in 2015 and economists are looking for growth 1.2 percent this year.
In December the Bank of Russia forecast growth this year of 0.5 to 1.0 percent, rising to 1.5 to 2.0 percent in 2018 and 2019, if its baseline scenario of oil prices around $40 comes true. Higher oil prices will boost growth this year to over 1.0 percent, rising to 2.0-2.5 percent in 2018 and 2019.
Russia's ruble tumbled in 2014 in response to the fall in oil prices, its conflict in eastern Ukraine, the occupation of Crimea and Western sanctions.

In response the central bank drew down its international reserves to support the ruble and began rasing rates, culminating in a stunning 650-basis-point hike in December that year to 17.0 percent.

Another bout of volatility hit the ruble in 2015 during renewed conflict in Ukraine's Donbass region, with the ruble's exchange rate falling by 18 percent against the U.S. dollar in 2015 following a 45 percent plunge in 2014.

The fall in the ruble fired up inflation, which topped 16 percent in February and March of 2015. But in late 2015 inflation started to decelerate sharply as the economy shrank while the ruble hit a historic low of just over 82 to the dollar in late January 2016.

Since then the ruble has been steadily gaining strength, helping lower inflation

The ruble was trading at 56.98 to the dollar today, up 7.6 percent this year but still down 42.3 percent since the start of 2014.

Tunisia raises rate 50 bps as dinar falls sharply

Tunisia's central bank raised its key interest rate by 50 basis points to 4.75 percent at an extraordinary board meeting to help ease rising inflationary pressures following a sharp fall in the dinar's exchange rate and said it was closely following those pressures so it could "undertake the appropriate actions on time."
It was the first change in rates by the Central Bank of Tunisia (CBT) since October 2015, when the rate was lowered by 50 basis points. The bank's board met on April 25.
The central bank also raised the minimum savings rate that banks can offer by 50 points to 4.0 percent to boost the incentive to save and thus liquidity in the financial system. Tunisia's banks are in need of liquidity given a weak level of savings in the country, the central bank said.
The rate hike comes a week after Tunisia's finance minister said the central bank would reduce interventions in the foreign exchange market so the value of the dinar gradually declines in an effort to boost exports and lower imports, and thus reduce the trade deficit.
But last week's sharp fall in the dinar appears to have surprised the central bank, which said economic data "in no way justify the fluctuations recorded on the exchange market," and talks between the IMF and the government "were globally positive and encouraging."
The central bank added it did not have an exchange rate target in mind, nor was it floating the dinar but would carry out "well-calibrated interventions" to smooth our sharp fluctuations in the exchange rate while seeking to "contain the trade deficit slippage," ensure financing of imports and preserve foreign currency reserves.
The International Monetary Fund (IMF) last week released some US$319 million as part of an overall fund facility for Tunisia of some $638.5 million that is aimed at boosting economic growth and jobs at a time of high fiscal and external deficits.
The government and IMF are also working to increase social spending and strengthening the country's social safety net to "protect the vulnerable in these challenging times," the IMF said.
The IMF also said on April 17 that tighter monetary policy would help counteract inflationary pressures, give further flexibility to the exchange rate and narrow the trade deficit.
On April 18 the finance minister told local radio that the central bank would reduce its interventions in the foreign exchange market while still preventing a sharp slide in the dinar and avoiding what he described as Egypt's "brutal devaluation" of its pound last year of over 30 percent.
On April 20 and 21 the dinar fell by almost 9 percent to 2.52 to the U.S. dollar but it has rebounded this week and was trading at 2.46 today, down 6.5 percent since the start of this year.
Tunisia's inflation rate rose to 4.8 percent in March from 4.6 percent in the two previous months while Gross Domestic Product in the fourth quarter of last year rose by an annual 1.1. percent, down from 1.2 percent in the third quarter.
It its statement, the IMF said growth was expected to double this year to 2.3 percent "but will remain too low to significantly reduce unemployment, especially in the interior regions and among the youth."
The official unemployment rate was 15.5 percent in the last quarter of 2016.

Turkey holds key rate, raises lending rate to curb inflation

Turkey's central bank left its benchmark one-week repurchase rate steady at 8.0 percent but raised its late liquidity lending rate by a further 50 basis points to 12.25 percent and held out the prospect of further rate hikes to prevent a deterioration in the inflation outlook.
While the Central Bank of the Republic of Turkey (CBRT) has maintained its key rate since hiking it by 50 basis points in November last year, it has been tightening its policy stance by other means, such as raising other policy rates, the rate it pays on local lenders' U.S dollar reserves and required reserve ratios in a bid to boost the value of the lira and thus slow down inflation.
It was the third time this year the late liquidity lending rate, currently used by the central bank to provide a large proportion of the funds that banks need, was raised this year.
This lending rate has now been raised by a total of 2.25 percentage points so far this year.
But inflation jumped to 11.29 percent in March, the highest since October 2008, and the second consecutive month of double-digit inflation, well in excess of the bank's target of about 5 percent.
The CBRT's cautious rate hike today comes a week after Turkish President Tayyip Erdogan, an ardent critic of high interest rates, won a referendum that grants him wider powers.
The CBRT said food prices had led to a rapid rise in inflation and while the recent rise in risk appetite by investors may contain some of the pressure on costs, the current level of inflation risks leading to even further cost rises.
Data showed prices of clothing and foot wear rose by 1.99 percent in March from February, followed by a 1.93 percent rise in the cost of food and non-alcoholic beverages.
Looking ahead, the central bank said it's tight monetary policy stance would continue until there is a "significant improvement in the inflation outlook" and "additional monetary tightening will be possible if needed."
After falling sharply in the last two months of 2016, Turkey's lira has staged a slight rebound since hitting a historic low of 3.87 to the U.S. dollar in late January, helped by the central bank's various tightening measures.
Today the lira was trading at 3.59 to the dollar, down 1.7 percent since the start of this year.

This week in monetary policy: Hungary, Argentina, Paraguay, Georgia, Turkey, Japan, Fiji, Sweden, euro area, Moldova, Russia, Bulgaria and Colombia

This week (April 23 through April 28) central banks from 13 countries or jurisdictions are scheduled to decide on monetary policy: Hungary, Argentina, Paraguay, Georgia, Turkey, Japan, Fiji, Sweden, euro area, Moldova, Russia, Bulgaria and Colombia.