Angola holds rate as inflation eases, FX reserves rise

     Angola's central bank left its basic interest rate (BNA) at 18.0 percent and said it had sold 735.94 million euros to commercial banks in March, pushing up total sales this year to 2.246 billion from 1.510 billion in February.
     After years of foreign currency shortage, the National Bank of Angola (BNA) in January switched to a floating exchange rate regime with bands from a fixed exchange rate system, and began auctions of foreign currency to determine a reference rate.
      The BNA's monetary policy committee said the difference between the exchange rate of the kwanza against the euro between Jan. 9, when a new foreign currency regime was adopted, and March 30 had narrowed to 83.72 percent from 101.19 percent.

      The combined impact of higher oil exports and prices helped the trade balance rise to US$2.67 billion in March, up from $2.01 billion in February, and pushed up the level of international reserves by 1.26 percent to $17.69 billion from February, the equivalent of 7.37 months of imports.

      The adoption of a new exchange rate regime in January led to an immediate plunge in the value of the kwanza, which has continued to depreciate since then. Today the kwanza was trading at 273 to the euro, down just over 27 percent since Jan. 8, the day before the switch in exchange rate regime.
      Against the U.S. dollar the kwanza was trading at 225.9, down 26.5 percent since Jan. 8.
      Angola's inflation rate has been declining steadily since hitting 41.12 percent in December 2016 and fell to 20.9 percent in March from 21.47 percent in February.
       The country's monetary base, which is now a monetary policy variable, grew by 4.56 percent in March for an annual increase of 15.09 percent. Credit issued in kwanza, especially to the production and distribution of electricity, gas, water and education, rose 0.33 percent in March for an annual rise of around 9.50 percent, BNA said.

Record US$ credit to EMEs boosts global liquidity - BIS

      An unprecedented surge in the issuance of international debt securities by emerging market economies (EMEs) in the second half of last year helped boost total U.S. dollar credit to non-bank borrowers outside the United States by 8.3 percent to $11.35 trillion during 2017, according to the Bank for International Settlements (BIS).
      Against the backdrop of a depreciation of the U.S. dollar in 20176, the annual growth of U.S. dollar credit to non-bank borrowers in EMEs more than tripled to 10 percent by end-2017 from 3 percent in 2016, mainly driven by international debt securities that grew by an annual 22 percent in the second half of last year.
       In contrast, U.S. dollar bank loans, which contracted in 2016, grew by only 2 percent in the second half of last year but still accounted for the majority of the overall stock of $3.7 trillion, said BIS in its latest release of global liquidity indicators.
       The availability of global liquidity reflects the ease of financing and is considered one of the factors in the build-up of financial imbalances ahead of the global financial crises. The term has also been used in the context of the spill-over effects of monetary conditions in advanced economies to emerging market economies.
       In addition to the growth in U.S. dollar credit, foreign currency lending in euros and Japanese yen also grew in the second half of 2017, with euro credit to non-bank borrowers outside the euro area up by 10 percent in 2017 while yen-denominated credit, which contracted in 2016, grew 6 percent, said Swiss-based BIS.

       Click to read the full BIS release on global liquidity indicators at end-December 2017.

       www.CentralBankNews.info

       
     
       
     
     

Botswana maintains rate with inflation in line with target

      Botswana's central bank left its Bank Rate steady at 5.0 percent, saying the state of the economy and the outlook for domestic and external activity suggests the current monetary policy stance is consistent with inflation within its objective range of 3-6 percent.
       The Bank of Botswana (BB), which has maintained its rate since cutting it to the current level in October 2017, said subdued domestic demand pressures and the modest increase in foreign prices contributed to the positive outlook for inflation, with upside risk from an improving global economy and the potential rise in commodity price, unexpected increases in administered prices and government levies or taxes.
       Downside risks emanate from modest demand pressure and a restrained rise in salaries.
       Botswana's inflation rate eased to 2.8 percent in March from 3.2 percent in February, with the exchange rate of the pula softening in the last month after appreciating since January 2016.
      The pula was trading at 9.8 to the U.S. dollar today, up 0.7 percent this year and 9 percent higher than at the start of 2017.
       Last year Botswana's economy grew by 2.4 percent, down from 4.3 percent in 2016, as mining output contracted by 11.2 percent, faster than a 3.5 precent decline in 2016.
       This year BB expects the economy to benefit from growth in services and a recovery in mining activity, in line with the positive global economic prospects. In addition, stability in water and electricity supply, accommodative monetary conditions and higher government spending should support economic activity.
      "Overall, the economy is expected to operate close to, but below full capacity in the medium term," the central bank said.

