This week in monetary policy: Ghana, Uganda, Australia, Romania, Poland and India

    This week - March 31 through April 6 - central banks from 6 countries or jurisdictions are scheduled to decide on monetary policy: Ghana, Uganda, Australia, Romania, Poland and India.
    Uganda's central bank had originally scheduled the policy decision for April 4 but said earlier this week the April monetary policy statement will be released at a press conference on April 1.
    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 14
MAR 31 - APR 6, 2019:
COUNTRY	DATE	RATE	LATEST	YTD	1 YR AGO
GHANA	1-Apr	16.00%	-100	-100	18.00%
UGANDA	1-Apr	10.00%	0	0	9.00%
AUSTRALIA	2-Apr	1.50%	0	0	1.50%
ROMANIA	2-Apr	2.50%	0	0	2.25%
POLAND	3-Apr	1.50%	0	0	1.50%
INDIA	4-Apr	6.25%	-25	-25	6.00%

    www.CentralBankNews.info

Angola maintains rate as inflation seen continuing trend

     Angola's central bank left its benchmark BNA rate steady at 15.75 percent, along with its other key rates and the reserve ratio, saying it expects inflation to remain along the same trend as seen in recent months.
     In January the National Bank of Angola (BNA) cut its rate by 75 basis points due to falling inflation and a contraction in the monetary base, BNA's operational variable as part of Governor Jose Massano's thorough overhaul of the bank's operations since he took over in October 2017.
    The rate cut in January was BNA's second rate cut since July 2018, bringing the total easing in the current cycle to 225 basis points.
      In February Angola's inflation rate fell to 17.96 percent from 18.2 percent in January, continuing the steady decline since it hit 41.12 percent in December 2016.
     BNA said the monetary aggregate M2 rose 1.7 percent in the last 12 months while the stock of credit shrank by 0.11 percent in February following a 0.4 percent rise in January for a decline of 2.41 percent in the last 12 months.
     BNA added measures should be taken to boost credit to the primary sector, the output of goods.
     In January Angola's trade deficit amounted to US$224.96 but in February there was a surplus of $1.62 billion, helping narrow the trade deficit in the first two months of this year by 64.68 percent from the last two months of 2018.
     Angola's gross international reserves fell to $15.99 billion in February, an import cover of 8.77 months, down from $16.6 billion in December 2018.

     www.CentralBankNews.info

Pakistan raises rate 50 bps in 7th hike since Jan. 2018

     Pakistan's central bank raised its policy rate for the seventh time 14 months, saying further policy measures are necessary to achieve sustainable growth and stability as there are still underlying inflationary pressures, the fiscal deficit is elevated and the current account deficit is still high despite a recent improvement.
      The State Bank of Pakistan (SBP) raised its key rate by 50 basis points to 10.75 percent, its second rate hike this year following a 25 point raise in January. Since January 2018, when SBP began tightening its monetary policy, the key rate has been raised by a total of 5 percentage points.
      SBB acknowledged a sizable contraction in Pakistan's current account deficit in the first two months of the year, which helped ease pressure on its foreign exchange reserves, improve stability in financial markets, reduce uncertainty and improved business confidence.
     "Nonetheless, despite narrowing, the current account deficit remains high, fiscal consolidation is slower than anticipated, and core inflation continues to rise," SBP said.
     Pakistan and the International Monetary Fund are currently in talks over a possible bailout.
     Pakistan's headline inflation rate rose to 8.21 percent in February from 7.2 percent in January, the highest jump in annual inflation since June 2014, while core inflation continued its upward trajectory seen in the last 13 months to 8.8 percent in February.
      Higher prices were due to higher administered prices of electricity and gas, and from the steady depreciation of the rupee since December 2017, SBP said, adding rising input costs from higher energy prides and the lagged impact of depreciation is likely to maintain upward pressure on inflation despite a decline in demand from its monetary policy.
      For fiscal 2019, which end June 30, SBB forecast inflation of 6.5 to 7.5 percent, similar to the forecast in its quarterly economic report released early this week
      Economic activity is experiencing the brunt of policymakers' efforts to curb inflation and reduce macroeconomic imbalances, SBP admitted, saying large-scale manufacturing was especially hard hit with output down 2.3 percent from July 2018 to January 2019 as compared with 7.2 percent growth in the same period last year.
      Growth in fiscal 2019 is projected around 3.5 percent as compared with its forecast of 3.5-4.0 percent in its quarterly economic report. This is down from 5.2 percent in fiscal 2018.
      Pakistan's current account deficit narrowed 22.6 percent to US$8.8 billion in July-February from $11.4 billion in the same period last year, helping stabilize the foreign exchange market, and SBP's foreign exchange reserves have slowly recovered to $10.7 billion as of March 25, still below the international standard of 3 months of import cover.

