The Central Bank of the Dominican Republic (BCRD) left its monetary policy rate steady at 5.50 percent and said it expects inflation to gradually converge to its target range over the next 2 years after inflation in December fell to the lowest rate in 34 years.
BCRD, which has maintained its rate since raising it by 25 basis points in July 2018, added economic activity was continuing to grow above its potential, amid low inflationary pressures, and estimated economic growth of 7.0 percent in 2018, driven by investment and private consumption.
In line with this strong economic activity, the central bank said credit to the private sector in local currency was up an annual 11.0. percent in January.
Headline inflation in the Dominican Republic dropped to 1.17 percent in December from 2.37 percent in November, mainly due to lower fuel prices from the fall in oil prices.
The December inflation rate is not only the lowest in 34 years, but below the central bank's target range of 4.0 percent, plus/minus 1 percentage point, and below BCRD's projection from December 2017 when it forecast that inflation would end 2018 around 1.3 percent.
Core inflation, which excludes some volatile agricultural products, alcohol, tobacco, fuel and managed transportation, ended last year at 2.47 percent, down from 2.54 percent in November.
As in December, BCRD said it was paying attention to the evolution of the normalization of monetary policy in the U.S., the behavior of the U.S. dollar and the price of oil, and stands ready to react in a timely manner before any factors generate deviations to its inflation target.
www.CentralBankNews.info
Thursday, January 31, 2019
Pakistan raises rate another 25 bps in 6th hike in a year
Pakistan's central bank raised its policy rate by another 25 basis points to 10.25 percent, saying confidence is improving and the impact of past rate hikes is beginning to bear fruit but the fiscal deficit has yet to show signs of consolidation, the current account deficit remains high and inflationary pressures persist.
The State Bank of Pakistan (SBP) has now raised its rate six times since January 2018 and by a total of 450 basis points.
Pakistan's inflation rate decelerated for the third month in a row to 6.17 percent in December but still averaged 6.0 percent in the first half of FY19, which began July 1, as compared with 3.8 percent in the same period the previous year.
Despite the recent decline in headline inflation, SBP said this was mainly due to a sharp fall in perishable food items and petroleum products and core inflation hit 8.4 percent in December and maintained its forecast for inflation to range between 6.5 to 7.5 percent in fiscal 2019.
"The pickup in inflation and the continuation of economic challenges are taking their toll on economic performance," SBP said, noting the economic slowdown in the first half when large-scale manufacturing contracted by 0.9 percent in the first five months.
The fiscal deficit in the first half of FY19 is also likely to be higher than in the same period last year, SBP said, reiterating its call for fiscal policy to be proactive and play a supportive role in generating stable and sustainable growth.
Pakistan's current account deficit narrowed 4.4 percent year-on-year in the first half of FY19 to US$8.0 billion due to lower imports but financing the deficit remains a challenge as foreign direct investments are insufficient to finance it, SBP said.
A significant part of the deficit was therefore managed by drawing on the country's own resources, lowering SBP's net liquid foreign exchange reserves to US$7.2 billion by end-December.
Bilateral official flows in the last few days has helped boost SBP's foreign exchange reserves to $8.2 billion and the country's foreign exchange reserves to $14.8 billion as of Jan. 25, it added.
In contrast to 2018, when the SBP's rate hikes coincided with rupee devaluations, the rupee was steady to slightly firmer in response to the rate hike to trade at 139.3 to the U.S. dollar from 139.5.
However, the rupee was still within this year's range of 139.8 to 138.7.
Compared with early December 2017, when the rupee was trading around 105 to the dollar before the monetary tightening cycle began, the rupee has depreciated almost 25 percent.
The State Bank of Pakistan (SBP) has now raised its rate six times since January 2018 and by a total of 450 basis points.
Pakistan's inflation rate decelerated for the third month in a row to 6.17 percent in December but still averaged 6.0 percent in the first half of FY19, which began July 1, as compared with 3.8 percent in the same period the previous year.
Despite the recent decline in headline inflation, SBP said this was mainly due to a sharp fall in perishable food items and petroleum products and core inflation hit 8.4 percent in December and maintained its forecast for inflation to range between 6.5 to 7.5 percent in fiscal 2019.
"The pickup in inflation and the continuation of economic challenges are taking their toll on economic performance," SBP said, noting the economic slowdown in the first half when large-scale manufacturing contracted by 0.9 percent in the first five months.
The fiscal deficit in the first half of FY19 is also likely to be higher than in the same period last year, SBP said, reiterating its call for fiscal policy to be proactive and play a supportive role in generating stable and sustainable growth.
Pakistan's current account deficit narrowed 4.4 percent year-on-year in the first half of FY19 to US$8.0 billion due to lower imports but financing the deficit remains a challenge as foreign direct investments are insufficient to finance it, SBP said.
A significant part of the deficit was therefore managed by drawing on the country's own resources, lowering SBP's net liquid foreign exchange reserves to US$7.2 billion by end-December.
Bilateral official flows in the last few days has helped boost SBP's foreign exchange reserves to $8.2 billion and the country's foreign exchange reserves to $14.8 billion as of Jan. 25, it added.
In contrast to 2018, when the SBP's rate hikes coincided with rupee devaluations, the rupee was steady to slightly firmer in response to the rate hike to trade at 139.3 to the U.S. dollar from 139.5.
However, the rupee was still within this year's range of 139.8 to 138.7.
Compared with early December 2017, when the rupee was trading around 105 to the dollar before the monetary tightening cycle began, the rupee has depreciated almost 25 percent.
Ukraine maintains rate as it wants to drive down inflation
Ukraine's central bank left its key policy rate steady at 18.0 percent to "drive inflation down to the target of 5% in 2020," despite recent signals from policy makers that it would be lowered.
The National Bank of Ukraine (NBU) acknowledged inflation fell to a 5-year low of 9.8 percent at the end of 2018 but stressed this was still above its 2018 target of 6.0 percent, plus/minus 2 percentage points.
