Trinidad and Tobago's central bank raised its benchmark repo rate by 25 basis points to 5.0 percent, noting growth led by the energy sector, a pickup in private sector credit, still low inflation, and the implications of higher U.S. interest rates for the country's external balance.
It is the first change in rates by the Central Bank of Trinidad and Tobago (CBTT) since December 2015 and continues a tightening cycle that began in September 2014. Since then, rates have been raised 225 basis points.
The expansion of Trinidad & Tobago's energy sector is expected to spill over into non-energy activities and private sector credit growth rose in April by an annual 5.8 percent and a rebound in business credit suggest that private sector confidence could be strengthening, CBTT said.
Rising U.S. interest rates and stable rates in Trinidad and Tobago has pushed the yield differential between 3-month TT and U.S. bonds to minus 74 basis points and plans by the U.S. Federal Reserve to raise rates further would widen the interest rate differential if TT rates remain unchanged.
Inflation in Trinidad and Tobago eased to 0.8 percent in March from 0.9 percent in February.
Friday, June 29, 2018
Indonesia raises rate 50 bps, relaxes loan restrictions
Indonesia's central bank raised its benchmark BI 7-day reverse repo rate by another 50 basis points to 5.25 percent in a move again described as a pre-emptive move to strengthen the rupiah's exchange rate while it also relaxed some of the rules governing the property sector to maintain the recovery of the economy.
It is Bank Indonesia 's(BI) third rate hike since May 17 and the rate has now been raised by 100 basis points this year, with BI confirming the tightening is still backed by dual intervention policy in the foreign exchange market and government securities (SBN) market to maintain market liquidity.
There are signs that BI's aggressive rate hike - an increase of 25 basis points was expected - are bearing fruit as the rupiah rose 0.8 percent to trade at 14,295 to the U.S. dollar after the hike.
The first two rate hikes on May 17 and May 30 had only provided brief respite for the rupiah and at the start of June the rupiah again continued to depreciate. Compared with the start of this year the rupiah is still down 5 percent.
It is Bank Indonesia 's(BI) third rate hike since May 17 and the rate has now been raised by 100 basis points this year, with BI confirming the tightening is still backed by dual intervention policy in the foreign exchange market and government securities (SBN) market to maintain market liquidity.
There are signs that BI's aggressive rate hike - an increase of 25 basis points was expected - are bearing fruit as the rupiah rose 0.8 percent to trade at 14,295 to the U.S. dollar after the hike.
The first two rate hikes on May 17 and May 30 had only provided brief respite for the rupiah and at the start of June the rupiah again continued to depreciate. Compared with the start of this year the rupiah is still down 5 percent.
Thursday, June 28, 2018
Egypt leaves rate steady, inflation seen in line with target
Egypt's central bank left its key policy rates steady for the second month in a row, saying inflation is expected to remain in line with its target for the fourth quarter of this year before declining to single digits after the temporary effect of supply shocks dissipate.
The Central Bank of Egypt (CBE) kept its overnight deposit rate, the overnight lending rate and the rate of the main operation at 16.75 percent, 17.75 percent and 17.25 percent, respectively.
This year the CBE has cut the rate by a total of 200 basis points.
In May last year the CBE set a target for inflation of 13 percent, plus/minus 3 percentage points, for the fourth quarter of 2018 and then single digits thereafter.
Egypt's urban inflation rate decelerated for the 10th consecutive month in May to 11.4 percent from a high of 32.95 percent in July 2017 while unemployment also continued to decline to 10.6 percent in the first quarter of this year, the lowest rate since the fourth quarter of 2010.
Inflation surged last year after the government slashed subsidies to energy and raised taxes in connection with a US$12 billion International Monetary Fund (IMF) aid package. In November 2016 the central bank also floated the pound, which quickly lost more than half its value, boosting import prices and thus inflation.
In January the IMF forecast that inflation would fall to 12 percent by June but also warned against premature rate cuts by the central bank.
Economic reforms have helped boost foreign and domestic investment and the economy has been growing steadily since the fourth quarter of 2016 and grew by an annual rate of 5.4 percent in the first quarter of this year, up from 5.3 percent in the previous quarter.
The country's potential output is also estimated to have benefitted from the structural reforms, thus easing inflationary pressures from the pickup in demand, CBE said.
Egypt's pound has depreciated slightly this year and was trading at 17.89 to the U.S. dollar today, down 0.4 percent this year.
The Central Bank of Egypt (CBE) kept its overnight deposit rate, the overnight lending rate and the rate of the main operation at 16.75 percent, 17.75 percent and 17.25 percent, respectively.
This year the CBE has cut the rate by a total of 200 basis points.
In May last year the CBE set a target for inflation of 13 percent, plus/minus 3 percentage points, for the fourth quarter of 2018 and then single digits thereafter.
Egypt's urban inflation rate decelerated for the 10th consecutive month in May to 11.4 percent from a high of 32.95 percent in July 2017 while unemployment also continued to decline to 10.6 percent in the first quarter of this year, the lowest rate since the fourth quarter of 2010.
Inflation surged last year after the government slashed subsidies to energy and raised taxes in connection with a US$12 billion International Monetary Fund (IMF) aid package. In November 2016 the central bank also floated the pound, which quickly lost more than half its value, boosting import prices and thus inflation.
In January the IMF forecast that inflation would fall to 12 percent by June but also warned against premature rate cuts by the central bank.
Economic reforms have helped boost foreign and domestic investment and the economy has been growing steadily since the fourth quarter of 2016 and grew by an annual rate of 5.4 percent in the first quarter of this year, up from 5.3 percent in the previous quarter.
The country's potential output is also estimated to have benefitted from the structural reforms, thus easing inflationary pressures from the pickup in demand, CBE said.
Egypt's pound has depreciated slightly this year and was trading at 17.89 to the U.S. dollar today, down 0.4 percent this year.
Wednesday, June 27, 2018
UPDATE-Jamaica cuts rate 50 bps as inflation decelerates
(UPDATED WITH DETAILS AND BOJ STATEMENT)
Jamaica's central bank cut its policy rate by a further 50 basis points to 2.0 percent, to "foster greater credit expansion and a faster pace of GDP growth which will support inflation returning to the target of 4.0 per cent to 6.0 percent."
The Bank of Jamaica (BOJ) has now cut its rate by 125 basis points this year and by 175 points since July last year when it adopted the overnight deposit rate as its new signal rate.
Jamaica's inflation rate decelerated further to 3.1 percent in May from 3.2 percent in April for the third month in a row of inflation below the central bank's target of 4 - 6 percent.
BOJ said its decision to boost monetary policy accommodation reflects its view that inflation from June to December is likely to remain below the target range and the earlier projected rise in inflation towards the centre of the target range by March 2019 is at risk.
In its previous policy decision from May, when it lowered the rate by 25 basis points, the BOJ forecast that inflation over the next three quarters would be slightly below the lower bound of the inflation target before rising towards the centre of the target in the following quarter.
BOJ's view on inflation for the rest of this year is largely predicted on continued weak domestic demand, which is constrained by tight fiscal policy and "increase uncertainties about global trade."
In addition, BOJ is also expecting agricultural food prices to remain low for longer than expected and the possibility that oil prices could be lower than projected.
"In the medium-term, the Bank's outlook for inflation continues to reflect a sluggish recovery in economic activity (real GDP)," BOJ said.
Jamaica's inflation rate has decelerated due to a rapid fall in in agricultural food and electricity prices.
Earlier this month the International Monetary Fund (IMF) noted the decline in Jamaica's inflation rate to below the BOJ's target range and lent its support to the recent rate cuts and its "resolve to cut interest rates further, if needed to steer inflation towards the mid-point of the central bank's target range."
The IMF team also welcomed the progress being made by authorities in revising the central bank act, which it said would be critical to a full shift to inflation target and the related work to strengthen central bank communications.
Jamaica's central bank cut its policy rate by a further 50 basis points to 2.0 percent, to "foster greater credit expansion and a faster pace of GDP growth which will support inflation returning to the target of 4.0 per cent to 6.0 percent."
The Bank of Jamaica (BOJ) has now cut its rate by 125 basis points this year and by 175 points since July last year when it adopted the overnight deposit rate as its new signal rate.
Jamaica's inflation rate decelerated further to 3.1 percent in May from 3.2 percent in April for the third month in a row of inflation below the central bank's target of 4 - 6 percent.
BOJ said its decision to boost monetary policy accommodation reflects its view that inflation from June to December is likely to remain below the target range and the earlier projected rise in inflation towards the centre of the target range by March 2019 is at risk.
In its previous policy decision from May, when it lowered the rate by 25 basis points, the BOJ forecast that inflation over the next three quarters would be slightly below the lower bound of the inflation target before rising towards the centre of the target in the following quarter.