Jamaica cuts rate 10th time to boost credit, economy

     Jamaica's central bank lowered its policy rate for the 10th time, saying this was "to stimulate an even faster expansion in private sector credit which should lead to higher economic activity, consistent with the inflation target."
     The Bank of Jamaica (BOJ) cut its policy rate by another 25 basis points to 1.25 percent and has now cut it by a total of 250 basis points since July 1, 2017 when it adopted the overnight deposit rate as its new policy rate.
     "The decision to lower the policy rate is aimed at supporting inflation returning to and remaining on target (4.0 percent to 6.0 percent) by December 2020," BOJ added.
     In February BOJ forecast inflation would dip below its target at various times over the next year - with the risks to this forecast balanced - before inflation would slowly converge toward the midpoint of its target in the medium term.
     But BOJ said the risks to this forecast have shifted to the downside and inflation is more likely to trend below this path, mainly due to lower-than-projected pass-through of oil prices to domestic energy prices and the prospect of favorable weather could lead to lower increases in food prices.
     Jamaica's inflation rate in February rose slightly to 2.4 percent in February from 2.3 percent in January but this was still the third month in a row with inflation below its target.
     "This suggest that recent improvements in economic activity have not been sufficient to return inflation to the target as quickly as desired," BOJ said.
     Over the next two years Jamaica's economy is expected to grow below its potential and slower-than-expected global growth could also present a downside risks to domestic growth, BOJ added.
     On the other hand, growth could also be higher than anticipated due to recently announced fiscal stimulus and positive developments in private sector credit, which grew 18.6 percent in January year-on-year from 14.4 percent in December 2018.
     Earlier this month International Monetary Fund staff reached agreement on a fifth review on Jamaica's stand-by arrangement, saying further monetary loosening was warranted to restore inflation to BOJ's target.
     The IMF board is expected to decide on the arrangement in April and upon approval an additional US$224 million will be made available, bridging the total accessible credit to $1.4 billion.

Kenya holds rate on stable inflation, growth optimism

     Kenya's central bank left its Central Bank Rate (CBR) unchanged at 9.0 percent, saying the current rate is appropriate as inflation expectations remain well anchored within its target range and the economy is operating close to its potential.
     The Central Bank of Kenya (CBK), which has kept its rate steady since July 2018, added today's meeting by its monetary policy committee (MPC) was held against the backdrop of macroeconomic stability, sustained optimism about economic growth prospects despite the delayed onset of rains in some parts of the country, a gradual rise in oil prices and a weakening of global economic growth.
      CBK's reference to anchored inflation expectations and economic output close to potential was also seen in its earlier policy statements from January this year and November 2018.
      Kenya's inflation rate fell to 4.14 percent in February from 4.7 percent in January on stable food prices, lower electricity and fuel prices and muted demand-driven inflationary pressures, the central bank said, adding inflation is expected to remain within its target range in the near term due to adequate food supplies and lower electricity prices.
      The foreign exchange market has also remained stable, CBK said, supported by a narrowing of the current account deficit to 4.7 percent of gross domestic product in February from 5.5 percent in February 2018 a horticulture exports have remained robust, remittances resilient and tourism receipts have risen while growth in imports has slowed.
     This year the current account deficit is seen narrowing further to 4.8 percent from 4.9 percent in 2018 while foreign exchange reserves at US$8,251 million are enough to 5.3 months of imports.
     Kenya's economy expanded 6.0 percent in the third quarter of last year, down from 6.2 percent in the second quarter, but the monetary policy committee's March market survey shows sustained optimism of stronger economic growth this year due to favorable weather, implementation of the government's Big 4 projects, public infrastructure investment and a stable macroeconomy despite signs of weaker global growth and increased volatility in international financial markets.
     Kenya's shilling firmed in the first two months of this year but it has given back gains since March 11 and was trading at 100.8 to the U.S. dollar today, up 1 percent this year.
     In September 2016 Kenya's government imposed a cap on commercial banks' interest rates, despite objections by the International Monetary Fund and banks, arguing lenders were not passing on low interest rates to borrowers.
     In June 2018 lawmakers blocked the finance minister's attempt to repeal the cap, which he said had led to lower credit growth, but on March 14 Nairobi's High Court annulled this cap of 4 percentage points above CBK's policy rate, calling it "vague, imprecise, ambitious and indefinite."
     The court suspended the implementation of its ruling for 12 months to give lawmakers and regulators time to adjust to any lifting of the cap.
     In today's statement, the central bank noted the court ruling, and "stressed that interest rate caps severely constrain the formulation, conduct and effectiveness of monetary policy," and the caps have hampered access to credit by growth sectors.