While the NBU expects inflation to continue to decline toward 6.3 percent at the end of this year and reach its medium-term target of 5.0 percent, plus/minus 1 percentage points, in early 2020, the bank's board said it still "deems it necessary to maintain the existing reasonably tight monetary conditions in order to ensure that inflation returns to its target range in Q1 2020."
The NBU added any further changes to its policy rate depends on inflation and while it would embark on an monetary easing cycle if inflation falls and returns to its target, it also warned that "if inflationary pressures rise and risks that inflation may not return to its target increase, the NBU could raise the key policy rate."
Today's decision, which comes after four rate hikes last year by a total of 350 basis points, surprised analysts who had taken note of Governor Yakiv Smoliy's statement to the Parliament earlier this month there were grounds for an easing of monetary policy.
Smoliy's comments followed those of Deputy Governor Dmitry Sologub, who had told Reuters on Jan. 11 that his personal position was that the reversal in the trend of inflation last year had created a potential for softer policy.
Ukraine's inflation rate fell to 9.8 percent in December last year from 14.1 percent in January, helped by a gradual appreciation of the hryvnia since September 2018, and last year's rate hikes that made it more attractive to save money than spend it.
The hryvnia rose further after the NBU's decision to 27.69 per U.S. dollar, down 0.9 percent this year but up 2 percent since the start of 2018.
NBU said inflation had deviated from its target last year mainly to factors beyond its control, such as higher administered prices, wage-driven growth in production costs - wages rose 12.5 percent last year - along with the rise in crude oil prices and higher vegetable prices from unfavorable weather.
Economic growth, which picked up in 2018 to an estimated 3.3 percent, is expected to slow this year to 2.5 percent due to tight monetary and fiscal policy, a lower grain harvest and a deceleration in global trade from protectionist measures.
But in 2020 and 2021, the NBU expects growth to accelerate as it loosens its policy, bolstering domestic demand an a pickup in investments as uncertainty over the political situation diminishes.
The economy is seen growing 2.9 percent in 2020 and 3.7 percent in 2021.
After widening to 3.6 percent of gross domestic product in 2018, the current account deficit is estimated to range between 3.0 and 4.0 percent of GDP in 2019 and 2020 with international reserves hovering around US$21 billion this year and next year.
The National Bank of Ukraine (NBU) acknowledged inflation fell to a 5-year low of 9.8 percent at the end of 2018 but stressed this was still above its 2018 target of 6.0 percent, plus/minus 2 percentage points.
While the NBU expects inflation to continue to decline toward 6.3 percent at the end of this year and reach its medium-term target of 5.0 percent, plus/minus 1 percentage points, in early 2020, the bank's board said it still "deems it necessary to maintain the existing reasonably tight monetary conditions in order to ensure that inflation returns to its target range in Q1 2020."
The NBU added any further changes to its policy rate depends on inflation and while it would embark on an monetary easing cycle if inflation falls and returns to its target, it also warned that "if inflationary pressures rise and risks that inflation may not return to its target increase, the NBU could raise the key policy rate."
Today's decision, which comes after four rate hikes last year by a total of 350 basis points, surprised analysts who had taken note of Governor Yakiv Smoliy's statement to the Parliament earlier this month there were grounds for an easing of monetary policy.
Smoliy's comments followed those of Deputy Governor Dmitry Sologub, who had told Reuters on Jan. 11 that his personal position was that the reversal in the trend of inflation last year had created a potential for softer policy.
Ukraine's inflation rate fell to 9.8 percent in December last year from 14.1 percent in January, helped by a gradual appreciation of the hryvnia since September 2018, and last year's rate hikes that made it more attractive to save money than spend it.
The hryvnia rose further after the NBU's decision to 27.69 per U.S. dollar, down 0.9 percent this year but up 2 percent since the start of 2018.
NBU said inflation had deviated from its target last year mainly to factors beyond its control, such as higher administered prices, wage-driven growth in production costs - wages rose 12.5 percent last year - along with the rise in crude oil prices and higher vegetable prices from unfavorable weather.
Economic growth, which picked up in 2018 to an estimated 3.3 percent, is expected to slow this year to 2.5 percent due to tight monetary and fiscal policy, a lower grain harvest and a deceleration in global trade from protectionist measures.
But in 2020 and 2021, the NBU expects growth to accelerate as it loosens its policy, bolstering domestic demand an a pickup in investments as uncertainty over the political situation diminishes.
The economy is seen growing 2.9 percent in 2020 and 3.7 percent in 2021.
After widening to 3.6 percent of gross domestic product in 2018, the current account deficit is estimated to range between 3.0 and 4.0 percent of GDP in 2019 and 2020 with international reserves hovering around US$21 billion this year and next year.
Wednesday, January 30, 2019
Chile raises rate 25 bps, gradual tightening still warranted
Chile's central bank raised its monetary policy rate by a further 25 basis points to 3.0 percent, saying economic conditions continue to warrant a gradual withdrawal of monetary stimulus as outlined in the December monetary policy report.
The Central Bank of Chile, which has now raised its rate twice since October 2018, reiterated its earlier guidance that it would proceed with withdrawing monetary stimulus "gradually and cautiously."
Today's rate hike comes after the board at its December meeting discussed raising the rate but decided against another hike because raising the rate so soon after the October hike might signal an unwarranted sign of urgency and would not be in line with its guidance of withdrawing monetary stimulus gradually and cautiously.
Including today's rate increase, which was unanimously agreed by the bank's board, the policy rate has now been raised by 50 basis points in the last four months.
Today's rate hike comes against a faster-than-expected easing of growth in the world economy but Chile's economy "regained its dynamism" in the last quarter of 2018, as expected, helped by non-mining activity and construction.
However, the central bank added that partial data for consumption show slower growth than in the first part of 2018, especially for durables though the latest survey of expectations still look for growth of 3.6 percent in 2019.
The central bank has estimated 2018 growth of 4 percent and between 3.25 and 4.25 percent in 2019 while underlying inflation is expected to converge to the 3.0 percent target within two years.
The Central Bank of Chile, which has now raised its rate twice since October 2018, reiterated its earlier guidance that it would proceed with withdrawing monetary stimulus "gradually and cautiously."