BOJ's view on inflation for the rest of this year is largely predicted on continued weak domestic demand, which is constrained by tight fiscal policy and "increase uncertainties about global trade."
In addition, BOJ is also expecting agricultural food prices to remain low for longer than expected and the possibility that oil prices could be lower than projected.
"In the medium-term, the Bank's outlook for inflation continues to reflect a sluggish recovery in economic activity (real GDP)," BOJ said.
Jamaica's inflation rate has decelerated due to a rapid fall in in agricultural food and electricity prices.
Earlier this month the International Monetary Fund (IMF) noted the decline in Jamaica's inflation rate to below the BOJ's target range and lent its support to the recent rate cuts and its "resolve to cut interest rates further, if needed to steer inflation towards the mid-point of the central bank's target range."
The IMF team also welcomed the progress being made by authorities in revising the central bank act, which it said would be critical to a full shift to inflation target and the related work to strengthen central bank communications.
Czech raises rate 25 bps as inflation exceeds forecast
The central bank of the Czech Republic raised its benchmark 2-week repurchase rate for the fourth time since embarking on a monetary tightening cycle as higher than expected inflation at home and abroad along with a weaker koruna made it necessary to raise rates earlier than forecast.
The Czech National Bank (CNB) raised its policy rate by another 25 basis points to 1.0 percent and has now raised it by 95 basis points since August 2017 when it began raising rates in response to accelerating inflation from a booming economy and rising wages.
It is CNB's second rate hike this year following an increase in February and was largely expected after CNB Governor Jiri Rusnok's earlier this month said the combination of a weaker than expected koruna and higher than expected wage rises had made room for an earlier rate rise.
At its previous policy meeting in May, when the CNB left its rates steady, Rusnok said a rate hike toward the end of the year was being considered. However, he also said an earlier hike could not be ruled out if the situation differed significantly from assumptions.
Since May two things have changed. First, oil prices have risen more than than expected and the consensus now looks for prices in 2018 to average $73.2 a barrel, up from CNB's forecast of $66.9.
Secondly, the U.S. dollar has risen on a combination of strong U.S. economic growth, a more hawkish Federal Reserve and a more dovish European Central Bank (ECB).
"These two factors are thus jointly fostering a higher koruna price of oil," Rusnok said, adding a desired tightening of monetary conditions through a higher exchange rate was not taking place and this trend may persist.
"It is therefore necessary and appropriate to increase interest rates earlier than implied by the current forecast presented in early May," he said.
In May the CNB forecast inflation of 1.9 percent in May but it turned out to be 2.2 percent, above the bank's 2.0 percent target due to higher prices of food and non-alcoholic beverages, and transport costs, including fuel.
Wages rose 8.6 percent in the first quarter, above the forecast 8.5 percent, as a shortage of available labour results in a overheated jobs market.
"At its meeting today, however, the Bank Board assessed the risks to the current forecast as being inflationary," Rusnok said.
In May the CNB forecast a 2018 euro-dollar rate of 1.23 but consensus is now looking to 1.20. For 2019 the euro-dollar rate has fallen to 1.22 from May's 1.24 forecast.
In response to today's hike, the koruna rose, reversing a steady decline since mid-April, but then quickly gave up its gains to end largely unchanged.
The koruna was trading at 25.9 and is 0.8 percent below its level at the start of 2018.
But the koruna is still significantly higher than during nearly five years of extraordinary easy policy when the CNB used interventions in currency markets to keep the koruna below 27 to the euro to avoid deflationary pressures.
In May the CNB forecast an average exchange rate of the koruna to the euro of 25 and in 2019 a rate of 24.4.
In an unanimous decision, the CNB board also raised its Lombard rate, which is used by banks to obtain overnight liquidity and sets a ceiling for short-term rates, by 50 basis points to 2.0 percent. However, it maintained the discount rate, which sets a floor for short-term money market rates, at 0.05 percent.
While inflation has risen faster than expected, the Czech economy has slowed more than expected due to a stronger negative contribution of net exports, lower inventory build-up and household consumption.
Annual growth in the first quarter was 4.4 percent, below 4.9 percent forecast, and down from 5.5 percent in the fourth quarter of last year. In May the CNB forecast that growth this year of 3.9 percent and the slow further to 3.4 percent in 2019.
Earlier this week the International Monetary Fund (IMF) commended the Czech Republic for its strong economy and favorable outlook though it also said the decline in the labour force poses a longer term challenge and in the near term a decline in global trade from increased protectionism poses a major risk given how tightly integrated the Czech economy is in global supply chains.
The IMF forecast growth this year of 3.7 percent, down from 2017's 4.4 percent, and then growth of 3.2 percent in 2019 and 2.5 percent in 2020 as domestic demand slowly cools from 4.0 percent growth this year to 3.7 percent and 3.1 percent in the next two years.
Inflation is forecast to average 2.3 percent this year, slightly down from 2.4 percent last year, and then 2.3 percent in 2019 and 2.0 percent in 2020.
Tuesday, June 26, 2018
Argentina maintains rate, contractionary monetary bias
Argentina's central bank left its monetary policy rate at 40.0 percent and said it would maintain the current contractionary bias of monetary policy until the trajectory of inflation, and inflation expectations, are aligned with the goal lowering inflation to 17 percent by December 2019.
Today's policy decision and guidance by the Central Bank of the Argentine Republic (BCRA) is the first since former Finance Minister Luis Caputo took over as governor from Federico Sturzenegger, who resigned on June 14.
The central bank has kept its policy rate at 40 percent since early May following three sharp rate hikes in 12 days, raising it by 12.75 percentage points since April 27.
Since Sturzenegger's resignation, in the wake of the U.S. Federal Reserve's more hawkish posture and the International Monetary Fund's (IMF) US$50 billion support package, the rout in the peso has come to a halt and the exchange rate has stabilized in recent days.
Today's guidance by the central bank is slightly more specific than its previous policy statement from June 12 when it also said it would maintain the current contractionary bias but did not include the goal of lowering inflation to 17 percent by December 2019.
As part of the agreement with the IMF, new inflation targets have been set and a new central bank law will strengthen the operational and financial autonomy of the central bank.
Before the next monetary policy decision on July 10, BCRA said further changes to the monetary policy framework would be announced while the central bank will continue to intervene in the secondary market for short-term peso debt (LEBAC) to reinforce the monetary policy signal.
For 2018 the central bank has eliminated its previous inflation target of 15 percent and replaced it with a target that aims for inflation below 22 percent for the second quarter of 2019, the first 12-month period that will be judged under the new policy framework.
For 2019 the central bank will now target inflation of 17 percent, up from the 10 percent that was set last December.
For 2020 inflation of 13 percent will be targeted, up from 5 percent, and for 2021 inflation of 9 percent will be targeted. By 2022 the central bank is targeting inflation of 5 percent, its estimate of price stability.
Argentina's inflation rate rose to 26.3 percent in May from 25.5 percent in April, partly reflecting the depreciation of the peso, and the central bank said the current outlook for inflation continues to call for a contractionary bias of monetary policy.
Market expectations for inflation remain above the 2019 inflation target and the central bank acknowledged the risk of higher-than-expected inflation from a larger-than-expected transfer of the exchange rate to retail prices.
The peso was trading at 27.08 to the U.S. dollar today, up 4.7 percent since a low of 28.35 on June 15 but still down 31 percent since the start of 2018.
BCRA also said economic activity up to March had been good but data for April and May show a deceleration, partly due to the income effect of higher inflation.
Argentina's agricultural sector is also suffering from extraordinary drought and BCRA said it may take a few more months for the economy to regain its "previous vigor."
It estimates growth slowing to close to 1 percent in 2018 before improving in 2019.
The IMF forecast 2018 growth of 0.4 percent, down from 2.9 percent in 2017. In 2019 growth is forecast to improve to 1.5 percent and then to 2.5 percent in 2020.
Inflation is seen ending this year at 27 percent, then 17 percent in 2019 and 13 percent in 2020.
www.CentralBankNews.info
Today's policy decision and guidance by the Central Bank of the Argentine Republic (BCRA) is the first since former Finance Minister Luis Caputo took over as governor from Federico Sturzenegger, who resigned on June 14.
The central bank has kept its policy rate at 40 percent since early May following three sharp rate hikes in 12 days, raising it by 12.75 percentage points since April 27.
Since Sturzenegger's resignation, in the wake of the U.S. Federal Reserve's more hawkish posture and the International Monetary Fund's (IMF) US$50 billion support package, the rout in the peso has come to a halt and the exchange rate has stabilized in recent days.
Today's guidance by the central bank is slightly more specific than its previous policy statement from June 12 when it also said it would maintain the current contractionary bias but did not include the goal of lowering inflation to 17 percent by December 2019.
As part of the agreement with the IMF, new inflation targets have been set and a new central bank law will strengthen the operational and financial autonomy of the central bank.