New Zealand maintains rate but rate cut now more likely

      New Zealand's central bank left its benchmark official cash rate (OCR) steady at 1.75 percent, as expected, but joined the growing number of central banks that are shifting toward easier monetary policy by saying "the more likely direction of our next OCR move is down" given the weaker global economic outlook and reduced momentum in domestic spending.
      It is the second, but a clear move by Reserve Bank of New Zealand (RBNZ) to prepare financial markets of  easier monetary policy following its statement in February that the next rate move could be "up or down."
      This compared with its statement in November 2018 when it said the next move would be dependent on economic data and it expected to keep OCR steady through this year and into 2020.
      In today's statement, RBNZ did not repeat it expected to maintain the rate in 2019 and into 2020.
      Although RBNZ said employment is near its maximum sustainable level, inflation remains below its target range, which calls for a continued supportive monetary policy, and the balance of risks have shifted to the downside as the risk of a more pronounced global downturn has risen and low business investment weights on domestic spending.
     RBNZ has clearly turned more pessimistic about the outlook for global growth as in February it said there were both upside and downside risks to its outlook.
      "We will keep the OCR at an expansionary level for a considerable period to contribute to maximizing sustainable employment, and maintaining low and stable inflation," RBNZ said, reiterating its guidance from February, which references the central bank's new dual mandate of keeping inflation between 1 and 3 percent, with a focus near 2 percent, while also supporting maximum sustainable employment.
     New Zealand's dollar, known as the kiwi, has been appreciating since October last year but fell more than one percent today after RBNZ's decision to 1.47 to the U.S. dollar, though it is still up 1.4 percent since the start of this year.
     New Zealand's inflation rate was steady at 1.9 percent in the fourth quarter of last year while the economy grew an annual 2.3 percent, down from 2.6 percent in the third quarter.