This week in monetary policy: Botswana, Bulgaria, Angola, Dominican Rep, Australia, Georgia, Tajikistan, Albania, USA, Czech Rep, Norway, Moldova & Chile

    This week - April 29 through May 5 - central banks from 13 countries or jurisdictions are scheduled to decide on monetary policy: Botswana, Bulgaria, Angola, Dominican Republic, Australia, Georgia, Tajikistan, Albania, USA, Czech Republic, Norway, Moldova and Chile.

    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 29 - MAY 5 2018:
COUNTRY	DATE	RATE	LATEST	YTD	1 YR AGO	MSCI
BOTSWANA	30-Apr	5.00%	0	0	5.50%
BULGARIA	30-Apr	0.00%	0	0	0.00%	FM
ANGOLA	30-Apr	18.00%	0	0	16.00%
DOMINICAN REP.	30-Apr	5.25%	0	0	5.75%
AUSTRALIA	1-May	1.50%	0	0	1.50%	DM
GEORGIA	2-May	7.25%	0	0	7.00%
TAJIKISTAN	2-May	14.00%	-75	-200	16.00%
ALBANIA	2-May	1.25%	0	0	1.25%
USA	2-May	1.75%	25	25	1.00%	DM
CZECH REPUBLIC	3-May	0.75%	0	25	0.05%	EM
NORWAY	3-May	0.50%	0	0	0.50%	DM
MOLDOVA	3-May	6.50%	0	0	9.00%
CHILE	3-May	2.50%	0	0	2.50%	EM

    www.CentralBankNews.info

Russia holds rate but still assumes it will ease further

      Russia's central bank left its key monetary policy rate at 7.25 percent after cutting it five times in a row after the ruble's plunge earlier this month triggered uncertainty over how this would impact inflation expectations.
      But the Bank of Russia, which has cut its rate twice this year and six times in 2017, remains confident that inflation will not overshoot its 4.0 percent target and that it will continue to lower rates this year even if the estimated neutral rate has moved slightly higher.
      Today's decision by the central bank's board was widely expected by financial markets after central bank officials said the fall in the ruble had lowered the likelihood of a rate cut today and the weaker ruble could spur inflation and inflationary expectations.
      Between April 9 and April 11 the ruble plunged 10 percent and Russian stocks by 9 percent in response to fresh sanctions by the United States for its alleged meddling in the 2016 presidential election and criticism by President Donald Trump over its support for the Syrian government, which was accused of launching a chemical weapons attack.
       But on April 10 Bank of Russia Governor Elvira Nabiullina said she would not step in to halt the ruble's slide, describing it as a market correction as investors were uncertain over the impact of sanctions, and the free float of the ruble would help absorb any external shocks.
       Deputy Governor Ksenia Yudayeva echoed Nabiullina's statement on April 16 and added the situation on the currency market was balanced and the central bank doesn't intervene purely due to volatility but only if there are risks to financial stability.
       The assurances by the central bank officials helped soothe investors' nerves but while Russian stocks have bounced back the ruble remains weaker than before the sanctions.
       In response to today's policy decision, the ruble firmed 0.5 percent to 62.5 to the U.S. dollar and is now up 3.4 percent since a low of 64.6 on April 11.
       But the ruble is still 7 percent below its pre-sanction level and down 7.7 percent since the start of the year.
       "The Bank of Russia estimates that the ruble weakening will quicken inflation movement to 4% without the risks of overpassing this level, unless the external environment changes considerably," the central bank said, confirming it still expects inflation in a range of 3-4 percent by the end of this year and then to remain close to 4.0 percent in 2019.
       Russia's inflation rate rose slightly to 2.4 percent in March from a record low of 2.2 percent in February and is estimated by the central bank at 2.3-2.5 percent in April, saying weekly data showed little response by consumer prices to the ruble weakening.
       Household inflation expectations also dropped to a historical low of 7.8 percent in March though the central bank said it was unclear how expectations would respond to financial market volatility.
       The weakening of the ruble should help boost inflation toward the 4 percent target earlier than expected, the bank said, adding that monetary policy is still expected to become neutral this year.
        The bank had estimated a neutral policy rate in a range of 6-7 percent but said today the potential size of further rate cuts was now smaller as the estimated neutral rate had shifted closer to the upper bound of this range given a rise in Russia's risk premium and the increase in interest rates in advanced economies.
        Economic activity in Russia is continuing to expand but is still posing little disinflationary pressure on consumer prices, paving a way for inflation to return to 4 percent.
        Output continued to expand throughout March, the bank said, forecasting economic growth in the first quarter of 1.3-1.5 percent and confirming its forecast for growth of 1.5-2.0 percent by the end of 2018, in line with the country's potential.