Before the next monetary policy decision on July 10, BCRA said further changes to the monetary policy framework would be announced while the central bank will continue to intervene in the secondary market for short-term peso debt (LEBAC) to reinforce the monetary policy signal.
For 2018 the central bank has eliminated its previous inflation target of 15 percent and replaced it with a target that aims for inflation below 22 percent for the second quarter of 2019, the first 12-month period that will be judged under the new policy framework.
For 2019 the central bank will now target inflation of 17 percent, up from the 10 percent that was set last December.
For 2020 inflation of 13 percent will be targeted, up from 5 percent, and for 2021 inflation of 9 percent will be targeted. By 2022 the central bank is targeting inflation of 5 percent, its estimate of price stability.
Argentina's inflation rate rose to 26.3 percent in May from 25.5 percent in April, partly reflecting the depreciation of the peso, and the central bank said the current outlook for inflation continues to call for a contractionary bias of monetary policy.
Market expectations for inflation remain above the 2019 inflation target and the central bank acknowledged the risk of higher-than-expected inflation from a larger-than-expected transfer of the exchange rate to retail prices.
The peso was trading at 27.08 to the U.S. dollar today, up 4.7 percent since a low of 28.35 on June 15 but still down 31 percent since the start of 2018.
BCRA also said economic activity up to March had been good but data for April and May show a deceleration, partly due to the income effect of higher inflation.
Argentina's agricultural sector is also suffering from extraordinary drought and BCRA said it may take a few more months for the economy to regain its "previous vigor."
It estimates growth slowing to close to 1 percent in 2018 before improving in 2019.
The IMF forecast 2018 growth of 0.4 percent, down from 2.9 percent in 2017. In 2019 growth is forecast to improve to 1.5 percent and then to 2.5 percent in 2020.
Inflation is seen ending this year at 27 percent, then 17 percent in 2019 and 13 percent in 2020.
www.CentralBankNews.info
Armenia holds rate, still sees need to tighten policy
Armenia's central bank maintained its benchmark refinancing rate at 6.0 percent and its tightening bias by reiterating that it still sees a need to gradually neutralize current stimulative monetary and credit conditions in order to reach its targeted level of inflation.
After cutting the repo rate 12 times by a total of 450 basis points from August 2015, the Central Bank of Armenia (CBA) has said since November 2017 that it will be tightening at some point.
But inflation remains well below the CBA's 4.0 percent target, falling to an annual rate of 1.6 percent in May from 2.4 percent in April due to lower prices of seasonal goods.
CBA said it expects inflation will remain in the lower part of its target range in coming months and then consolidate near 4.0 percent within the forecast horizon. The CBA has a 1.5 percentage point range around its 4.0 percent midpoint target.
Inflation expectations have stabilized over the past year and additional inflationary pressures are not expected in coming months, the central bank said, adding the balance of risks that economic developments and inflation will deviate from its forecasts are more balanced.
Economic activity in Armenia remained relatively high in the first quarter of this year due to higher productive growth in industry, construction and services, the central bank said, accompanied by a strong recovery in domestic demand.
But domestic demand is expected to slow and gradually approach a sustainable level from the second quarter, CBA said.
Armenia's Gross Domestic Product grew by an annual 9.6 percent in the first quarter, down from 11 percent in the fourth quarter of last year.
Since early 2015 the exchange rate of Armenia's dram has been relatively stable and was trading at 482.3 to the U.S. dollar today, up 0.4 percent this year.
www.CentralBankNews.info
After cutting the repo rate 12 times by a total of 450 basis points from August 2015, the Central Bank of Armenia (CBA) has said since November 2017 that it will be tightening at some point.
But inflation remains well below the CBA's 4.0 percent target, falling to an annual rate of 1.6 percent in May from 2.4 percent in April due to lower prices of seasonal goods.
CBA said it expects inflation will remain in the lower part of its target range in coming months and then consolidate near 4.0 percent within the forecast horizon. The CBA has a 1.5 percentage point range around its 4.0 percent midpoint target.
Inflation expectations have stabilized over the past year and additional inflationary pressures are not expected in coming months, the central bank said, adding the balance of risks that economic developments and inflation will deviate from its forecasts are more balanced.
Economic activity in Armenia remained relatively high in the first quarter of this year due to higher productive growth in industry, construction and services, the central bank said, accompanied by a strong recovery in domestic demand.
But domestic demand is expected to slow and gradually approach a sustainable level from the second quarter, CBA said.
Armenia's Gross Domestic Product grew by an annual 9.6 percent in the first quarter, down from 11 percent in the fourth quarter of last year.
Since early 2015 the exchange rate of Armenia's dram has been relatively stable and was trading at 482.3 to the U.S. dollar today, up 0.4 percent this year.
www.CentralBankNews.info
Rwanda maintains rate, raises growth forecast to 7.2%
Rwanda's central bank kept its benchmark repo rate steady at 5.50 percent, saying positive macroeconomic conditions, including low inflationary and exchange rate pressures, seen in the second quarter of this year "are likely to prevail in the remaining part of 2018."
The National Bank of Rwanda (BNR) raised its forecast for growth this year to 7.2 percent, in line with the International Monetary Fund's projection, from its March forecast of 6.5 percent.
BNR has maintained its rate since December 2017 when it was cut for the third time since it embarked on an easing cycle in December 2016. Since then, the rate has been cut 100 basis points.
While inflation remains low and stable, Rwanda's economy has been growing strongly with Gross Domestic Product expanding by an annual 10.6 percent in the first quarter of this year and slightly up from 10.5 percent in the fourth quarter of last year.
Economic activity was fueled by a 12 percent expansion in the service sector, an 8 percent rise in the agricultural sector and a 7 percent rise in industry.
"Leading indicators of economic activities show that the economy has continued to perform well in 2018 Q2, tending towards attaining the 7.2 percent GDP growth projection in 2018," BNR said.
In March BNR Governor John Rwangombwa's predicted 2018 growth of 6.5 percent based on good climate conditions. Growth in 2017 is estimated at 6.1 percent, down from 6.0 percent in 2016.
Earlier this month the IMF forecast 2019 growth of 7.8 percent and 2020 growth of 8.0 percent. Inflation is seen averaging 2.8 percent this year, 5.0 percent in 2019 and 5.0 percent in 2020.
In March the central bank forecast inflation this year of 5.0 percent, up from 4.9 percent in 2017.
Rwanda's inflation rate turned positive in May after three months of deflation, reaching the highest level since October 2017. Inflation rose to 1.8 percent in May from minus 0.1 percent in April after a rise in food, energy and transport costs.
Rwanda's franc has been depreciating steadily in the last decade and was down by 1.5 percent against the U.S. dollar by the end of May as compared with December, slightly up from a 1.0 percent depreciation in the same 2017 period but down from a 4.0 percent fall in same 2016 period, BNR said.
Today the Rwandan franc (FRW) was trading at 860 to the U.S. dollar today, down 1.9 percent this year.
www.CentralBankNews.info
The National Bank of Rwanda (BNR) raised its forecast for growth this year to 7.2 percent, in line with the International Monetary Fund's projection, from its March forecast of 6.5 percent.
BNR has maintained its rate since December 2017 when it was cut for the third time since it embarked on an easing cycle in December 2016. Since then, the rate has been cut 100 basis points.
While inflation remains low and stable, Rwanda's economy has been growing strongly with Gross Domestic Product expanding by an annual 10.6 percent in the first quarter of this year and slightly up from 10.5 percent in the fourth quarter of last year.
Economic activity was fueled by a 12 percent expansion in the service sector, an 8 percent rise in the agricultural sector and a 7 percent rise in industry.
"Leading indicators of economic activities show that the economy has continued to perform well in 2018 Q2, tending towards attaining the 7.2 percent GDP growth projection in 2018," BNR said.
In March BNR Governor John Rwangombwa's predicted 2018 growth of 6.5 percent based on good climate conditions. Growth in 2017 is estimated at 6.1 percent, down from 6.0 percent in 2016.
Earlier this month the IMF forecast 2019 growth of 7.8 percent and 2020 growth of 8.0 percent. Inflation is seen averaging 2.8 percent this year, 5.0 percent in 2019 and 5.0 percent in 2020.
In March the central bank forecast inflation this year of 5.0 percent, up from 4.9 percent in 2017.
Rwanda's inflation rate turned positive in May after three months of deflation, reaching the highest level since October 2017. Inflation rose to 1.8 percent in May from minus 0.1 percent in April after a rise in food, energy and transport costs.
Rwanda's franc has been depreciating steadily in the last decade and was down by 1.5 percent against the U.S. dollar by the end of May as compared with December, slightly up from a 1.0 percent depreciation in the same 2017 period but down from a 4.0 percent fall in same 2016 period, BNR said.