Nigeria cuts rate 50 bps on lower inflation, stable naira

     Nigeria's central bank lowered its monetary policy rate for the first time in 3-1/2 years, noting "with great satisfaction" the continued decline in inflation, the stability of the naira's exchange rate, a robust level of reserves and positive forecasts for economic growth in 2019.
     The Central Bank of Nigeria (CBN) cut its key rate by 50 basis points to 13.50 percent, the first change in rates since a 200 basis point rate hike in July 2016 and and the first rate cut since November 2015.
     "The Committee also noted that having achieved a relatively stable exchange rate with price stability, it is imperative that monetary policy should explore the next steps necessary for enhancing growth, reducing unemployment and diversifying the base of the economy," the central bank said.
      CBN's monetary policy committee (MPC) noted a rise in capital inflows into Nigeria, saying this was "a demonstration of sustained confidence by the foreign investor community in the Nigerian economy," but added it was not "unmindful" of the slowdown in economic growth of some advanced economies, with the dovish stance of some central banks acting "as an early warning sign of broader macroeconomic vulnerabilities."
     The rate cut was decided by 6 of the 11 members of the MPC, with 2 members voting in favor of a 25 point, one member voting for a 100 point cut and 2 members voting to keep the rate unchanged.
      In addition, 10 of the 11 members voted to keep all policy tools constant while one member voted to lower the cash reserve ratio (CRR) to 21.5 percent from 22.5 percent.
     Nigeria, which relies on oil for about 80 percent of its exports, was hit hard by the fall in crude oil prices in 2014 which lead to a chronic shortage of foreign exchange and capital flight.
      In contrast to other oil exporters, such as Russia and Kazakhstan that let their currencies decline, Nigeria propped up its naira via capital controls and spent some 20 percent of its foreign reserves defending the naira's peg to the U.S. dollar from early 2015 around 199.
     But in June 2016 the CBN finally scrapped the peg in favor of a managed float, leading to an immediate 30 percent plunge in its value.
     As the pressure on the naira continued, the central bank opted for a system of multiple exchange rates rather than floating its currency and the naira settled around 315 to the dollar in the first half of 2017. In August 2017 the naira fell another 14 percent when the CBN moved toward unifying its multiple exchange rates.
     Since then the naira has been more stable and was trading at 362 to the dollar today, up 0.4 percent since the start of this year, a development the CBN "noted with satisfaction."
     A moderate rise in oil prices has helped Nigeria's reserves, which rose 6.73 percent to US$45.2 billion as of March 21 from end-February.
     The fall in the naira has kept up pressure on inflation but since mid-2018 it has stabilized though it has remained above 11 percent since May.
     In February headline inflation eased to 11.31 percent and core inflation eased to 9.8 percent, mainly due to lower food prices.
     Nigeria emerged from recession in 2017 and economic growth steadily picked up speed last year, with gross domestic product rising an annual 2.4 percent in the fourth quarter of 2018, up from 1.81 percent in the third quarter, and the highest growth rate since the third quarter of 2015.
     The main impetus for growth came from the non-oil sector, which grew 2.7 percent in the fourth quarter while the oil sector shrank by 1.62 percent.
     CBN's policy decision comes amid talk that its governor, Godwin Emefiele, will step down at the end of his 5-year term in June

Kyrgyzstan maintains rate, prices to rise after deflation

      Kyrgyzstan's central bank left its benchmark discount rate at 4.50 percent but said price dynamics remain low and inflation could reach 5.0 percent by December but only average a maximum of 3.0 percent during the year.
     The National Bank of the Kyrgyz Republic (NBKR), which cut its rate by 25 basis points in February in its first easing since May 2018, also reiterated its outlook from last month that inflation should settle within its target range of 5 - 7 percent in the medium term based on a gradual increase of economic activity in the country and region.
     In February NBKR lowered its forecast for inflation to average around 3.0 percent this year from December's forecast that inflation would average 5-7 percent this year.
     Inflation in the Kyrgyz Republic fell 0.7 percent year-on-year in February from 0.4 percent in January, the first deflation since December 2016.
     As of March 15, NBKR said consumer prices were down 0.4 percent on lower food prices while a rise in prices of services and non-food products slowed, and alcohol and tobacco prices rose moderately.
     The economy is continuing to expand, with gross domestic product up 4.9 percent in the first 2 months of the year and excluding the Kumtor gold mine growth was 1.0 percent, supported by the inflow of remittances of 11.2 percent in January and a 4.4 percent rise in real wages.
     In 2018 Kyrgyzstan's economy grew 3.50 percent and last week the International Monetary Fund forecast growth this year of 3.8 percent and average inflation of 2.2 percent.
      NBKR added its monetary policy remains focused on stimulating lending and economic growth and the situation is stable in the domestic foreign exchange market.
      The Kyrgyzstani som has been steady since November last year and was trading at 69.7 to the U.S. dollar today, up 0.2 percent this year.
      In its statement on March 20, the IMF forecast the country's fiscal deficit will widen to 3.4 percent of GDP from 1.3 percent last year, and a "challenging investment climate and corruption continue to stand in the way of price sector-led diversification" so growth of around 4 percent over the next 5 years would be insufficient to reduce poverty and raise living standards.
      To help build buffers, the IMF said the fiscal deficit should not exceed 2.5 percent in the medium term and tax exemptions and the public sector wage bill should be lowered to create fiscal space to invest in human capital and infrastructure.
      Despite reform efforts, the IMF said remittances, which are susceptible to shocks, still accounts for 30 percent of the economy and gold accounts for 38 percent of exports, which could decline sharply in 2023 if the output from Kumtor is not replaced.
     
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This week in monetary policy: Kyrgyzstan, Hungary, Nigeria, New Zealand, Kenya, Jamaica, Fiji, Czech Rep., Albania, South Africa, Egypt, Mexico, Bulgaria, Angola, Chile, Trinidad & Tobago and Dominican Rep.