Today's rate hike comes after the board at its December meeting discussed raising the rate but decided against another hike because raising the rate so soon after the October hike might signal an unwarranted sign of urgency and would not be in line with its guidance of withdrawing monetary stimulus gradually and cautiously.
Including today's rate increase, which was unanimously agreed by the bank's board, the policy rate has now been raised by 50 basis points in the last four months.
Today's rate hike comes against a faster-than-expected easing of growth in the world economy but Chile's economy "regained its dynamism" in the last quarter of 2018, as expected, helped by non-mining activity and construction.
However, the central bank added that partial data for consumption show slower growth than in the first part of 2018, especially for durables though the latest survey of expectations still look for growth of 3.6 percent in 2019.
The central bank has estimated 2018 growth of 4 percent and between 3.25 and 4.25 percent in 2019 while underlying inflation is expected to converge to the 3.0 percent target within two years.
US Fed holds rate and will be patient in further tightening
The U.S. Federal Reserve left its benchmark federal funds rate steady at 2.25 - 2.50 percent, as widely expected, and confirmed its shift toward patience in raising rates and tightening monetary policy further by reducing its holdings of bonds "in light of global economic and financial developments and muted inflation pressure."
As a clear sign of the Fed's concern over the dampening impact on the U.S. economy from slowing global growth, the Federal Open Market Committee (FOMC), the Fed's policy-making arm, said it was prepared to adjust the pace of the normalization of its balance sheet and use this "if future economic conditions were to warrant a more accommodative monetary policy than can be achieved solely by reducing the federal funds rate."
Underlining this marked shift to a more dovish stance, which was first signaled by Fed Chairman Jerome Powell on Jan. 4, the FOMC also dropped its previous reference to the need for further gradual increases in the federal funds rate.
In December, when the Fed raised its rate for the 9th time since December 2015, the Fed cut its forecast for rate hikes this year to two from an earlier forecast of three as it said it was now taking into account financial and international developments, a reference to the stock market sell-off in December and the weakening pace of global growth.
In today's statement, which was unanimously adopted by the FOMC's 10 members, the Fed reiterated its view from December that the labour market had continued to strengthen, that economic activity has been rising at a solid rate, job gains have been strong, household spending has continued to grow strongly while the growth of business investment has moderated.
In a separate statement, the FOMC also confirmed its longer-run goals and monetary policy strategy, which includes the target of 2.0 percent inflation, as measured by the annual change in personal consumption expenditures, and its commitment to living up to its mandate from the U.S. Congress of "promoting maximum employment, stable prices and moderate long-term interest rates."
In the statement, which was originally adopted in 2012, the FOMC also referred to its estimate of the longer-run unemployment rate, which in its most recent projections was 4.4 percent.
Headline inflation in the U.S. dropped to 1.9 percent in December from 2.2 percent in November while growth in the third quarter eased to 3.4 percent from the second quarter.
The U.S. dollar weakened around 0.6 percent in the wake of the Fed's policy shift to trade at 1.148 to the euro.
As a clear sign of the Fed's concern over the dampening impact on the U.S. economy from slowing global growth, the Federal Open Market Committee (FOMC), the Fed's policy-making arm, said it was prepared to adjust the pace of the normalization of its balance sheet and use this "if future economic conditions were to warrant a more accommodative monetary policy than can be achieved solely by reducing the federal funds rate."
Underlining this marked shift to a more dovish stance, which was first signaled by Fed Chairman Jerome Powell on Jan. 4, the FOMC also dropped its previous reference to the need for further gradual increases in the federal funds rate.
In December, when the Fed raised its rate for the 9th time since December 2015, the Fed cut its forecast for rate hikes this year to two from an earlier forecast of three as it said it was now taking into account financial and international developments, a reference to the stock market sell-off in December and the weakening pace of global growth.
In today's statement, which was unanimously adopted by the FOMC's 10 members, the Fed reiterated its view from December that the labour market had continued to strengthen, that economic activity has been rising at a solid rate, job gains have been strong, household spending has continued to grow strongly while the growth of business investment has moderated.
But instead of its past reference to the need for further increases in the fed funds rate to maintain the economic expansion and inflation near its objective, the FOMC today merely said it viewed a "sustained expansion of economic activity, strong labour market conditions and inflation near the Committee's symmetric 2 percent objective as the most likely outcomes."
"The case for raising rates has weakened somewhat," Powell said, adding inflation has been muted in past months and the recent drop in oil prices is likely to push inflation lower in coming months.
In a slight change to its comment on inflation, the FOMC added today that "measures of inflation compensation have moved lower in recent months" but reiterated that overall and core inflation remain near 2 percent and measures of longer-term inflation expectations were little changed."The case for raising rates has weakened somewhat," Powell said, adding inflation has been muted in past months and the recent drop in oil prices is likely to push inflation lower in coming months.
In addition, the Fed omitted its previous reference to the risks to its economic outlook as "balanced," a further illustration of the uncertainty about its future policy.
In a separate statement, the FOMC also confirmed its longer-run goals and monetary policy strategy, which includes the target of 2.0 percent inflation, as measured by the annual change in personal consumption expenditures, and its commitment to living up to its mandate from the U.S. Congress of "promoting maximum employment, stable prices and moderate long-term interest rates."
In the statement, which was originally adopted in 2012, the FOMC also referred to its estimate of the longer-run unemployment rate, which in its most recent projections was 4.4 percent.
Headline inflation in the U.S. dropped to 1.9 percent in December from 2.2 percent in November while growth in the third quarter eased to 3.4 percent from the second quarter.
The U.S. dollar weakened around 0.6 percent in the wake of the Fed's policy shift to trade at 1.148 to the euro.
UPDATE-This week in monetary policy: Ghana, Kenya, Fiji, Hungary, Armenia, Georgia, Malawi, Tajikistan, Bangladesh, USA, Chile, Pakistan, Ukraine, Bulgaria, Colombia and Dominican Rep.
(Following item has been updated with an announcement on Jan. 29 from the State Bank of Pakistan that its monetary policy committee will meet on Jan. 31 and Governor Tariq Bajwa will unveil the decision at a press conference.)