BOJ maintains policy, raises growth, lower inflation f'cast

     The Bank of Japan (BOJ) maintained its monetary policy stance, with two new deputy governors voting with Governor Haruhiko Kuroda, as the bank's growth forecast for the current fiscal year was raised while the inflation forecast was lowered.
      The BOJ, which in September 2016 changed the focus of its monetary policy to yield curve control from quantitative easing to boost inflation to 2 percent, added risks to economic activity in fiscal 2018 were balanced while the risk were skewed to the downside for fiscal 2019, mainly due to international developments and the dampening impact of a hike in taxes in October 2019.
       On the price front, the BOJ said the risks were skewed to the downside from lagging inflation expectations, the lack of responsiveness to the output from some services prices and rent, and the development of foreign exchange rates and international commodity prices.
       In an update to its economic forecast, the majority of the BOJ's board expects Japan's Gross Domestic Product to grow by 1.6 percent in fiscal 2018, which began on April 1, up from 1.4 percent that was forecast in January. This compares with an estimated 1.9 percent growth in fiscal 2017.
       Inflation, which declined to 1.1 percent in March from 1.5 percent in February, is seen averaging 1.3 percent in fiscal 2018, down from the previous forecast of 1.4 percent.
       For fiscal 2019 economic growth is seen at 0.8 percent, up from a previous forecast of 0.7 percent while inflation, including the impact of a hike in sales taxes, is seen unchanged at 2.3 percent.
        For fiscal 2020, growth is seen steady at 0.8 percent while inflation is seen at 2.3 percent and 1.8 percent when the impact of a rise in consumption taxes to 10 percent from 8 percent is excluded.
       The BOJ also confirmed that it will continue with "Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control" as long as necessary in order to reach its 2.0 percent inflation.
        This policy includes a negative interest rate of minus 0.1 percent on banks' deposits that exceed reserve requirements along with the purchase of government bonds of around 80 trillion yen in order to keep 10-year government bond yields around 0 percent.
        The two-day meeting by the BOJ's policy board was the first since Governor Kuroda was approved for a second term, and included two new board members: Masazumi Wakatabe and Masayoshi Amamiya.

ECB maintains policy stance as inflation still subdued

      The European Central Bank (ECB) retained its key interest rates and confirmed that it will continue to purchase assets at a pace of 30 billion euros a month until the end of September, or beyond if necessary, as inflation remains "subdued" and economic growth has recently moderated.
       But while the ECB remains confident inflation will converge towards its target and the economic expansion is on track, it still maintained that "an ample degree of monetary stimulus remains necessary for underlying inflation pressures to continue to build up and support headline inflation developments over the medium term."
       The decision by the ECB's governing council was largely as expected by financial markets with the euro easing to $1.219, continuing its recent fall since topping $1.25 on Feb. 1, on softer economic activity in the first quarter.
       But the euro remains 1.6 percent higher than at the start of this year on expectations this softening of growth is temporary and the ECB will begin to wind down its asset purchase program this year before embarking on rate hikes around the middle of 2019.
      "The underlying strength of the euro area economic continues to support our confidence that inflation will converge towards our inflation aim of below, but close to 2% over the medium term," said ECB President Mario Draghi, despite adding that underlying inflation remains subdued and "has yet to show convincing signs of a sustained upward trend."      
        Inflation in the 19-nation euro area rose slightly to 1.3 percent in March from only 1.1 percent in February. In its March forecast the ECB maintained its forecast for inflation to average 1.4 percent this year and remain at this level in 2019.
        At the previous meeting in March, the ECB governing council began preparing financial markets for normalizing its monetary policy by dropping a reference to being ready to increase its asset purchases, also known as quantitative easing, which was first begun in March 2015.
       Between March 2015 and March 2016 the monthly average purchases of public and private assets by the ECB amounted to 60 billion euros and then 80 billion from April 2016 to March 2017.
       From March 2017 monthly purchases were then lowered back down to 60 billion euros and then in October last year the ECB's council whittled it further down to 30 billion until the end of September 2018.