    This week - March 24 through March 30 - central banks from 17 countries or jurisdictions are scheduled to decide on monetary policy: Kyrgyz Republic, Hungary, Nigeria, New Zealand, Kenya, Jamaica, Fiji, Czech Republic, Albania, South Africa, Egypt, Mexico, Bulgaria, Angola, Chile, Trinidad & Tobago, and Dominican Republic.

    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 13
MAR 24 - MAR 30, 2019:
COUNTRY	DATE	RATE	LATEST	YTD	1 YR AGO
KYRGYZSTAN	25-Mar	4.50%	-25	-25	5.00%
HUNGARY	26-Mar	0.90%	0	0	0.90%
NIGERIA	26-Mar	14.00%	0	0	14.00%
NEW ZEALAND	27-Mar	1.75%	0	0	1.75%
KENYA	27-Mar	9.00%	0	0	9.50%
JAMAICA	27-Mar	1.50%	-25	-25	2.75%
FIJI	28-Mar	0.50%	0	0	0.50%
CZECH REPUBLIC	28-Mar	1.75%	0	0	0.75%
ALBANIA	28-Mar	1.00%	0	0	1.25%
SOUTH AFRICA	28-Mar	6.75%	0	0	6.50%
EGYPT	28-Mar	15.75%	-100	-100	16.75%
MEXICO	28-Mar	8.25%	0	0	7.50%
BULGARIA	29-Mar	0.00%	0	0	0.00%
ANGOLA	29-Mar	15.75%	-75	-75	18.00%
CHILE	29-Mar	3.00%	25	25	2.50%
TRINIDAD & TOBAGO	29-Mar	5.00%	0	0	4.75%
DOMINICAN REP.	29-Mar	5.50%	0	0	5.25%

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Paraguay cuts rate 2nd month in row, still data-dependent

     Paraguay's central bank lowered its policy rate for the second month in a row to ensure inflation moves towards its target as the latest economic data shows a deceleration in the pace of growth in parts of the economy.
     The Central Bank of Paraguay (BCP) cut its rate by another 25 basis points to 4.75 percent and has now cut it by 50 points this year following a cut in February.
     Since May 2016 BCP has cut its rate five times and by a total of 125 basis points.
     As in February, BCP said the next policy decision will depend on economic data, both internal and external, and its monetary policy committee was again unanimous in its policy decision.
     In its statement, BCP noted the downside risks in the international economy and the U.S. Federal Reserve's more conservative stance regarding the pace of monetary changes.
     Within South America, BCP said Argentina's economic situation remains complex although stabilization measures have been put in place while the economic recovery in Brazil is slower than expected.
     Inflation in Paraguay has mainly stabilized but remains at a low level, BCP said.
     Paraguay's headline inflation rate rose slightly to 2.7 percent in February from 2.4 percent in January but remains well below BCP's target of 4.0 percent.
     Earlier this month the International Monetary Fund said Paraguay's economy had grown rapidly in the past 15 years - an average of 4.5 percent -  helping reduce poverty, with prudent macroeconomic policies, low inflation and low fiscal deficits playing an important role,
     Going forward, the IMF said the key challenge will be to sustain this growth as the boom in agricultural commodities may provide less support going forward.
     Last year Paraguay's economy grew 3.75 percent, driven by strong domestic demand that was fueled by a rebound in credit growth, but growth was uneven as the economy was hit by spillovers from regional financial turbulence.
     Argentina's financial crises led to a risk aversion against the region, hitting Paraguay's guarani, although by less than the fall seen in Argentina's peso. The result was the guarani rose against the peso and Brazil's real, hitting tourism from those countries and trade.
     This year the IMF expects Paraguay's economy to expand around 3.5 percent, with a drought expected to reduce the soybean harvest but this should be partly offset by a pickup in tourism and trade as the exchange rate shocks from 2018 unwinds.
     IMF said BCP's monetary policy stance appeared appropriate, with inflation set to move back to 4.0 percent by the end of the year last year's rise in the guarani reverses.
     Against the U.S. dollar the guarani lost 5.9 percent in 2018 and it has continued to lose ground this year and was trading at 6,152 to the dollar today, down 3.3 percent this year.