Today the Rwandan franc (FRW) was trading at 860 to the U.S. dollar today, down 1.9 percent this year.
www.CentralBankNews.info
Monday, June 25, 2018
Kyrgyzstan holds rate, plans to maintain current stance
The central bank of Kyrgyzstan left its policy rate, the discount rate, steady at 4.75 percent and confirmed that it plans to keep the current direction of monetary policy in the forthcoming period in the absence of external shocks.
Last month the National Bank of the Kyrgyz Republic (NBKR) cut its rate for the first time since December 2016 and said it intended to stick to the current direction of monetary policy for the time being, provided there are no external shocks.
Commenting on its decision, the central bank said it was taking into account the external risks and the domestic trends where the inflationary environment is low and economy is benefitting from the continued inflow of remittances and higher wages that are stimulating private consumption.
Inflation in Kyrgyzstan decelerated to 1.2 percent in May from 2.0 percent in April and fell further to 1.0 percent as of June 15 as food prices continued to decline, the central bank said.
The NBKR confirmed it expects inflation to remain below the target of 5 -7 percent in the medium term as long as the favorable situation in domestic and foreign markets continues.
The combination of growing demand and soft monetary conditions should help inflation recover.
Economic activity in the Kyrgyz Republic has slowed somewhat, the NBKR said, adding Gross Domestic Product in the January - May period grew 0.7 percent. Excluding output from the Kumtor gold mine, GDP grew 2.5 percent.
In the first quarter of this year GDP grew an annual 1.3 percent, down from 4.5 percent in the fourth quarter of last year.
The central bank expects the favorable economic situation to continue this year, supported by growth in Kyrgyzstan's trading partners and good private consumption.
The foreign exchange market has remained stable, continuing the situation seen since April 2016.
Against the U.S. dollar, which has shown widespread strength in recent months, the Kyrgyzstani som has appreciated 1 percent this year and was trading at 68.24 to the dollar today.
www.CentralBankNews.info
Last month the National Bank of the Kyrgyz Republic (NBKR) cut its rate for the first time since December 2016 and said it intended to stick to the current direction of monetary policy for the time being, provided there are no external shocks.
Commenting on its decision, the central bank said it was taking into account the external risks and the domestic trends where the inflationary environment is low and economy is benefitting from the continued inflow of remittances and higher wages that are stimulating private consumption.
Inflation in Kyrgyzstan decelerated to 1.2 percent in May from 2.0 percent in April and fell further to 1.0 percent as of June 15 as food prices continued to decline, the central bank said.
The NBKR confirmed it expects inflation to remain below the target of 5 -7 percent in the medium term as long as the favorable situation in domestic and foreign markets continues.
The combination of growing demand and soft monetary conditions should help inflation recover.
Economic activity in the Kyrgyz Republic has slowed somewhat, the NBKR said, adding Gross Domestic Product in the January - May period grew 0.7 percent. Excluding output from the Kumtor gold mine, GDP grew 2.5 percent.
In the first quarter of this year GDP grew an annual 1.3 percent, down from 4.5 percent in the fourth quarter of last year.
The central bank expects the favorable economic situation to continue this year, supported by growth in Kyrgyzstan's trading partners and good private consumption.
The foreign exchange market has remained stable, continuing the situation seen since April 2016.
Against the U.S. dollar, which has shown widespread strength in recent months, the Kyrgyzstani som has appreciated 1 percent this year and was trading at 68.24 to the dollar today.
www.CentralBankNews.info
This week in monetary policy: Kyrgyzstan, Armenia, Argentina, Czech Rep., Jamaica, New Zealand, Fiji, Indonesia, Egypt, Sri Lanka, Bulgaria, Trinidad & Tobago, Dominican Rep. & Colombia
This week - June 24 through June 30 - central banks from 14 countries or jurisdictions are scheduled to decide on monetary policy: Kyrgyz Republic, Armenia, Argentina, Czech Republic, Jamaica, New Zealand, Fiji, Indonesia, Egypt, Sri Lanka, Bulgaria, Trinidad and Tobago, Dominican Republic 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 26 | |||||
| JUNE 24 - JUN 30, 2018: | |||||
| COUNTRY | DATE | RATE | LATEST | YTD | 1 YR AGO |
| KYRGYZSTAN | 25-Jun | 4.75% | -25 | -25 | 5.00% |
| ARMENIA | 26-Jun | 6.00% | 0 | 0 | 6.00% |
| ARGENTINA | 26-Jun | 40.00% | 0 | 1125 | 26.25% |
| CZECH REPUBLIC | 27-Jun | 0.75% | 0 | 25 | 0.05% |
| JAMAICA | 27-Jun | 2.50% | -25 | -75 | 4.75% |
| NEW ZEALAND | 28-Jun | 1.75% | 0 | 1.75% | |
| FIJI | 28-Jun | 0.50% | 0 | 0 | 0.50% |
| INDONESIA | 28-Jun | 25 | 50 | 50 | 4.75% |
| EGYPT | 29-Jun | 16.75% | 0 | -200 | 16.75% |
| SRI LANKA | 29-Jun | 7.25% | 0 | 0 | 7.25% |
| BULGARIA | 29-Jun | 0.00% | 0 | 0 | 0.00% |
| TRINIDAD & TOBAGO | 29-Jun | 4.75% | 0 | 0 | 4.75% |
| DOMINICAN REP. | 29-Jun | 5.25% | 0 | 0 | 5.75% |
| COLOMBIA | 29-Jun | 4.25% | -25 | -50 | 5.75% |
Thursday, June 21, 2018
Mexico hikes rate 25 bps, peso worsens inflation outlook
Mexico's central bank raised its benchmark interest rate by a further 25 basis points to 7.75 percent, as expected, as a fall in the peso's exchange rate in the last two months has worsened the outlook for inflation.
The Bank of Mexico (Banxico) has now raised its rate 13 times and by a total of 475 basis points since December 2015 when the U.S. Federal Reserve started tightening its policy, putting downward pressure on the peso's exchange rate which then raises import prices and inflation.
After raising the rate in February, its first and only rate hike this year, Banxico held fire in April and May as inflation decelerated and fell to a 2018 low of 4.51 percent in May while inflation expectation for this year also eased.
"Nevertheless, some of the upside risks to inflation identified by the Central Bank have started to materialize," the central bank said, pointing to the depreciation of the peso along with rising prices of gasoline and LP gas.
The balance of risks to inflation have thus deteriorated and could delay the decline in inflation toward the central bank's target of 3.0 percent.
"Looking ahead, the Governing Board will maintain a prudent monetary policy stance and will continue to follow closely the potential pass-through of exchange rate fluctuations to prices, the monetary policy stance relative to that of the U.S., and the conditions of slack in the Mexican economy," Banxico said.
In response to the rate hike, the peso rose against the U.S. dollar and was trading at 20.24 to the dollar, down 2.8 percent this year. Compared with the start of 2016, the peso has lost 14 percent.
In sync with most currencies, the peso has come under pressure from the stronger U.S. dollar, propelled by the Fed's two rate hikes this year, and a more hawkish stance adopted last week.
Uncertainty over NAFTA negotiations, U.S. tariffs on steel and aluminum and Mexico's general election in July has also contributed to peso weakness.
Mexico's economy has slowed since early 2017 but Banxico said it was in a better position now to cope with adverse scenarios and it gained strength in the first quarter.
But overall, the central bank still thinks the balance of risks to growth remain to the downside.
Mexico's economy grew by 1.1 percent in the first quarter of this year from the fourth quarter but on an annual basis growth eased to 1.3 percent from 1.5 percent.
The Bank of Mexico (Banxico) has now raised its rate 13 times and by a total of 475 basis points since December 2015 when the U.S. Federal Reserve started tightening its policy, putting downward pressure on the peso's exchange rate which then raises import prices and inflation.
After raising the rate in February, its first and only rate hike this year, Banxico held fire in April and May as inflation decelerated and fell to a 2018 low of 4.51 percent in May while inflation expectation for this year also eased.
"Nevertheless, some of the upside risks to inflation identified by the Central Bank have started to materialize," the central bank said, pointing to the depreciation of the peso along with rising prices of gasoline and LP gas.
The balance of risks to inflation have thus deteriorated and could delay the decline in inflation toward the central bank's target of 3.0 percent.
"Looking ahead, the Governing Board will maintain a prudent monetary policy stance and will continue to follow closely the potential pass-through of exchange rate fluctuations to prices, the monetary policy stance relative to that of the U.S., and the conditions of slack in the Mexican economy," Banxico said.
In response to the rate hike, the peso rose against the U.S. dollar and was trading at 20.24 to the dollar, down 2.8 percent this year. Compared with the start of 2016, the peso has lost 14 percent.
In sync with most currencies, the peso has come under pressure from the stronger U.S. dollar, propelled by the Fed's two rate hikes this year, and a more hawkish stance adopted last week.