       Economic growth in the euro area was steady at annual growth of 2.7 percent in the third and fourth quarters of last year, for average growth of 2.4 percent in 2017, the highest since 2007.

       Recent data have showed some moderation in the pace of growth since the start of this year, Draghi said, adding this could reflect a pull-back from the high pace of growth last year while temporary factors may also be at work.

        But private consumption is still supported by declining unemployment - the jobless rate fell to  8.5 percent in February to the lowest since December 2008 - growing household wealth, rising business investment, corporate profits and housing investment, Draghi added.

        And while the global expansion is still boosting euro area exports, Draghi said the risks related to global factors, "including the threat of increased protectionism, have become more prominent."

       The risks to the growth outlook remains broadly balanced.

       In March ECB staff raised their 2018 growth forecast to 2.4 percent but left the 2019 and 2020 forecast unchanged at 1.9 percent and 1.7 percent, respectively.

Sweden holds rate, pushes back rate hike to end-year

       Sweden's central bank left its benchmark repo rate at minus 0.50 percent but pushed back its forecast for a rate hike to "towards the end of the year" from "during the second half of this year", saying continued support from monetary policy is needed to keep inflation on target.
       Sveriges Riksbank, which has maintained its ultra-low rate since February 2016, said it is proceeding "cautiously" when approaching what would be the first rate hike since July 2011 as the risks of too low inflation are more difficult to manage when interest rates are at current levels than when inflation is too high.
       "If the conditions for inflation were to change, the Executive Board is prepared to adjust monetary policy," said the Riksbank.
       Although economic activity in Sweden remains strong and headline inflation is close to the central bank's target, the Riksbank said underlying inflation had been lower than expected and this raised questions about the strength of recent price increases.
       Part of the reason for higher inflation stems from the recent rise in higher energy prices and a weakening of the krona's exchange rate in recent months.
       The Riksbank said it wants economic activity to remain strong to impact prices and ensure that the exchange rate "develops in a way compatible with inflation stabilizing close to the target."
       Arguing in favor of raising rates, the Riksbank said low rates are helping raise the risks from high and rising household debt but the fundamental causes of high debt still remain and the answers lie in housing and taxation policy, and in some cases macro prudential policy.
       As in February, Deputy Governor Henry Ohlsson voted to raise the repo rate by 25 basis points due to strong economic growth in Sweden and abroad.
       Today's decision by the Riksbank was expected by financial markets as inflation has decelerated in recent months and the Riksbank wants to ensure that inflation rises sustainably to its 2.0 percent target after undershooting since January 2012.
       In response to the Riksbank's dovish decision, the Swedish krona eased to 8.58 to the U.S. dollar from 8.54, or by 0.5 percent, and is now 4.5 percent below the level at the start of this year.
       Sweden's headline inflation rate rose to 1.9 percent in March from 1.6 percent in the two preceding months while underlying inflation - the Riksbank's preferred inflation gauge that is known as CPIF inflation - hit 2.0 percent in March.
       In an update to its forecast, the Riksbank raised its headline inflation forecast for 2018 to 1.8 percent from 1.7 percent in February but kept the 2019 forecast steady at 2.6 percent. For 2020 headline inflation is seen rising to 2.9 percent.
      Underlying inflation is also seen higher and averaging 1.9 percent this year, up from 1.8 percent previously forecast, but then remaining steady at 1.9 percent in 2019 before rising to 2.0 percent in 2010.
      The path for the repo rate was lowered to minus 0.5 percent for 2018 from minus 0.4 percent and then to minus 0.1 percent for 2019 from a previous zero percent. For 2020 the repo rate is seen averaging 0.5 percent, down from 0.6 percent.
      Economic activity is seen slightly weaker this year than previously forecast, with Gross Domestic Product up by 2.6 percent compared with 2.8 percent, but up from 2017's 2.4 percent. But in 2019 growth is seen rising by 2.0 percent, up from 1.8 percent forecast in February.
      In the fourth quarter of last year Sweden's GDP expanded by an annual rate of 3.3 percent, up from 2.9 percent in the second quarter, for average 2017 growth of 2.4 percent, down from 3.2 percent in 2016.