This week - January 27 through February 2 - central banks from 16 countries or jurisdictions are scheduled to decide on monetary policy: Ghana, Kenya, Hungary, Armenia, Georgia, Malawi, Tajikistan, Bangladesh, United States, Chile, Pakistan, Ukraine, Bulgaria, Colombia, Dominican Republic and Azerbaijan.
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, and the rate one year ago.
The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.
| WEEK 5 | |||||
| JAN 27 - FEB 2, 2019: | |||||
| COUNTRY | DATE | RATE | LATEST | YTD | 1 YR AGO |
| GHANA | 28-Jan | 16.00% | -100 | -100 | 20.00% |
| KENYA | 28-Jan | 9.00% | 0 | 0 | 10.00% |
| FIJI | 29-Jan | 0.50% | 0 | 0 | 0.50% |
| HUNGARY | 29-Jan | 0.90% | 0 | 0 | 0.90% |
| ARMENIA | 29-Jan | 5.75% | -25 | -25 | 6.00% |
| GEORGIA | 30-Jan | 6.75% | -25 | -25 | 7.25% |
| MALAWI | 30-Jan | 14.50% | -150 | -150 | 16.00% |
| TAJIKISTAN | 30-Jan | 14.00% | 0 | 0 | 14.75% |
| BANGLADESH | 30-Jan | 6.00% | 0 | 0 | 6.75% |
| UNITED STATES | 30-Jan | 2.50% | 25 | 0 | 1.50% |
| CHILE | 30-Jan | 2.75% | 0 | 0 | 2.50% |
| PAKISTAN | 31-Jan | 10.00% | 150 | 0 | 6.00% |
| UKRAINE | 31-Jan | 18.00% | 0 | 0 | 16.00% |
| BULGARIA | 31-Jan | 0.00% | 0 | 0 | 0.00% |
| COLOMBIA | 31-Jan | 4.25% | 0 | 0 | 4.50% |
| DOMINICAN REP. | 31-Jan | 5.50% | 0 | 0 | 5.25% |
| AZERBAIJAN | 1-Feb | 9.75% | 0 | 0 | 15.00% |
Malawi cuts rate 150 bps, inflation seen easing, FX stable
Malawi's central bank cut its policy rate by a further 150 basis points to 14.50 percent, saying risks to inflation are expected to ease this year after last year's shocks while the kwacha is expected to remain stable as in the last two years.
The Reserve Bank of Malawi (RBM), which has been lowering its rate since November 2016, also lowered its Lombard rate to 40 basis points above the policy rate from a previous 200 basis point margin, the liquidity reserve requirement (LRR) by 250 points for local currency deposits to 5.0 percent and the requirement for foreign currency deposits by 375 points to 3.75 percent.
The RBM's monetary policy committee said it was creating further room to adjust the LRR downward by incentivizing banks to invest in certain sectors and instruments.
The large cut in the Lombard rate is aimed at encouraging banks to lower their lending rates and thus boost economic growth as the past rate cuts by RBM has not been fully transmitted to the economy, the central bank said, adding it expects all commercial banks from now on to use the Lombard rate as the base lending rate.
"The Committee's assessment is that the stance of monetary policy remains adequately tight and monetary policy actions will continue to gradually anchor inflation expectations towards the medium term inflation objective of 5 percent without necessarily jeopardizing government's growth agenda," the central bank said.
The Reserve Bank has been cutting rates consistently since November 2016 and has now lowered the rate by a total of 12.50 percentage points as inflation has declined from almost 25 percent in December 2015 when two years of drought led to rocketing food prices.
Improved weather then led to better harvests and helped stabilize the exchange rate of the kwacha, which depreciated sharply from 2012 to March 2016.
Since then the kwacha has been relatively stable and traded at 736 per U.S. dollar at the end of December, largely unchanged since mid-2016, RBM said, adding adequate foreign exchange reserves, which equalled 3.61 months at the end of last year, should support the kwacha along with the agricultural marketing season that begins in the next 2-3 months.
"It is therefore projected that the exchange rate stability witnessed in the past two years will also prevail in 2019," RBM said.
Inflation in Malawi, which borders Tanzania, Zambia and Mozambique, jumped last year on the back of a 50 percent rise in electricity tariffs, a 19 percent rise in fuel prices, and an increase in maize prices of over 60 percent due to dry spells and armed conflict in some parts of the country.
Inflation rose to 10.1 percent in November from 8.1 percent in January before easing to 9.9 percent in December.
The central bank expects favorable weather so far to lead to higher agricultural output than projected, pushing down food inflation, and lowered its forecast for inflation this year to 8.5 percent from an earlier forecast of 10.1 percent.
Georgia cuts rate 25 bps and sees further easing in 2019
Georgia's central bank lowered its benchmark refinancing rate by 25 basis points to 6.75 percent on continued weak inflationary pressures and said it expects to reduce the rate further this year.
The National Bank of Georgia (NBG), which has maintained its rate since embarking on an easing cycle in July 2018, also repeated last month's guidance that the pace of further easing of monetary policy was tied to the output gap and external risks.
Today's rate cut comes after the central bank's president, Koba Gvenetadze, last week told Reuters NBG would lower its rate to between 5 and 6 percent over the next two years.
In today's statement, the central bank external risks to inflation had weakened since the monetary policy committee's last meeting in December and it expected inflation to move around its target in the medium term after remaining close to the 3.0 percent target in 2018.
Georgia's inflation rate fell to a 25-month low of 1.5 percent in December from 1.9 percent in November.
NBG added positive trends in the foreign sector had continued toward the end of last year, with the export of goods up by 23 percent last year and revenue from tourism up by 18 percent in the year.
However, beginning with the second half of the year, domestic demand had slowed.
Georgia's gross domestic product grew by 3.7 percent year-on-year in the third quarter of last year, down from 5.6 percent in the second and 5.2 percent in the first quarter.