    www.CentralBankNews.info

Norway raises rate 25 bps, next hike likely in 6 months

     Norway's central bank raised its policy rate for the second time in the current tightening cycle and said it was likely to raise it again during the next 6 months to curb inflation from faster-than-expected economic growth and a weaker krone.
     Norges Bank (NB) raised its key rate by 25 basis points to 1.0 percent and has now raised it by a total of 50 basis points since September 2018 when the rate was raised for the first time in 7 years.
      The rate hike was well-telegraphed after the central bank in December said it was likely to raise the rate today and continue to raise the rate as it unwinds its accommodative monetary policy stance.
     "Our current assessment of the outlook and balance of risks suggests that the policy rate will most likely be increased further in the course of the next half-year," NB Governor Oeystein Olsen said in a statement.
     In an update to its quarterly monetary policy report, the central bank raised its forecast for the policy rate over the next few years from its December report but lowered it slightly further out, with the upward shift reflecting stronger domestic demand and a weaker exchange rate of the krone.
     The downward revision of the rate path reflects the prospects for lower growth and a more gradual rate rise among Norway's trading partners, changes illustrated by the recent dovish shifts by major central banks, such as the U.S. Federal Reserve, the European Central Bank and the Bank of Canada.
     NB's policy rate is now seen averaging 1.1 percent this year, up from December's forecast of 1.0 percent, and 1.6 percent in 2020, up from 1.4 percent previously forecast.
     But for 2021 the rate is forecast to average 1.7 percent, down from 1.8 percent, and then remaining at that level in 2022.
     "The uncertainty surrounding global developments and the effects of monetary policy suggest a cautious approach to interest rate setting," Olsen said.
     While the global economy has slowed in recent months, Norway's oil-fueled economy has been expanding at a solid pace since 2016, with capacity utilization now slightly above normal.
     In the fourth quarter of last year, Norway's economy expanded by an annual 1.7 percent and NB's regional March survey this showed firms expect growth to remain firm over the next 6 months on higher oil investment, digitalization and high public investment.
     Illustrating the upward pressure on inflation from the strong economy, the survey showed rising capacity utilization and employment, with annual wage growth estimated of 3.0 percent.
     NB raised its forecast for economic growth in the mainland, which excludes the oil shelf in the North Atlantic, to 2.7 percent this year from a previous 2.3 percent and 2018's 2.5 percent, supported by steady increases in both household consumption and business investment.
     Investments in petroleum extraction and pipelines is especially strong this year, seen up 12.5 percent from last year, an upward revision by 2.0 percent.
     Further out, these oil-related investments are seen declining and lower growth abroad will weigh on Norway's economy.
     For 2020 NB sees overall economic growth in Norway of 1.8 percent, up from 1.6 percent, but then 1.2 percent in 2021, down from 1.4 percent, and 1.5 percent in 2022.
    Headline inflation in Norway has topped the central bank's 2.0 percent target since February 2018 and was steady at 3.5 percent for the second consecutive month in February. Core inflation jumped in February to 2.6 percent from 2.1 percent in the previous two months.
     A weaker than expected krone in 2018 has also put upward pressure on inflation.
     But over the last week the krone has reversed course and it received another boost following the Federal Reserve's forecast on Wednesday that it would keep the fed funds rate on hold this year and stop shrinking its balance sheet by October.
     The krone was trading at 8.44 per U.S. dollar today, up 3.2 percent this year.