Paraguay maintains rate as inflation within target range

       Paraguay's central bank left its monetary policy rate at 5.25 percent, saying the most prudent strategy is to continue with the current monetary policy settings as inflation remains consistent with the objective and expectations remain anchored to this goal.
       The Central Bank of Paraguay (BCP), which has maintained its rate since cutting it by 25 basis points in August 2017, added the decision by its markets operation committee (CEOMA) was unanimous.
       Today's decision by BCP comes as the runner-up in Sunday's presidential election, Efrain Alegre, demanded a recount, saying he had evidence of fraudulent voting.
       The official elections tribunal said Mario Abdo had won 46.44 percent to Alegre's 42.74 percent. Abdo is the son of the late private secretary of dictator Alfredo Stroessner, who ruled Paraguay for 35 years until 1989.
       Voters were picking the successor to President Horacio Cartes who introduced the country to international capital markets in 2013. Since then Paraguay has tapped bond markets five times, most recently in March when it raised $530 million in 30-year bonds at a yield of 5.6 percent.
       Paraguay's inflation rate was steady at 4.1 percent in February and March, within the central bank's target of 4.0 percent, plus/minus 2 percentage points.
       Paraguay's economy expanded by an annual rate of 3.0 percent in the third quarter of 2017, up from 1.1 percent in the second quarter.
       The exchange rate of the guarani, which fell sharply from September 2014 to January 2016, has been appreciating slightly this year, quoted at 5,564.9 to the U.S. dollar today, up 0.6 percent.

      www.CentralBankNews.info

Offshore, EMEs, US boost Q4 '17 global banking - BIS

     The upturn in international banking activity that began in the third quarter of 2017 gained momentum in the fourth quarter with lending to borrowers in offshore banking centers surging by $124 billion followed by a $55 billion rise to emerging market economies (EMEs) and a $45 billion increase in credit to borrowers from the United States, according to the Bank for International Settlements (BIS).
      Total cross-border lending by global banks rose by $123 billion from end-September to end-December 2017 for annual growth of 2 percent and total outstanding claims have now reached $29 trillion, said Swiss-based BIS.
       In the last few years, offshore banking centers have been one of the fastest growing areas of cross-border banking, with Hong Kong and Singapore recording the largest increases in the fourth quarter of last year with lending of $63 billion and $41 billion, respectively.
       And in 2017 outstanding claims on offshore centers by global banks topped the previous peak of $4.3 trillion in March 2008, during the Global Financial Crises, with total claims now at $4.6 trillion end-2017, said BIS, known as the central bankers' bank.
      Most of these claims were denominated in U.S. dollars, $2.8 trillion, followed by $0.7 trillion in yen-lending and $0.3 trillion in euros. Lending activity between offices in the same banking group rose by $134 billion.
      Cross-border lending to emerging markets rose for the fourth consecutive quarter, with the $55 billion rise in the fourth quarter boosting annual growth to 9 percent, driven by lending to Africa, the Middle East and emerging Asia.
       After edging up in the first three quarters of last year, credit to borrowers from Russia again fell in the fourth quarter by $8 billion to end the year at $99 billion, sharply down from $189 billion in early 2013.
        Lending to borrowers in Latin America also continued to shrink, down by $12 billion in the fourth quarter, bringing the annual fall in 2017 to 3 percent, similar to the decline seen in 2016.
       Credit to Brazil and Mexico saw the largest quarterly declines while claims on Chile and Argentina rose, BIS said.
       Japanese banks have expanded their global presence since 2009 - they surpassed French banks in 2011, U.S. banks in 2013 and UK banks in 2015 - and now have the largest international balance sheets, with total foreign claims of $4 trillion at the end of 2017.
     