The International Monetary Fund (IMF) expects Georgia's economy to grow 4.6 percent in 2019 after 5 percent last year with inflation averaging 3.1 percent this year after 2.8 percent in 2018.
In December the IMF said the country's economic performance was strong but downside risks had risen.
It added the central bank's inflation-targeting framework, combined with a floating exchange rate regime, was serving the country well and the monetary policy stance was appropriate.
Georgia's lari, which fell sharply from October to November last year, has been relatively stable this year and was trading at 2.65 to the U.S. dollar today, up 1.1 percent since the start of 2019.
www.CentralBankNews.info
The National Bank of Georgia (NBG), which has maintained its rate since embarking on an easing cycle in July 2018, also repeated last month's guidance that the pace of further easing of monetary policy was tied to the output gap and external risks.
Today's rate cut comes after the central bank's president, Koba Gvenetadze, last week told Reuters NBG would lower its rate to between 5 and 6 percent over the next two years.
In today's statement, the central bank external risks to inflation had weakened since the monetary policy committee's last meeting in December and it expected inflation to move around its target in the medium term after remaining close to the 3.0 percent target in 2018.
Georgia's inflation rate fell to a 25-month low of 1.5 percent in December from 1.9 percent in November.
NBG added positive trends in the foreign sector had continued toward the end of last year, with the export of goods up by 23 percent last year and revenue from tourism up by 18 percent in the year.
However, beginning with the second half of the year, domestic demand had slowed.
Georgia's gross domestic product grew by 3.7 percent year-on-year in the third quarter of last year, down from 5.6 percent in the second and 5.2 percent in the first quarter.
The International Monetary Fund (IMF) expects Georgia's economy to grow 4.6 percent in 2019 after 5 percent last year with inflation averaging 3.1 percent this year after 2.8 percent in 2018.
In December the IMF said the country's economic performance was strong but downside risks had risen.
It added the central bank's inflation-targeting framework, combined with a floating exchange rate regime, was serving the country well and the monetary policy stance was appropriate.
Georgia's lari, which fell sharply from October to November last year, has been relatively stable this year and was trading at 2.65 to the U.S. dollar today, up 1.1 percent since the start of 2019.
www.CentralBankNews.info
Tuesday, January 29, 2019
Armenia cuts rate 25 bps and sees continued easy policy
Armenia's central bank lowered its benchmark refinancing rate by 25 basis points to 5.75 percent and said it will be necessary to maintain easy monetary conditions for a longer period to ensure price stability as inflation is now expected to remain below the targeted 4.0 percent until the end of the the forecast horizon.
Today's rate cut comes after the Central Bank of Armenia (CBA), which turned dovish in November last year, turned more pessimistic about the outlook for inflation and said the risks to its outlook were on the downside.
Last month the CBA confirmed its easing bias but had expected inflation to stabilize around its target by the end of its forecast horizon after dipping below the lower end of the range that extends from 2.5 to 5.5 percent.
It is CBA's first rate cut since February 2017 when it wrapped up an easing cycle that involved 12 rate cuts for a total easing of 450 basis points that began in August 2015. Starting in November 2017 the CBA then shifted to a tightening bias before adopting an easing bias in November 2018.
Armenia's inflation rate was steady at 1.8 percent in December and November and CBA expects the low inflationary environment to remain as global economic growth shows signs of weakening in both advanced and emerging market economies, and this tends to weaken global commodity prices and thus inflationary pressures from abroad.
Economic activity in Armenia also remains weak, with growth in 2018 likely around 5.0 percent, as demand is weakening due to tighter fiscal policy and slower private spending.
Economic growth has slowed in the last three quarters, with gross domestic product in the third quarter up 2.7 percent year-on-year, down from 7.5 percent in the second and 9.7 percent in the first.
Armenia's dram has weakened slightly this year and was trading around 486 to the U.S. dollar today, down 0.5 percent this year.
www.CentralBankNews.info
Today's rate cut comes after the Central Bank of Armenia (CBA), which turned dovish in November last year, turned more pessimistic about the outlook for inflation and said the risks to its outlook were on the downside.
Last month the CBA confirmed its easing bias but had expected inflation to stabilize around its target by the end of its forecast horizon after dipping below the lower end of the range that extends from 2.5 to 5.5 percent.
It is CBA's first rate cut since February 2017 when it wrapped up an easing cycle that involved 12 rate cuts for a total easing of 450 basis points that began in August 2015. Starting in November 2017 the CBA then shifted to a tightening bias before adopting an easing bias in November 2018.
Armenia's inflation rate was steady at 1.8 percent in December and November and CBA expects the low inflationary environment to remain as global economic growth shows signs of weakening in both advanced and emerging market economies, and this tends to weaken global commodity prices and thus inflationary pressures from abroad.
Economic activity in Armenia also remains weak, with growth in 2018 likely around 5.0 percent, as demand is weakening due to tighter fiscal policy and slower private spending.
Economic growth has slowed in the last three quarters, with gross domestic product in the third quarter up 2.7 percent year-on-year, down from 7.5 percent in the second and 9.7 percent in the first.
Armenia's dram has weakened slightly this year and was trading around 486 to the U.S. dollar today, down 0.5 percent this year.
www.CentralBankNews.info
Monday, January 28, 2019
Ghana cuts rate another 100 bps on stable conditions
Ghana's central bank cut its policy rate by another 100 basis points to 16.0 percent, saying current conditions provide scope to translate some of the recent gains in macroeconomic stability to the economy and the immediate risks to disinflation were contained.
The Bank of Ghana (BOG), which has been in a monetary easing cycle since November 2016, added domestic economic growth remains fairly robust and in line with projections and inflation, which has been declining steadily, is forecast to remain within the target band of 8.0 percent, plus/minus 2 percentage points.
BOG cut its rate by 300 basis points last year and has now cut its by 10 percentage points since November 2016 as inflation has steadily declined from over 19 percent in March that year to 9.4 percent in December 2018.
The decline in inflation has been helped by BOG's tight monetary policy and it said underlying inflationary pressures were contained with measures of core inflation pointing to a general easing, underpinned by well-anchored inflation expectations by consumers and business.