Uncertainty over NAFTA negotiations, U.S. tariffs on steel and aluminum and Mexico's general election in July has also contributed to peso weakness.
Mexico's economy has slowed since early 2017 but Banxico said it was in a better position now to cope with adverse scenarios and it gained strength in the first quarter.
But overall, the central bank still thinks the balance of risks to growth remain to the downside.
Mexico's economy grew by 1.1 percent in the first quarter of this year from the fourth quarter but on an annual basis growth eased to 1.3 percent from 1.5 percent.
UK's BOE maintains rate but MPC votes 3-6 for hike
The U.K. central bank left its benchmark Bank Rate at 0.50 percent but 3 members of its 9-member monetary policy committee (MPC) voted to raise the rate immediately as they were highly confident the economic slowdown in the first quarter was temporary and a modest tightening now would help avoid a rise in inflation that would then lead to higher rate hikes that end up triggering sharp falls in growth and employment.
At the previous MPC meeting in May only two external members - Ian McCafferty and Michael Saunders - had voted to raise the Bank Rate by 25 basis points but they have now been joined by Andrew Haldane, chief economist of the Bank of England (BOE).
In the run-up to the May meeting, early expectations the BOE would raise its rate for the second time since November 2017 were dashed after it became clear the economy had slowed sharply in the first quarter.
Investors questioned whether the BOE was correct in considering this slowdown as temporary and began wondering whether it would have to postpone any rate hikes to 2019.
Slower than expected growth in the euro area, a soft patch in China and a reversal of capital flows to some emerging markets amidst robust U.S. growth reinforced investors' nervousness and this accelerated the fall in the pound's exchange rate along with a broad rise in the U.S. dollar.
Today the BOE answered many of these questions, saying recent data confirmed that "the slowdown in Q1 had been temporary," and the collective judgement of the MPC remains that "an ongoing tightening of monetary policy over the forecast period would be appropriate to return inflation sustainably to its target..."
News since the May meeting had given the majority of the MPC "greater reassurance that the softness of activity in the first quarter had been largely temporary," as household consumption and sentiment had "bounced back strongly from what appeared to be erratic weakness in Q1, partly related to the adverse weather."
The reaction of currency markets to the BOE's decision was immediate, with the pound jumping 1.5 percent to 1.31 per U.S. dollar. The pound is now up 3 percent since the start of this year.
After slumping to quarterly growth of only 0.1 percent in the first quarter, the BOE said its staff expected second quarter Gross Domestic Product growth of 0.4 percent, in line with its May estimate, and growth in unit wage costs had appeared to pick up.
Headline inflation and core inflation was steady in May and April at 2.4 percent and 2.1 percent, respectively, both 0.1 points higher than expected in May, with the fall in the pound tending to push up inflation further ahead.
Although growth in the U.K. is modest by historical standards and forecast to average around 1.75 percent in the next few years, it is still above the diminished rate of supply, resulting in a small margin of excess demand by early 2020. This feeds into higher wages and costs.
In addition to deciding on the Bank Rate, the MPC also looked at its stock of assets that it has purchased in recent years - a policy known as quantitative easing - in order to hold down long-term interest rates and stimulate the economy when policy and short term rates are already very low.
Under a policy from 2015, the BOE had planned to not reduce its stock of 435 billion of U.K. government bonds and 10 billion of corporate bonds until the Bank Rate reached around 2.0 percent.
But reflecting the rate cut in August 2016, in the wake of the U.K.'s Brexit vote, the effective lower bound of the Bank Rate has fallen and the BOE may now decide to reduce its stock of assets at a gradual and predictable pace once the Bank Rate has reached around 1.5 percent.
At the previous MPC meeting in May only two external members - Ian McCafferty and Michael Saunders - had voted to raise the Bank Rate by 25 basis points but they have now been joined by Andrew Haldane, chief economist of the Bank of England (BOE).
In the run-up to the May meeting, early expectations the BOE would raise its rate for the second time since November 2017 were dashed after it became clear the economy had slowed sharply in the first quarter.
Investors questioned whether the BOE was correct in considering this slowdown as temporary and began wondering whether it would have to postpone any rate hikes to 2019.
Slower than expected growth in the euro area, a soft patch in China and a reversal of capital flows to some emerging markets amidst robust U.S. growth reinforced investors' nervousness and this accelerated the fall in the pound's exchange rate along with a broad rise in the U.S. dollar.
Today the BOE answered many of these questions, saying recent data confirmed that "the slowdown in Q1 had been temporary," and the collective judgement of the MPC remains that "an ongoing tightening of monetary policy over the forecast period would be appropriate to return inflation sustainably to its target..."
News since the May meeting had given the majority of the MPC "greater reassurance that the softness of activity in the first quarter had been largely temporary," as household consumption and sentiment had "bounced back strongly from what appeared to be erratic weakness in Q1, partly related to the adverse weather."
The reaction of currency markets to the BOE's decision was immediate, with the pound jumping 1.5 percent to 1.31 per U.S. dollar. The pound is now up 3 percent since the start of this year.
After slumping to quarterly growth of only 0.1 percent in the first quarter, the BOE said its staff expected second quarter Gross Domestic Product growth of 0.4 percent, in line with its May estimate, and growth in unit wage costs had appeared to pick up.
Headline inflation and core inflation was steady in May and April at 2.4 percent and 2.1 percent, respectively, both 0.1 points higher than expected in May, with the fall in the pound tending to push up inflation further ahead.
Although growth in the U.K. is modest by historical standards and forecast to average around 1.75 percent in the next few years, it is still above the diminished rate of supply, resulting in a small margin of excess demand by early 2020. This feeds into higher wages and costs.
In addition to deciding on the Bank Rate, the MPC also looked at its stock of assets that it has purchased in recent years - a policy known as quantitative easing - in order to hold down long-term interest rates and stimulate the economy when policy and short term rates are already very low.
Under a policy from 2015, the BOE had planned to not reduce its stock of 435 billion of U.K. government bonds and 10 billion of corporate bonds until the Bank Rate reached around 2.0 percent.
But reflecting the rate cut in August 2016, in the wake of the U.K.'s Brexit vote, the effective lower bound of the Bank Rate has fallen and the BOE may now decide to reduce its stock of assets at a gradual and predictable pace once the Bank Rate has reached around 1.5 percent.
Norway maintains rate but likely to hike in September
Norway's central bank left its key policy rate at 0.50 percent but said the economic upturn is continuing and the "current assessment of the outlook and balance of risks suggest that the key policy rate will most likely be raised in September 2018."
Norges Bank (NB) had already flagged that it would raise its rate in the second half of this year but has now pinpointed this could happen on Sept. 18 when its board meets to discuss another update of its economic forecasts. The board also meets on Aug. 15.
"Monetary policy is expansionary. The outlook for the Norwegian economy suggest that it will soon be appropriate to raise the key policy rate," NB Governor Oyestein Olsen said.
In its March monetary policy report NB began preparing the ground for tighter monetary policy by raising its forecast for the policy rate this year to an average of 0.6 percent from 0.5 percent.
NB has kept its rate steady since cutting it in March 2016 as it wrapped up an easing cycle of more than four years. It has not raised its key rate since May 2011.
In today's update of the policy report, NB confirmed it still expects the rate to average 0.6 percent this year and then 1.1 percent in 2019, implying two rate hikes of 25 basis points each next year.
For 2020 the NB also forecasts two rate hikes with the rate averaging 1.6 percent, up from 1.5 percent forecast in March. In 2021 the rate is seen averaging 2.0 percent.
"Uncertainty surrounding the effects of a higher interest rate suggests a cautious approach," NB said, adding the balance of risks imply gradual rate rises in the years ahead.
After several years of weak growth, Norway's economy picked up speed last year and is expected to strengthen further this year on higher oil production and solid growth among its trading partners. This is pushing up capacity utilization to above normal levels and wage growth.
NB maintained its 2018 forecast for growth of Norway's mainland economy, which excludes the offshore oil and gas industry, of 2.6 percent but raised it to 2.3 percent in 2019, up from 2.0 percent, but lowered it slightly to 1.6 percent in 2020 and 1.3 percent in 2021.
Inflation has also accelerated in recent months from higher energy prices and taxes and hit 2.3 percent in May, down from 2.4 percent in April, but up from 2.2 percent in February and March.
Underlying or core inflation, which excludes energy and taxes, was only 1.2 percent in May but is still expected to rise gradually from higher wages.
NB raised its forecast for headline inflation this year to 2.3 percent from 2.1 percent but trimmed the 2019 forecast to 1.6 percent, the 2020 forecast to 1.6 percent and the 2021 forecasts to 1.9 percent.
Core inflation is seen averaging 1.3 percent this year, then 1.5 percent in 2019, 1.6 percent in 2020 and 1.9 percent in 2021.