       Click to read BIS' international banking statistics at end-December 2017.

       www.CentralBankNews.info
     
         

This week in monetary policy: Hungary, Argentina, Paraguay, Turkey, Fiji, Sweden, ECB, Moldova, Japan, Russia & Colombia

    This week - April 22 through April 28 - central banks from 11 countries or jurisdictions are scheduled to decide on monetary policy: Hungary, Argentina, Paraguay, Turkey, Fiji, Sweden, ECB, Moldova, Japan, Russia and Colombia.
    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 17
APR 22 - APR 28, 2018:
COUNTRY	DATE	RATE	LATEST	YTD	1 YR AGO	MSCI
HUNGARY	24-Apr	0.90%	0	0	0.90%	EM
ARGENTINA	24-Apr	27.25%	0	-150	26.25%	FM
PARAGUAY	24-Apr	5.25%	0	0	5.50%
TURKEY	25-Apr	8.00%	0	0	8.00%	EM
FIJI	26-Apr	0.50%	0	0	0.50%
SWEDEN	26-Apr	-0.50%	0	0	-0.50%	DM
EURO AREA	26-Apr	0.00%	0	0	0.00%	DM
MOLDOVA	26-Apr	6.50%	0	0	9.00%
JAPAN	27-Apr	-0.10%	0	0	-0.10%	DM
RUSSIA	27-Apr	7.25%	-25	-50	9.25%	EM
COLOMBIA	27-Apr	4.50%	0	-25	6.50%	EM

    www.CentralBankNews.info

Indonesia maintains rate and confirms growth forecast

      Indonesia's central bank left its benchmark 7-day reverse repurchase rate steady at 4.25 percent, as expected, and confirmed that it still expects economic growth this year of 5.1-5.5 percent while inflation should remain within the bank's target range despite "rising external pressures."
      Bank Indonesia (BI), which lowered its key rate by 200 basis points in 2016 and 2017, also reiterated its recent view that it considers this past easing of monetary policy as sufficient to boost the momentum behind the economic recovery.
      However, BI also echoed other central banks' concern of the risks facing the global economy from increased uncertainty in financial markets from a normalization of U.S. monetary policy and "inward-oriented trade policy, geopolitical risks from the Middle East, rising oil prices, and the possibility of a trade war between the United States and China.
        Indonesia's economy, which grew 5.1 percent last year, is forecast to expand at a faster rate in the first quarter of this year than in the same 2017 quarter, buoyed by domestic demand, particularly investment, BI said.
        Investments are up in building and non-construction investment, supported by government and private infrastructure projects, and mining investment.
        BI's first quarter business survey shows higher business activity along with improved performance by non-financial corporations while private consumption is expected to rise due to higher income and accelerated social assistance.
        Exports of mined commodities and manufacturing is also positive while imports are seen rising, particularly of capital goods and raw materials.
        Indonesia's Gross Domestic Product grew by an annual rate of 5.19 percent in the fourth quarter of last year, up from 5.06 percent in the third quarter.
        Indonesia's trade balance recorded a surplus of US$1.09 billion in March, after a deficit of $0.05 billion in February, with a surplus in the first quarter of $0.28 billion, helping boost foreign reserves to $126.0 billion at the end of March, the equivalent of 7.7 months of imports and serving of official external debt.
        The current account deficit is forecast to be in a range of 2.0-2.5 percent of GDP in 2018, below the 3.0 percent limit considered safe.
        Indonesia's inflation rate rose to 3.4 percent in March from 3.18 percent in February - within the BI's target of 3.5 percent, plus/minus 1 percentage point - and is expected to remain in the range this year, BI confirmed.
        The exchange rate of Indonesia's rupiah depreciated in February and March, with BI attributing this to an improvement in U.S. economic data along with expectations of more aggressive rate hikes by the U.S. Fed and the risk of a US-China trade war.
        These factors encouraged the reversal of foreign capital and put pressure on the exchange rate of currencies worldwide, including the rupiah.
        However, the rupiah has stabilized in April, helped by BI's "stabilization measures," continued control of inflation, a rising rating on its debt, and a surplus in the trade balance that boosted the inflow of foreign portfolio capital.
        Last week Moody's joined other ratings agencies and upgraded Indonesia's rating to Baa2 from Baa3 and raised its outlook to stable, noting the country's control of budget deficits and inflation.
       The rupiah was trading around 13,790 to the U.S. dollar today, down 1.6 percent this year.
       Indonesia's parliament earlier this month confirmed Perry Warjiyo as the next governor of BI. Warjiyo, who has been deputy governor since April 2013, will take over from Agus Martowardojo when his term expires in May.