Ghana's cedi, which has been depreciating gradually since June last year, fell 1.2 percent in response to the rate cut to be down 1.6 percent since the start of the year.
Economic growth in 2018 was slower than in 2017 but BOG said private sector credit growth was continuing to recover and surveys show an easing of banks' credit stance in the first quarter of this year in line with their enhanced capital levels.
Business and consumer surveys also showed some rebound in confidence and optimism about the economy notwithstanding slower growth in the CIEA economic activity index for November of 3.1 percent, down from 8.3 percent in the same 2017 month.
Ghana's economy grew an annual 7.4 percent in the third quarter of last year, up from 5.4 percent in the two previous quarters, and BOG estimated overall 2018 growth of 5.6 percent.
The surplus in Ghana's trade balance grew to 2.7 percent of gross domestic product in 2018 from 2.0 percent in 2017, helping narrow the current account further to 3.2 percent of GDP from 3.4 percent in 2017.
But with lower net capital inflows, the balance of payments fell into a deficit of 1.0 percent of GDP from a surplus of 1.9 percent in 2017, BOG said, adding gross international reserves eased to US$7.0 billion at the end of December from 47.6 billion the end of 2017.
The Bank of Ghana (BOG), which has been in a monetary easing cycle since November 2016, added domestic economic growth remains fairly robust and in line with projections and inflation, which has been declining steadily, is forecast to remain within the target band of 8.0 percent, plus/minus 2 percentage points.
BOG cut its rate by 300 basis points last year and has now cut its by 10 percentage points since November 2016 as inflation has steadily declined from over 19 percent in March that year to 9.4 percent in December 2018.
The decline in inflation has been helped by BOG's tight monetary policy and it said underlying inflationary pressures were contained with measures of core inflation pointing to a general easing, underpinned by well-anchored inflation expectations by consumers and business.
Ghana's cedi, which has been depreciating gradually since June last year, fell 1.2 percent in response to the rate cut to be down 1.6 percent since the start of the year.
Economic growth in 2018 was slower than in 2017 but BOG said private sector credit growth was continuing to recover and surveys show an easing of banks' credit stance in the first quarter of this year in line with their enhanced capital levels.
Business and consumer surveys also showed some rebound in confidence and optimism about the economy notwithstanding slower growth in the CIEA economic activity index for November of 3.1 percent, down from 8.3 percent in the same 2017 month.
Ghana's economy grew an annual 7.4 percent in the third quarter of last year, up from 5.4 percent in the two previous quarters, and BOG estimated overall 2018 growth of 5.6 percent.
The surplus in Ghana's trade balance grew to 2.7 percent of gross domestic product in 2018 from 2.0 percent in 2017, helping narrow the current account further to 3.2 percent of GDP from 3.4 percent in 2017.
But with lower net capital inflows, the balance of payments fell into a deficit of 1.0 percent of GDP from a surplus of 1.9 percent in 2017, BOG said, adding gross international reserves eased to US$7.0 billion at the end of December from 47.6 billion the end of 2017.
Kenya holds rate, inflation anchored, growth strong
Kenya's central bank kept its Central Bank Rate steady at 9.0 percent and reiterated its view from November that inflation expectations remain well anchored and the economy is operating close to its potential.
The Central Bank of Kenya (CBK), which cut its rate twice last year by a total of 100 basis points, added this month's MPC private market survey also showed that near-term inflation expectations were lowered due to expected lower prices of food, fuel and electricity.
The survey also revealed increased optimism of stronger growth this year than in 2018 due to a better investment climate, continued infrastructure development and implementation of President Uhuru Kenyatta's Big 4 projects to improve manufacturing, universal healthcare, affordable housing and food security.
However, optimism was tempered by slow growth in private sector credit and concerns over slower global growth this year, CBK said.
In the 12 months to December, private sector credit grew 2.4 percent, down from 3.0 percent in November, and CBK expects credit growth to strengthen this year.
In September 2016 Kenya's government imposed a cap on bank's interest rates, despite objections by the International Monetary Fund and commercial banks, arguing lenders were not passing on low interest rates to borrowers.
Earlier this month a lawmaker proposed raising this cap to 6 percentage points above the CBK rate from the current 4 points. In June 2018 lawmakers blocked the finance minister's attempt to repeal the cap, which he said had led to lower credit growth.
After slowing in 2017, Kenya's economy expanded strongly last year, with gross domestic product up an annual 6.0 percent in the third quarter, compared with 4.7 percent in the same 2017 quarter, and CBK said strong growth had continued in the fourth quarter.
"Growth is expected to remain strong in 2019, supported by agricultural production, a stable macroeconomic environment, and continued improvement in the business environment," CBK said.
Kenya's inflation rate has been stable within the central bank's target range of 5.0 percent, plus/minus 2.5 percentage points, in recent months and is expected to decline in the near term due to lower oil prices, stable food prices and expectations of lower electricity prices.
Headline inflation rose to 5.71 percent in December from 5.58 percent in November.
After falling sharply last October and November following a report by the IMF that said Kenya's shilling was overvalued, the shilling has bounced back strongly and was trading at 100.73 to the U.S. dollar today, up 1.13 percent this year.
CBK's governor, Patrick Njoroge, who worked at the IMF before becoming governor in 2015, dismissed the IMF's findings, saying it had used an inappropriate method for assessing the value of the shilling and the central bank lets financial markets drive the price of the currency and only intervenes to minimize volatility.
The Central Bank of Kenya (CBK), which cut its rate twice last year by a total of 100 basis points, added this month's MPC private market survey also showed that near-term inflation expectations were lowered due to expected lower prices of food, fuel and electricity.
The survey also revealed increased optimism of stronger growth this year than in 2018 due to a better investment climate, continued infrastructure development and implementation of President Uhuru Kenyatta's Big 4 projects to improve manufacturing, universal healthcare, affordable housing and food security.
However, optimism was tempered by slow growth in private sector credit and concerns over slower global growth this year, CBK said.
In the 12 months to December, private sector credit grew 2.4 percent, down from 3.0 percent in November, and CBK expects credit growth to strengthen this year.