Norway's krone has on average been slightly weaker than NB had projected in March but is still projected to appreciate in coming years due to a gradual widening of the interest rate differential against its trading partners.
The krone was trading at 8.15 to the U.S. dollar today, up 0.6 percent this year.
Norges Bank (NB) had already flagged that it would raise its rate in the second half of this year but has now pinpointed this could happen on Sept. 18 when its board meets to discuss another update of its economic forecasts. The board also meets on Aug. 15.
"Monetary policy is expansionary. The outlook for the Norwegian economy suggest that it will soon be appropriate to raise the key policy rate," NB Governor Oyestein Olsen said.
In its March monetary policy report NB began preparing the ground for tighter monetary policy by raising its forecast for the policy rate this year to an average of 0.6 percent from 0.5 percent.
NB has kept its rate steady since cutting it in March 2016 as it wrapped up an easing cycle of more than four years. It has not raised its key rate since May 2011.
In today's update of the policy report, NB confirmed it still expects the rate to average 0.6 percent this year and then 1.1 percent in 2019, implying two rate hikes of 25 basis points each next year.
For 2020 the NB also forecasts two rate hikes with the rate averaging 1.6 percent, up from 1.5 percent forecast in March. In 2021 the rate is seen averaging 2.0 percent.
"Uncertainty surrounding the effects of a higher interest rate suggests a cautious approach," NB said, adding the balance of risks imply gradual rate rises in the years ahead.
But while NB sees continued expansion in Norway's economy that leads to higher wages and strong demand, it is less upbeat about the prospects for global growth that could prove to be weaker than assumed due to rising protectionism and political uncertainty.
"There is uncertainty surrounding global economic developments," NB said in its monetary policy report. While trade policy measures so far are assumed to have limited impact on growth, NB warned "increased protectionism may dampen global growth to a further extent than projected."After several years of weak growth, Norway's economy picked up speed last year and is expected to strengthen further this year on higher oil production and solid growth among its trading partners. This is pushing up capacity utilization to above normal levels and wage growth.
NB maintained its 2018 forecast for growth of Norway's mainland economy, which excludes the offshore oil and gas industry, of 2.6 percent but raised it to 2.3 percent in 2019, up from 2.0 percent, but lowered it slightly to 1.6 percent in 2020 and 1.3 percent in 2021.
Inflation has also accelerated in recent months from higher energy prices and taxes and hit 2.3 percent in May, down from 2.4 percent in April, but up from 2.2 percent in February and March.
Underlying or core inflation, which excludes energy and taxes, was only 1.2 percent in May but is still expected to rise gradually from higher wages.
NB raised its forecast for headline inflation this year to 2.3 percent from 2.1 percent but trimmed the 2019 forecast to 1.6 percent, the 2020 forecast to 1.6 percent and the 2021 forecasts to 1.9 percent.
Core inflation is seen averaging 1.3 percent this year, then 1.5 percent in 2019, 1.6 percent in 2020 and 1.9 percent in 2021.
Norway's krone has on average been slightly weaker than NB had projected in March but is still projected to appreciate in coming years due to a gradual widening of the interest rate differential against its trading partners.
The krone was trading at 8.15 to the U.S. dollar today, up 0.6 percent this year.
Wednesday, June 20, 2018
Philippines raises rate for 2nd month, stresses vigilance
The Philippine central bank raised its monetary policy rates for the second month in a row, saying it is ready to take further action if needed and emphasized its "continued vigilance against developments, including excessive peso volatility, that could affect the outlook for inflation."
Bangko Sentral ng Pilipinas (BSP) said it "is prepared to take further policy action as needed to achieve its price and financial stability objectives."
BSP raised its benchmark overnight reverse repurchase (RRP) by another 25 basis points to 3.50 percent, along with its overnight lending and deposit rates, a move that was expected by most analysts.
The benchmark rate has now been raised 50 basis points following the hike in May, which was the first rate hike by BSP since September 2014.
Today's rate hike follows a rise in inflation in May to 4.6 percent, the fifth month of accelerating inflation and the third month inflation has been over the central bank's target range of 2 -4 percent around a 3.0 percent midpoint.
Explaining the reason for its second consecutive rate increase, BSP said inflation expectations for this year remained elevated and this posed a risk of further prices increases.
And while 2019 inflation expectations remain within the target range, BSP said elevated expectations for this year posed a risk of sustained price pressure from future wage and prices.
Rising oil and commodity prices is also expected to have a stronger effect on inflation given robust demand in the Philippines, underlying that upside risks dominate the inflation outlook.
Last week's hawkish stance by the U.S. Federal Reserve has also put further pressure on the exchange rate of the peso, which the raises import prices and adds to inflationary pressure.
The peso has been weakening all year and was trading at 53.46 to the U.S. dollar today, down 6.5 percent since the start of this year.
Bangko Sentral ng Pilipinas (BSP) said it "is prepared to take further policy action as needed to achieve its price and financial stability objectives."
BSP raised its benchmark overnight reverse repurchase (RRP) by another 25 basis points to 3.50 percent, along with its overnight lending and deposit rates, a move that was expected by most analysts.
The benchmark rate has now been raised 50 basis points following the hike in May, which was the first rate hike by BSP since September 2014.
Today's rate hike follows a rise in inflation in May to 4.6 percent, the fifth month of accelerating inflation and the third month inflation has been over the central bank's target range of 2 -4 percent around a 3.0 percent midpoint.
Explaining the reason for its second consecutive rate increase, BSP said inflation expectations for this year remained elevated and this posed a risk of further prices increases.
And while 2019 inflation expectations remain within the target range, BSP said elevated expectations for this year posed a risk of sustained price pressure from future wage and prices.
Rising oil and commodity prices is also expected to have a stronger effect on inflation given robust demand in the Philippines, underlying that upside risks dominate the inflation outlook.
Last week's hawkish stance by the U.S. Federal Reserve has also put further pressure on the exchange rate of the peso, which the raises import prices and adds to inflationary pressure.
The peso has been weakening all year and was trading at 53.46 to the U.S. dollar today, down 6.5 percent since the start of this year.
Tuesday, June 19, 2018
Morocco maintains rate on moderate underlying inflation
Morocco's central bank continued to keep its monetary policy rate at 2.25 percent, unchanged since March 2016, saying underlying inflation remains moderate despite the recent rise in headline inflation which is based on changes to the consumer price index along with higher prices of volatile food products and tariffs on regulated prices.
Underlying inflation is forecast to average 1.1 percent this year and 1.6 percent in 2019, the Bank of Morocco, or Bank Al-Maghrib (BAM), said. This forecast is down from March when BAM forecast 2018 underlying inflation of 1.4 percent and 1.9 percent in 2019.
Morocco's headline inflation rate rose to 2.7 percent in May from 2.5 percent in April and BAM expects inflation to average 2.4 percent this year and then ease to 1.4 percent in 2019.
The forecast for 2018 headline inflation is sharply up from the previous forecast in March of 1.8 percent while the 2019 forecast is largely similar to the previous 1.5 percent forecast.
After slowing in 2016, Morocco's economy recovered last year and is forecast to continue to expand this year on good agricultural production and improved non-agricultural activities.
Last year Morocco's economy grew by 4.1 percent, up from 1.1 percent in 2016, and BAM forecast 3.6 percent growth this year and 3.1 percent in 2019.
In March BAM raised its 2018 growth forecast to 3.3 percent from 3.0 percent but lowered its 2019 forecast to 3.5 percent from 3.6 percent.
Exports from Morocco are expected to continue to rise this year, with exports and the automotive industry getting a boost next year from start of production at the Peugeot Citroen plant near Rabat which is planned to produce 100,000 cars next year before total output of 200,000 vehicles and 200,000 engines at its final stage.
BAM forecast goods export to rise 5.8 percent this year and 6.9 percent in 2019, with tourism revenue up 8 percent this year and 4 percent in 2019.
The current account deficit is seen easing to 3.6 percent of GDP in 20189 from 4.1 percent this year while foreign exchange reserves are seen ending this year at 255.4 billion dirhams and 245.9 billion by end-2019, enough for more than 5 months of imports.
In January last year Morocco introduced a more flexible exchange rate system by widening the dirham's fluctuation band against hard currencies to 2.5 percent on either side from 0.3 percent for a total range of 5.0 percent.
The dirham is mainly pegged to the euro but last year BAM reduced the euro weight to 60 percent from 80 percent and raised the U.S. dollar weighting to 40 percent from 20 percent.
Underlying inflation is forecast to average 1.1 percent this year and 1.6 percent in 2019, the Bank of Morocco, or Bank Al-Maghrib (BAM), said. This forecast is down from March when BAM forecast 2018 underlying inflation of 1.4 percent and 1.9 percent in 2019.
Morocco's headline inflation rate rose to 2.7 percent in May from 2.5 percent in April and BAM expects inflation to average 2.4 percent this year and then ease to 1.4 percent in 2019.