Canada holds rate, still cautious but looking to tighten

      Canada's central bank left its benchmark target for the overnight rate at 1.25 percent, as expected, and confirmed it still expects to raise rates further by saying "higher interest rates will be warranted over time, although some monetary policy accommodation will still be needed to keep inflation on target."
       The Bank of Canada (BOC), which has raised its rate three times since July 2017, said its governing council had noticed "some progress" in the dynamics of inflation and wage growth but as in its previous policy statement from March it added that it would "remain cautious with respect to future policy adjustments, guided by incoming data."
       Growth in Canada was weaker than expected in the first quarter, but BOC expects growth to rebound in the second quarter, resulting in 2 percent average growth in the first half of this year.
       The reason for slower growth in the first three months was due to a slowdown in exports, mainly from transportation bottlenecks, and lower activity in the housing market from new mortgage guidelines and other measures than pulled forward transactions to 2017.
        BOC expects this weakness to be unwound as the year progresses and over the next three years, Canada's economy is seen operating slightly above its potential rate, supported not only by fiscal stimulus by the federal and provincial governments but also upward revisions to the country's output potential in its latest monetary policy report.
        Exports are expected to strengthen due to foreign demand but BOC said both exports and investments "are being held back by ongoing competitiveness challenges and uncertainty about trade policies."
        BOC forecast growth this year of 2.0 percent, down from its January forecast of 2.2 percent, and well below 2017's growth of 3.0 percent.
        Growth in 2019 is seen rising to 2.1 percent, up from 1.6 percent previously forecast, and then easing to 1.8 percent in 2020.
         On Tuesday the International Monetary Fund (IMF) lowered its forecast for Canada's growth this year to 2.1 percent from January's forecast of 2.3 percent. For 2019 the IMF sees 2.0 percent growth.
         Canada's headline inflation rate rose to 2.2 percent in February from 1.7 percent in January and BOC said inflation is now expected to be higher than it forecast in January on higher gasoline prices and wage increases.
        This year inflation is expected to average 2.3 percent, up from its previous forecast of 2.0 percent, and above the BOC's 2.0 percent target. In 2017 inflation averaged 1.6 percent.
        In 2019 inflation is then seen easing to 2.1 percent and remaining at that level in 2020.