In September 2016 Kenya's government imposed a cap on bank's interest rates, despite objections by the International Monetary Fund and commercial banks, arguing lenders were not passing on low interest rates to borrowers.
Earlier this month a lawmaker proposed raising this cap to 6 percentage points above the CBK rate from the current 4 points. In June 2018 lawmakers blocked the finance minister's attempt to repeal the cap, which he said had led to lower credit growth.
After slowing in 2017, Kenya's economy expanded strongly last year, with gross domestic product up an annual 6.0 percent in the third quarter, compared with 4.7 percent in the same 2017 quarter, and CBK said strong growth had continued in the fourth quarter.
"Growth is expected to remain strong in 2019, supported by agricultural production, a stable macroeconomic environment, and continued improvement in the business environment," CBK said.
Kenya's inflation rate has been stable within the central bank's target range of 5.0 percent, plus/minus 2.5 percentage points, in recent months and is expected to decline in the near term due to lower oil prices, stable food prices and expectations of lower electricity prices.
Headline inflation rose to 5.71 percent in December from 5.58 percent in November.
After falling sharply last October and November following a report by the IMF that said Kenya's shilling was overvalued, the shilling has bounced back strongly and was trading at 100.73 to the U.S. dollar today, up 1.13 percent this year.
CBK's governor, Patrick Njoroge, who worked at the IMF before becoming governor in 2015, dismissed the IMF's findings, saying it had used an inappropriate method for assessing the value of the shilling and the central bank lets financial markets drive the price of the currency and only intervenes to minimize volatility.
Saturday, January 26, 2019
This week in monetary policy: Ghana, Kenya, Hungary, Armenia, Georgia, Tajikistan, Bangladesh, USA, Chile, Ukraine, Bulgaria, Dominican Rep. & Azerbaijan
This week - January 27 through February 2 - central banks from 14 countries or jurisdictions are scheduled to decide on monetary policy: Ghana, Kenya, Hungary, Armenia, Georgia, Tajikistan, Bangladesh, United States, Chile, Ukraine, Bulgaria, Colombia, Dominican Republic and Azerbaijan.
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, and the rate one year ago.
The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.
| WEEK 5 | |||||
| JAN 27 - FEB 2, 2019: | |||||
| COUNTRY | DATE | RATE | LATEST | YTD | 1 YR AGO |
| GHANA | 28-Jan | 17.00% | 0 | 0 | 20.00% |
| KENYA | 28-Jan | 9.00% | 0 | 0 | 10.00% |
| HUNGARY | 29-Jan | 0.90% | 0 | 0 | 0.90% |
| ARMENIA | 29-Jan | 6.00% | 0 | 0 | 6.00% |
| GEORGIA | 30-Jan | 7.00% | 0 | 0 | 7.25% |
| TAJIKISTAN | 30-Jan | 14.00% | 0 | 0 | 14.75% |
| BANGLADESH | 30-Jan | 6.00% | 0 | 0 | 6.75% |
| UNITED STATES | 30-Jan | 2.50% | 25 | 0 | 1.50% |
| CHILE | 30-Jan | 2.75% | 0 | 0 | 2.50% |
| UKRAINE | 31-Jan | 18.00% | 0 | 0 | 16.00% |
| BULGARIA | 31-Jan | 0.00% | 0 | 0 | 0.00% |
| COLOMBIA | 31-Jan | 4.25% | 0 | 0 | 4.50% |
| DOMINICAN REP. | 31-Jan | 5.50% | 0 | 0 | 5.25% |
| AZERBAIJAN | 1-Feb | 9.75% | 0 | 0 | 15.00% |
Friday, January 25, 2019
Angola cuts rate 75 bps on decelerating inflation
Angola's central bank lowered its benchmark BNA rate by 75 basis points to 15.75 percent, saying the cut was supported by the decline in inflation during 2018 and a 10.71 percent contraction in the monetary base, the bank's operational variable, in the last 12 months.
It is the National Bank of Angola's (BNA) second rate cut since July 2018, bringing the total reduction to 225 basis points in this easing cycle.
BNA Governor Jose Massano has been overhauling the central bank since he took over in October 2017 and his first move the following month was to raise the BNA rate 200 basis points to 18.0 percent to reinforce his commitment to tackling inflation.
Angola's inflation rate began accelerating in early 2015 and rose steadily before hitting 41.12 percent in December 2016. Although inflation then eased in in the first half of 2017, it rose again in October, the month Massano took over from his predecessor, Walter Filipe da Silva.
The appointment of Massano as BNA Governor was part of President Joao Laurenco's move to clean up Angola's image as a corrupt nation. Laurenco took over as president in September 2017 from Jose Eduardo dos Santos, who had been in power for 38 years.
In addition to the rate hike in November 2017, Massano has carried out a plethora of policy changes at the BNA, including adopting the monetary base as an operational variable for monetary policy to better control liquidity, replacing the fixed exchange rate regime with a floating regime with bands, conducting auctions to set a reference rate for the kwanza, lowering and changing the basis for banks' mandatory reserves, and unifying the rate on the marginal lending facility with that of the bank's basic interest rate.
Most recently, BNA earlier this month revoked the banking licenses of two banks after they failed to raise their capital to meet new minimum levels. Local media reported that both institutions had ties to the sons of the former president.
Throughout 2018 Angola's inflation rate has decelerated steadily from 22.72 percent in January although it rose in December to 18.6 percent from 18.36 in November.
In today's statement, BNA's monetary policy committee said the stock of credit in kwanza rose 0.50 percent in December from November for annual growth of 20.16 percent while gross international reserves declined to US$16.16 billion in December 2018 from $18.23 billion in December 2017, enough to finance 6.8 months of imports.
After depreciating steadily following BNA's switch to a floating exchange rate regime, the kwanza has stabilized in recent months and was trading at 310.8 to the U.S. dollar today, down 0.7 percent this year.