The forecast for 2018 headline inflation is sharply up from the previous forecast in March of 1.8 percent while the 2019 forecast is largely similar to the previous 1.5 percent forecast.
After slowing in 2016, Morocco's economy recovered last year and is forecast to continue to expand this year on good agricultural production and improved non-agricultural activities.
Last year Morocco's economy grew by 4.1 percent, up from 1.1 percent in 2016, and BAM forecast 3.6 percent growth this year and 3.1 percent in 2019.
In March BAM raised its 2018 growth forecast to 3.3 percent from 3.0 percent but lowered its 2019 forecast to 3.5 percent from 3.6 percent.
Exports from Morocco are expected to continue to rise this year, with exports and the automotive industry getting a boost next year from start of production at the Peugeot Citroen plant near Rabat which is planned to produce 100,000 cars next year before total output of 200,000 vehicles and 200,000 engines at its final stage.
BAM forecast goods export to rise 5.8 percent this year and 6.9 percent in 2019, with tourism revenue up 8 percent this year and 4 percent in 2019.
The current account deficit is seen easing to 3.6 percent of GDP in 20189 from 4.1 percent this year while foreign exchange reserves are seen ending this year at 255.4 billion dirhams and 245.9 billion by end-2019, enough for more than 5 months of imports.
In January last year Morocco introduced a more flexible exchange rate system by widening the dirham's fluctuation band against hard currencies to 2.5 percent on either side from 0.3 percent for a total range of 5.0 percent.
The dirham is mainly pegged to the euro but last year BAM reduced the euro weight to 60 percent from 80 percent and raised the U.S. dollar weighting to 40 percent from 20 percent.
Today the dirham was trading at 9.54 to the U.S. dollar, down 2 percent this year, and at 11.06 to the euro, up 1.4 percent this year.
Botswana keeps rate steady on positive inflation outlook
Botswana's central bank again left its Bank Rate at 5.0 percent, citing a positive outlook for price stability and economic activity that is expected to strengthen but still remain below capacity.
The Bank of Botswana (BB) has kept its rate steady since cutting it to the current level in October 2017.
Botswana's inflation rate eased to 3.3 percent in May from 3.4 percent in April and is forecast to remain within the bank's target range of 3 - 6 percent in the medium term based on subdued domestic demand and a modest increase in foreign prices.
Risks on the upside arise from higher administered prices, government levies or taxes, along with higher-than-expected commodity prices. Downside risks stem from restrained global economic activity, technological progress and productivity improvements, BB said.
Botswana's economy slowed last year due to declines in copper and nickel production, and lower activity in construction and trade. But the fiscal and external accounts were nearly balanced, the exchange rate was stable and public debt was low and about 19 percent of Gross Domestic Product, according to the International Monetary Fund (IMF) on June 8.
Botswana's GDP slowed to 2.4 percent growth in 2017 from 2016's 4.3 percent as mining output shrank by 11.2 percent from a decline of 3.5 percent in 2016 while non-mining activity rose by 4.2 percent, down from 5.5 percent growth in 2016.
But growth in 2018 is expected to pick up from 2017, both BB and the IMF said, supported by a recovery of mining activity, including higher diamond sales, stable supply of water and electricity, and higher government spending.
In synch with the rise in the U.S. dollar, Botswana's pula has been depreciating in recent months and was trading at 10.45 to the dollar today, down. 5.5 percent this year.
The Bank of Botswana (BB) has kept its rate steady since cutting it to the current level in October 2017.
Botswana's inflation rate eased to 3.3 percent in May from 3.4 percent in April and is forecast to remain within the bank's target range of 3 - 6 percent in the medium term based on subdued domestic demand and a modest increase in foreign prices.
Risks on the upside arise from higher administered prices, government levies or taxes, along with higher-than-expected commodity prices. Downside risks stem from restrained global economic activity, technological progress and productivity improvements, BB said.
Botswana's economy slowed last year due to declines in copper and nickel production, and lower activity in construction and trade. But the fiscal and external accounts were nearly balanced, the exchange rate was stable and public debt was low and about 19 percent of Gross Domestic Product, according to the International Monetary Fund (IMF) on June 8.
Botswana's GDP slowed to 2.4 percent growth in 2017 from 2016's 4.3 percent as mining output shrank by 11.2 percent from a decline of 3.5 percent in 2016 while non-mining activity rose by 4.2 percent, down from 5.5 percent growth in 2016.
But growth in 2018 is expected to pick up from 2017, both BB and the IMF said, supported by a recovery of mining activity, including higher diamond sales, stable supply of water and electricity, and higher government spending.
In synch with the rise in the U.S. dollar, Botswana's pula has been depreciating in recent months and was trading at 10.45 to the dollar today, down. 5.5 percent this year.
Monday, June 18, 2018
Mongolia maintains rate after first meeting of new MPC
Mongolia's central bank kept its policy rate at 10.0 percent, saying the outlook for inflation is stable around the target level of 8 percent and economic growth is expected to pick up further.
The decision to maintain the rate comes after the Bank of Mongolia (BOM) slashed its key rate by 500 basis points since December 2016, including a 100 point cut in March when it also said it expected inflation to stabilize around its target level.
Despite the rising price of global oil prices, BOM said prices of some of its export commodities had been improving and this lead to a relatively stable outlook for the terms of trade.
The decision by BOM's monetary policy committee (MPC) comes after Mongolia's parliament approved a new central bank law that named the MPC as the official body that takes monetary policy decisions in a collective framework.
Decisions will now be made after meetings held in two phases, and the first meeting of the new committee took place on June 11, followed by a second meeting on June 15 in which economic conditions, the economic outlook and risks, and the monetary policy stance was discussed.
In its statement issued June 18, the central bank said the MPC set a ceiling on debt to income ratio for personal consumption credit issued by banks at 70 percent to prevent an accumulation of risk in the financial sector from a rapid acceleration of consumer credit and household debt.
The new 7-member committee includes four members that are appointed by the parliament for six-year terms. Previously, all members of the MPC were appointed by the governor of BOM.
The other three members of the MPC include the central bank's governor, the first deputy governor and the deputy governor of the BOM.
Mongolia's inflation rate rose slightly to 6.1 percent in May from 6.0 percent in April while economic activity has been accelerating in the first quarter as mining investments are continuing to expand and investor and consumer confidence has recovered.
Surges of imports, however, in tandem with higher exports may pose a downside risk to the balance of payments, BOM said.
Mongolia's economy was hit hard in 2016 when foreign investment collapsed following a fall in the prices of its major exports such as coal and copper.
In May 2017 the IMF and Mongolia agreed on a 3-year, $425 million loan as part of a total financing package worth $5.5 billion that was supported by Japan, Korea, the World Bank and the Asian Development Bank, the fourth-largest aid package in IMF history.
Since then commodity prices have been rising, with Mongolia's coal exports to China up as China has been closing its mines and banned the import of coal from North Korea.
Last month the IMF reached staff-level agreement on the fourth review of Mongolia's extended fund facility, releasing another US$434.3 million.
"Macro-economic performance under the program remains positive, with all quantitative targets met," the IMF said, adding fiscal results in the first quarter were much better than expected as revenues rose 21 percent and net international reserves rose by $200 million.
The exchange rate of the tugrik, which tumbled in the second half of 2016, has been relatively stable since September last year and was trading at 2,421 to the U.S. dollar today, unchanged from 2,422 at the start of this year.
www.CentralBankNews.info
The decision to maintain the rate comes after the Bank of Mongolia (BOM) slashed its key rate by 500 basis points since December 2016, including a 100 point cut in March when it also said it expected inflation to stabilize around its target level.
Despite the rising price of global oil prices, BOM said prices of some of its export commodities had been improving and this lead to a relatively stable outlook for the terms of trade.
The decision by BOM's monetary policy committee (MPC) comes after Mongolia's parliament approved a new central bank law that named the MPC as the official body that takes monetary policy decisions in a collective framework.
Decisions will now be made after meetings held in two phases, and the first meeting of the new committee took place on June 11, followed by a second meeting on June 15 in which economic conditions, the economic outlook and risks, and the monetary policy stance was discussed.
In its statement issued June 18, the central bank said the MPC set a ceiling on debt to income ratio for personal consumption credit issued by banks at 70 percent to prevent an accumulation of risk in the financial sector from a rapid acceleration of consumer credit and household debt.
The new 7-member committee includes four members that are appointed by the parliament for six-year terms. Previously, all members of the MPC were appointed by the governor of BOM.
The other three members of the MPC include the central bank's governor, the first deputy governor and the deputy governor of the BOM.
Mongolia's inflation rate rose slightly to 6.1 percent in May from 6.0 percent in April while economic activity has been accelerating in the first quarter as mining investments are continuing to expand and investor and consumer confidence has recovered.