US Fed holds rate, slashes forecast for hikes to 0 in 2019

     The U.S. Federal Reserve left its benchmark federal funds rate steady at 2.25 - 2.50 percent, as widely expected, but acknowledged economic activity has slowed and slashed its forecast for the rate path this year through 2021, with the rate seen on hold for the rest of this year.
     The Federal Open Market Committee (FOMC), the Fed's policy-making body, forecast the fed funds rate would average 2.4 percent this year, sharply down from December's forecast of 2.9 percent, which had implied 2 rate hikes this year.
      In 2020 the Fed expects to raise its rate once to an average of 2.6 percent, down from December's projection of an average rate of 3.1 percent, and then maintain this rate in 2021.
      After raising its rate 9 times since December 2015, the Fed shifted into a more dovish policy stance in early January following a sharp stock market sell-off in December.
     In January, when the Fed also kept its rate steady, the Fed said it was ready to adjust the pace of normalization of its balance sheet if economic conditions were to warrant an easier policy.
     Since October 2017 the Fed has slowly been shrinking its holdings of some $4 trillions of bonds by allowing $30 billion of Treasuries and $20 billion in mortgage bonds to mature every month.
     Today, the Fed said it would slow the redemptions of Treasury bonds to $15 billion a month and then stop the runoff at the end of September.
     As far as mortgage bonds, the Fed will let these bonds mature and then from October reinvest the principal payments into Treasuries up to $20 billion a month as it gradually meets its longer-term aim of primarily owning Treasury securities.
     In its statement, the FOMC said the labor market remains strong but economic activity has slowed from its solid rate in the fourth quarter of 2018, with data showing slower growth in household spending and business fixed investment in the first quarter.
     The U.S. economy began to slow toward the end of last year, with quarterly growth in gross domestic product down to 2.6 percent from the third quarter. On an annual basis, GDP still rose 3.1 percent in the fourth quarter, the 10th consecutive quarter of growth.
     As in January, the FOMC said it "will be patient" as it decides on future rate changes in light of global economic and financial developments and muted inflation pressures.
     Reflecting the impact on the U.S. economy from the slowdown in Europe and China, the Fed cut its forecast for economic growth this year to 2.1 percent from its previous expectation of 2.3 percent and the 2020 forecast to 1.9 percent from 2.0 percent.
     In 2021 growth is expected to decelerate further to 1.8 percent, as forecast in December.
     While economic growth still remains solid, inflation has been trending downward since mid-2018, with headline inflation of 1.5 percent in February, largely due to lower energy prices.
     As in January, the FOMC was unanimous in its policy decision.

UPDATE-Thailand maintains rate, lowers growth forecast slightly

     (Following report was updated with Bank of Thailand's forecasts)    
     Thailand's central bank kept its policy rate steady at 1.75 percent, as expected, saying it expects the country's economy to grow slightly slower than expected but it will still expand around its potential level as domestic demand will improve while slower global growth will dent exports.
     The Bank of Thailand (BOT), which raised its rate in December 2018 for the first time since August 2011, said overall financial conditions remain accommodative and conducive to economic growth while domestic consumption will continue to expand and inflation is in line with expectations.
     Last month BOT also left its rate on hold although two members of the monetary policy committee voted to raise the rate again by 25 basis points to curb risks to financial stability and create more policy space for the central bank to ease in the event of an economic downturn.
     Today's policy decision was unanimous.
     In today's statement, BOT said there were still risks to financial stability in the future that warrant continued monitoring but recent macro prudential measures and the higher policy rate would help curb the build-up of vulnerabilities in the financial system from the search for yield in a low interest rate environment that might lead to an underpricing of risks.
     Looking ahead, BOT said the "current accommodative monetary policy stance would remain appropriate" and it would continue to monitor growth, inflation and financial risks in deciding the appropriate policy in the period ahead.
     "In addition, given heightened global and domestic uncertainties in the current period, the Committee thus voted to keep the policy rate unchanged at this meeting to assess the clarity of impacts from such uncertainties," BOT said.
     On March 24 Thailand will hold its first general election since a military coup in 2014 under a new constitution that essentially gives the military more sway over future governments.
     BOT cut its 2019 growth forecast to 3.8 percent from December's forecast of 4.0 percent and forecast growth in 2020 of 3.9 percent. The forecast for export growth this year was lowered to 3.0 percent from 3.8 percent.
      Last month BOT Governor Veerathai Santiprabhob said Thailand's economy was expected to slow in the current quarter but it was still on track to meet the 2019 forecast of 4.0 percent.
      In 2018 Thailand's export-dependent economy grew 4.1 percent, the fastest pace in 6 years, with annual growth of 3.7 percent in the fourth quarter, up from 3.2 percent in the third quarter.
     While private consumption is expected to continue to expand, BOT said exports had grown at a slower pace than previously expected due to the global economic slowdown, a down cycle of electronic products and impacts of the trade protectionism measures between the U.S. and China.
     Thailand's headline inflation rate rose to 0.73 percent in February from 0.27 percent in January, well below BOT's target of 1.0 to 4.0 percent.
      In its latest forecast, BOT maintained its forecast for headline inflation of 1.0 percent this year, slightly down from 1.1 percent in 2018, and forecasts 1.1 percent for 2020.
     After rising from November last year to mid-February, Thailand's baht dropped this month and BOT said the exchange rate "would likely remain volatile due to both domestic and external uncertainties."
     The baht was trading at 31.7 to the U.S. dollar today, up 2.5 percent this year.