Kazakhstan cuts rate 25 bps and will continue easing

      Kazakhstan's central bank lowered its base rate by another 25 basis points to 9.25 percent and said  it "will continue the policy of the gradual reduction of the base rate, securing the maintenance of the neutral monetary conditions."
      It is the third rate cut in a row by the National Bank of Kazakhstan (NBK) and in line with the central bank's guidance from March that it would continue to gradually reduce its base rate toward a neutral policy stance, in which there is a balance between the pursuit of price stability and economic growth.
      The rate cut comes after the central bank last week confirmed its economic outlook and said there was a high likelihood that inflation this year would ease to below the lower boundary of its 5-7 percent target range.
      The NBK has now cut its key rate by 100 basis points this year and by a total of 775 points since embarking on an monetary easing cycle in May 2016.
       Inflation in Kazakhstan rose slightly to 6.6 percent in March from 6.5 percent in February due to a rise in the cost of some imported products based on world market prices along with an "emerging increase of the domestic demand among households," NBK said.
       However, inflationary expectations are continuing to decline, with expectations for one-year ahead down to 5.8 percent in March from 7.1 percent in December.
       The exchange rate of Kazakhstan's tenge also remains favorable, the central bank said, noting oil prices are above US$65 per barrel while inflation in its main trading partners is moderate.
       Despite the recent hit to Russia's stock market from new U.S. sanctions, the NBK said it still sees the external sector as positive and the recent volatility in the tenge's exchange rate in response to the fall in Russian assets was considered "short-term and moderate."
       "This is why the National Bank does not consider it necessary to tighten the monetary policy conditions as a response to tenge deprecation," the central bank said.
       The tenge fell by up to 3.8 percent last week on worries over Russia but was still trading at 329.2 to the U.S. dollar today, 1.1 percent higher than at the start of the year.
       In August 2015 the tenge plunged following the central bank's move to a floating exchange rate regime and has been relatively steady since May 2016 when the central bank started cutting rates.
      The NBK moved to a floating exchange rate regime in response to capital outflows and the conversion of many tenge bank deposits to foreign currency. Oil accounts for about 60 percent of Kazakhstan's exports and over 10 percent of its Gross Domestic Product. 
       Economic activity in Kazakhstan is continuing to strengthen on the back of broad-based growth in such sectors as mining of oil and iron ore, engineering, agriculture, trade and transportation.
       Despite a 4.5 percent decline in building industry in January-February, the central bank said fixed capital investments had expanded by 54.4 percent in the first two months.
       Gross Domestic Product grew by an annual rate of 4.0 percent in the fourth quarter of last year and in its inflation report from February the central bank forecast 2.9 percent growth this year and 2.8 percent in the first nine months of 2019.

This week in monetary policy: Kazakhstan, Israel, Canada and Indonesia

     This week - April 15 through April 21 - central banks from 4 countries or jurisdictions are scheduled to decide on monetary policy: Kazakhstan, Israel, Canada and Indonesia.

    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 16
APR 15 - APR 21, 2018:
COUNTRY	DATE	RATE	LATEST	YTD	1 YR AGO	MSCI
KAZAKHSTAN	16-Apr	9.50%	-25	-75	11.00%	FM
ISRAEL	16-Apr	0.10%	0	0	0.10%	DM
CANADA	18-Apr	1.25%	0	25	0.50%	DM
INDONESIA	19-Apr	4.25%	0	0	4.75%	EM

    www.CentralBankNews.info

Singapore tightens policy to curb rising inflation

        Singapore's central bank tightened its monetary policy by increasing "slightly" the appreciation slope of the Singapore dollar from zero percent in light of rising inflation due to an improving labour market as the island state's economy is likely to continue on its steady expansion path in 2018.
        The Monetary Authority of Singapore (MAS), which targets the value of the Singapore dollar against a basket of currencies as a way to control inflation, added the width of the policy band and the level of which it is centered will remain unchanged.
       "This policy stance is consistent with a modest and gradual appreciation path of the S$NEER (S$ Nominal Effective Exchange Rate) policy band that will ensure medium-term price stability," MAS said.
         MAS had kept the appreciation rate of the Singapore dollar against an undisclosed basket of currencies at zero percent since April 2016 and the last time it increased the slope of the appreciation was in April 2012. 
         But in its previous policy review from October 2017, MAS dropped the reference to maintaining the neutral stance for an "extended period, " signaling it was ready to tighten its policy.
         Singapore's economy grew by an annual rate of 4.3 percent in the first quarter of this year, according to advance estimates by the trade and industry ministry, up from 3.6 percent in the full 2017 year.
        Barring a setback in global trade, MAS expects Singapore's economy to continue expanding in coming quarters with growth slightly above the middle of its forecast range of 1.5-3.5 percent.
        However, MAS was also clearly concerned that rising trade tensions between the United States and China could impact global trade, and said its "measured adjustment" to its policy stance took into account the uncertainty presented by the ongoing trade tensions.
        Singapore's headline inflation rate rose to 0.5 percent in February from zero percent in January while MAS core inflation, which excludes private road and accommodation costs, rose to an average of 1.6 percent in January-February from 1.4 percent in the fourth quarter of last year.
        In coming quarters, MAS expects imported inflation to rise mildly due to rising global demand with oil prices rising moderately as compared with 2017.
        "Should economic conditions evolve as expected MAS Core inflation will rise gradually over the course of this year. For 2018 core inflation should come within the upper half of the 1-2% forecast range, " MAS said.

       www.CentralBankNews.info