Surges of imports, however, in tandem with higher exports may pose a downside risk to the balance of payments, BOM said.
Mongolia's economy was hit hard in 2016 when foreign investment collapsed following a fall in the prices of its major exports such as coal and copper.
In May 2017 the IMF and Mongolia agreed on a 3-year, $425 million loan as part of a total financing package worth $5.5 billion that was supported by Japan, Korea, the World Bank and the Asian Development Bank, the fourth-largest aid package in IMF history.
Since then commodity prices have been rising, with Mongolia's coal exports to China up as China has been closing its mines and banned the import of coal from North Korea.
Last month the IMF reached staff-level agreement on the fourth review of Mongolia's extended fund facility, releasing another US$434.3 million.
"Macro-economic performance under the program remains positive, with all quantitative targets met," the IMF said, adding fiscal results in the first quarter were much better than expected as revenues rose 21 percent and net international reserves rose by $200 million.
The exchange rate of the tugrik, which tumbled in the second half of 2016, has been relatively stable since September last year and was trading at 2,421 to the U.S. dollar today, unchanged from 2,422 at the start of this year.
www.CentralBankNews.info
Mozambique cuts rate 7th time on single-digit inflation
Mozambique's central bank cut its monetary policy rate for the seventh time in a row as forecast that show inflation will remain in single digits justify continuing the easing that began in April 2017.
The Bank of Mozambique (BM) cut its MIMO (monetary policy rate) by another 75 basis points to 15.75 percent and has now cut the rate by 600 basis points since April last year when MIMO replaced the standing facility rate as the new signal rate and set it at 21.75 percent.
This year BM has cut its policy rate three times by a total of 375 basis points.
BM also lowered the standing deposit facility (SDF) rate by 50 basis points to 12.0 percent but maintained the standing lending facility (SLF) rate at 18.0 percent along with the reserve requirement for domestic currency liabilities at 14 percent and for foreign currency liabilities at 22 percent.
As in recent months, the central bank said it would continue to monitor economic and financial indicators as well as risk factors and "may take the necessary corrective measures before the next meeting" of its monetary policy committee.
While economic conditions continue to favor low and stable inflation, the central bank said monetary policy will continue to be prudent in light of risks from the stability of public debt along with the evolution of regulated prices. BM also noted external risks from recent trade tensions between major economies, a volatile U.S. dollar and commodity prices, especially oil.
Mozambique's inflation rate rose to 3.26 percent in May from 2.33 percent in April but was down from 20.45 percent in May 2017 due to higher transport and liquid fuel prices.
Excluding administered prices, inflation in May was 1.03 percent.
Economic growth in Mozambique remains moderate, BM said, saying Gross Domestic Product grew an annual 3.2 percent in the first quarter of this year, down from 4.5 percent in the same 2017 period and down from 3.7 percent in the fourth quarter of last year.
But in contrast to the first quarter of last year, where several sectors slowed, all sectors saw positive changes this year apart from electricity and water, which shrank by 1.8 percent.
In April the economic climate index improved, reflecting optimism by entrepreneurs, especially those in the transport and trade sectors, BM said.
Banks' lending rates have shown "a timid reaction" to BM's rate cuts and credit to the private sector remains stagnant at a time of a continuous rise in internal public debt, BM said, noting the public deficit worsened in the first quarter, putting pressure on domestic financing.
Improved external demand is supporting Mozambique's exports, with the trade deficit down by US$113 million in the first quarter of this year from the same 2017 period due to an increase in exports of US$194 million while imports rose $82 million.
The current account deficit, however, rose by $153 million to $964 million, mainly reflecting the payment of services by large foreign direct investment projects.
Despite the global trend of a stronger U.S. dollar, Mozambique's metical - which 38 years on June 16 ago replaced Portugal's escudo - has appreciated since early March and is now at levels similar to the start of this year.
The metical was trading at 59.2 to the dollar today compared with 58.9 at the start of this year and up 5.9 percent since a 2018 low of 62.7 on March 9.
Mozambique's international reserves declined slightly to $3.235 billion, enough for 7 months of imports, from $3.260 billion at the end of the first quarter.
The Bank of Mozambique (BM) cut its MIMO (monetary policy rate) by another 75 basis points to 15.75 percent and has now cut the rate by 600 basis points since April last year when MIMO replaced the standing facility rate as the new signal rate and set it at 21.75 percent.
This year BM has cut its policy rate three times by a total of 375 basis points.
BM also lowered the standing deposit facility (SDF) rate by 50 basis points to 12.0 percent but maintained the standing lending facility (SLF) rate at 18.0 percent along with the reserve requirement for domestic currency liabilities at 14 percent and for foreign currency liabilities at 22 percent.
As in recent months, the central bank said it would continue to monitor economic and financial indicators as well as risk factors and "may take the necessary corrective measures before the next meeting" of its monetary policy committee.
While economic conditions continue to favor low and stable inflation, the central bank said monetary policy will continue to be prudent in light of risks from the stability of public debt along with the evolution of regulated prices. BM also noted external risks from recent trade tensions between major economies, a volatile U.S. dollar and commodity prices, especially oil.
Mozambique's inflation rate rose to 3.26 percent in May from 2.33 percent in April but was down from 20.45 percent in May 2017 due to higher transport and liquid fuel prices.
Excluding administered prices, inflation in May was 1.03 percent.
Economic growth in Mozambique remains moderate, BM said, saying Gross Domestic Product grew an annual 3.2 percent in the first quarter of this year, down from 4.5 percent in the same 2017 period and down from 3.7 percent in the fourth quarter of last year.
But in contrast to the first quarter of last year, where several sectors slowed, all sectors saw positive changes this year apart from electricity and water, which shrank by 1.8 percent.
In April the economic climate index improved, reflecting optimism by entrepreneurs, especially those in the transport and trade sectors, BM said.
Banks' lending rates have shown "a timid reaction" to BM's rate cuts and credit to the private sector remains stagnant at a time of a continuous rise in internal public debt, BM said, noting the public deficit worsened in the first quarter, putting pressure on domestic financing.
Improved external demand is supporting Mozambique's exports, with the trade deficit down by US$113 million in the first quarter of this year from the same 2017 period due to an increase in exports of US$194 million while imports rose $82 million.
The current account deficit, however, rose by $153 million to $964 million, mainly reflecting the payment of services by large foreign direct investment projects.
Despite the global trend of a stronger U.S. dollar, Mozambique's metical - which 38 years on June 16 ago replaced Portugal's escudo - has appreciated since early March and is now at levels similar to the start of this year.
The metical was trading at 59.2 to the dollar today compared with 58.9 at the start of this year and up 5.9 percent since a 2018 low of 62.7 on March 9.
Mozambique's international reserves declined slightly to $3.235 billion, enough for 7 months of imports, from $3.260 billion at the end of the first quarter.
Sunday, June 17, 2018
This week in monetary policy: Mozambique, Botswana, Hungary, Morocco, Thailand, Brazil, Switzerland, Norway, Taiwan, Philippines, UK, Mexico, Paraguay & Mongolia
This week - June 17 through June 23 - central banks from 14 countries or jurisdictions are scheduled to decide on monetary policy: Mozambique, Botswana, Hungary, Morocco, Thailand, Brazil, Switzerland, Norway, Taiwan, Philippines, United Kingdom, Mexico, Paraguay and Mongolia.
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 25 | |||||
| JUNE 17 - JUN 23, 2018: | |||||
| COUNTRY | DATE | RATE | LATEST | YTD | 1 YR AGO |
| MOZAMBIQUE | 18-Jun | 16.50% | -150 | -300 | 21.75% |
| BOTSWANA | 19-Jun | 5.00% | 0 | 0 | 5.50% |
| HUNGARY | 19-Jun | 0.90% | 0 | 0 | 0.90% |
| MOROCCO | 19-Jun | 2.25% | 0 | 0 | 2.25% |
| THAILAND | 20-Jun | 1.50% | 0 | 0 | 1.50% |
| BRAZIL | 20-Jun | 6.50% | 0 | -50 | 10.25% |
| SWITZERLAND | 21-Jun | -0.75% | 0 | 0 | -0.75% |
| NORWAY | 21-Jun | 0.50% | 0 | 0 | 0.50% |
| TAIWAN | 21-Jun | 1.375% | 0 | 0 | 1.375% |
| PHILIPPINES | 21-Jun | 3.25% | 25 | 25 | 3.00% |
| UNITED KINGDOM | 21-Jun | 0.50% | 0 | 0 | 0.25% |
| MEXICO | 21-Jun | 7.50% | 0 | 25 | 7.00% |
| PARAGUAY | 21-Jun | 5.25% | 0 | 0 | 5.50% |
| MONGOLIA | 22-Jun | 10.00% | -100 | -100 | 12.00% |
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