BNA said it would maintain the rate on its permanent liquidity absorption facility at 0 percent along with the mandatory reserve ratio in kwanza at 17.0 percent and the ratio for foreign currency deposits at 15.0 percent.
www.CentralBankNews.info
It is the National Bank of Angola's (BNA) second rate cut since July 2018, bringing the total reduction to 225 basis points in this easing cycle.
BNA Governor Jose Massano has been overhauling the central bank since he took over in October 2017 and his first move the following month was to raise the BNA rate 200 basis points to 18.0 percent to reinforce his commitment to tackling inflation.
Angola's inflation rate began accelerating in early 2015 and rose steadily before hitting 41.12 percent in December 2016. Although inflation then eased in in the first half of 2017, it rose again in October, the month Massano took over from his predecessor, Walter Filipe da Silva.
The appointment of Massano as BNA Governor was part of President Joao Laurenco's move to clean up Angola's image as a corrupt nation. Laurenco took over as president in September 2017 from Jose Eduardo dos Santos, who had been in power for 38 years.
In addition to the rate hike in November 2017, Massano has carried out a plethora of policy changes at the BNA, including adopting the monetary base as an operational variable for monetary policy to better control liquidity, replacing the fixed exchange rate regime with a floating regime with bands, conducting auctions to set a reference rate for the kwanza, lowering and changing the basis for banks' mandatory reserves, and unifying the rate on the marginal lending facility with that of the bank's basic interest rate.
Most recently, BNA earlier this month revoked the banking licenses of two banks after they failed to raise their capital to meet new minimum levels. Local media reported that both institutions had ties to the sons of the former president.
Throughout 2018 Angola's inflation rate has decelerated steadily from 22.72 percent in January although it rose in December to 18.6 percent from 18.36 in November.
In today's statement, BNA's monetary policy committee said the stock of credit in kwanza rose 0.50 percent in December from November for annual growth of 20.16 percent while gross international reserves declined to US$16.16 billion in December 2018 from $18.23 billion in December 2017, enough to finance 6.8 months of imports.
After depreciating steadily following BNA's switch to a floating exchange rate regime, the kwanza has stabilized in recent months and was trading at 310.8 to the U.S. dollar today, down 0.7 percent this year.
BNA said it would maintain the rate on its permanent liquidity absorption facility at 0 percent along with the mandatory reserve ratio in kwanza at 17.0 percent and the ratio for foreign currency deposits at 15.0 percent.
www.CentralBankNews.info
2019 Global Central Bank Calendar - updated with Namibia & Bangladesh
(Following item has been updated with this year's schedule for monetary policy statements by the Bank of Namibia and the January date for Bangladesh Bank's monetary policy statement for the January-June period)
Following is the 2019 calendar for monetary policy.
The table includes scheduled meetings for more than 45 central bank committees or boards that decide monetary policy. In the event meetings take place over several days, the date listed is for the final day when decisions are normally announced.
The calendar is updated regularly to reflect the latest information as some central banks only release tentative schedules at the beginning of the year while other central banks only schedule their meetings a few months in advance.
Readers are encouraged to check the latest version of the calendar by clicking here.
You may replicate the table in part or in full only if cite Central Bank News as the source or provide a link to www.centralbanknews.info.
Following is the 2019 calendar for monetary policy.
The table includes scheduled meetings for more than 45 central bank committees or boards that decide monetary policy. In the event meetings take place over several days, the date listed is for the final day when decisions are normally announced.
The calendar is updated regularly to reflect the latest information as some central banks only release tentative schedules at the beginning of the year while other central banks only schedule their meetings a few months in advance.
Readers are encouraged to check the latest version of the calendar by clicking here.
You may replicate the table in part or in full only if cite Central Bank News as the source or provide a link to www.centralbanknews.info.
| DATE | FX CODE | COUNTRY | CENTRAL BANK | |
| JANUARY | ||||
| 7-Jan | ILS | Israel | Bank of Israel | |
| 8-Jan | RON | Romania | National Bank of Romania | |
| 9-Jan | PLN | Poland | National Bank of Poland | |
| 9-Jan | CAD | Canada | Bank of Canada | |
| 10-Jan | RSD | Serbia | National Bank of Serbia | |
| 10-Jan | PEN | Peru | Central Reserve Bank of Peru | |
| 14-Jan | KZT | Kazakhstan | National Bank of Kazakhstan | |
| 16-Jan | TRY | Turkey | Central Bank of Republic of Turkey | |
| 17-Jan | FJD | Fiji | Reserve Bank of Fiji | |
| 17-Jan | IDR | Indonesia | Bank Indonesia | |
| 17-Jan | ZAR | South Africa | South African Reserve Bank | |
| 21-Jan | PYG | Paraguay | Central Bank of Paraguay | |
| 22-Jan | NGN | Nigeria | Central Bank of Nigeria | |
| 23-Jan | JPY | Japan | Bank of Japan | |
| 24-Jan | KRW | South Korea | Bank of Korea | |
| 24-Jan | MYR | Malaysia | Central Bank of Malaysia | |
| 24-Jan | NOK | Norway | Norges Bank | |
| 24-Jan | EUR | Euro area | European Central Bank | |
| 25-Jan | AOA | Angola | Bank of Angola | |
| 28-Jan | GHS | Ghana | Bank of Ghana | |
| 28-Jan | KES | Kenya | Central Bank of Kenya | |
| 29-Jan | HUF | Hungary | Central Bank of Hungary | |
| 29-Jan | AMD | Armenia | Central Bank of the Republic of Armenia | |
| 30-Jan | GEL | Georgia | National Bank of Georgia | |
| 30-Jan | TJS | Tajikistan | National Bank of Tajikistan | |
| 30-Jan | BDT | Bangladesh | Bangladesh Bank | |
| 30-Jan | USD | United States | Federal Reserve | |
| 30-Jan | CLP | Chile | Central Bank of Chile | |
| 31-Jan | UAH | Ukraine | National Bank of Ukraine | |
| 31-Jan | BGN | Bulgaria | Bulgarian National Bank | |
| 31-Jan | COP | Colombia | Central Bank of Colombia | |
| 31-Jan | DOP | Dominican Republic | Central Bank of the Dominican Rep. | |
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