Morocco holds rate but lowers inflation forecast again

     Morocco's central bank left its monetary policy rate at 2.25 percent but again lowered its outlook for economic growth and inflation amidst a continued slowdown in the global economy and an uncertain outlook due to trade, geopolitical tensions and Brexit.
     The Bank of Morocco, or Bank Al-Maghrib (BAM), has kept its rate at the current level since March 2016.
      Morocco's inflation rate averaged 1.9 percent in 2018, up from 0.7 percent in 2017, but BAM expects headline inflation to average 0.6 percent this year before rebounding to 1.1 percent in 2020, driven by an expected rise in core inflation to 0.8 percent in 2019 and 1.4 percent in 2020 on an expected rise in domestic demand.
     In January Morocco's consumer prices fell 0.5 percent year-on-year, the first case of deflation since July 2017, due to lower prices of food and non-alcoholic beverages, and transport.
     Since June last year BAM has continuously lowered its inflation forecasts and in December it forecast 2.0 percent inflation for 2018, 1.0 percent for 2019 and 1.2 percent for 2020.
     Morocco's economy slowed more than expected last year, with gross domestic product in the third quarter up by 3.0 percent, down from 3.9 percent a year earlier, and BAM projected average 2018 growth of 3.1 percent, down from 4.1 percent in 2017.
     In December last year BAM forecast average 3.3 percent growth for 2018, down from June's forecast of 3.6 percent and September's forecast of 3.5 percent.
     The slowdown in growth was mainly centered on the agricultural sector, with valued added slowing to growth of 4.3 percent from 15.4 percent in 2017, while non-agricultural activities grew 2.9 percent from 2.7 percent.
      Overall growth this year was forecast at 2.7 percent and then 3.9 percent in 2020, down from December's forecast of 3.1 percent growth in 2019 but the forecast for 2020 is higher than the previous forecast of 3.6 percent.
     Morocco's exports of goods improved last year but imports were marked by higher energy prices and capital goods' purchases, expanding the current account deficit to 5.2 percent of GDP from 3.6 percent in 2017.
     This year the deficit is seen narrowing to 4.1 percent and then 3.4 percent in 2020 due to an expected decline in energy imports and a slowdown in capital goods' purchases.
      Foreign Direct Investment inflows reached the equivalent of 4.1 percent of GDP in 2018 and are expected to drop to 3.4 percent in 2019 and in 2020.
      Helped by Gulf states' grants of 2 billion dirhams in 2019 and 1.8 billion in 2020, along with expected international borrowings by Morocco's Treasury, net international reserves are seen rising to 239 billion dirhams in 2019 from 231 billion in 2018 before falling to 236 billion in 2020, the equivalent of just over 5 months of imports.
      The real effective exchange rate of the dirham is expected to appreciate by 0.7 percent this year but then depreciate by 0.5 percent in 2020, BAM said.
      In December the International Monetary Fund board approved a precautionary, 2-year, US$2.97 billion line of credit for Morocco - similar to three previous arrangements - to provide Morocco with insurance against external risks and support the government's plans to reduce fiscal and external vulnerabilities and promote higher and more inclusive economic growth.

This week in monetary policy: Morocco, Thailand, Iceland, USA, Brazil, Indonesia, Philippines, Norway, Switzerland, Taiwan, UK, Russia, Paraguay & Colombia

    This week - March 17 through March 23 - central banks from 14 countries or jurisdictions are scheduled to decide on monetary policy: Morocco, Thailand, Iceland, United States, Brazil, Indonesia, Philippines, Norway, Switzerland, Taiwan, United Kingdom, Russia, Paraguay 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, 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 12
MAR 17 - MAR 23, 2019:
COUNTRY	DATE	RATE	LATEST	YTD	1 YR AGO
MOROCCO	19-Mar	2.25%	0	0	2.25%
THAILAND	20-Mar	1.75%	0	0	1.50%
ICELAND	20-Mar	4.50%	0	0	4.25%
UNITED STATES	20-Mar	2.50%	0	0	1.75%
BRAZIL	20-Mar	6.50%	0	0	6.50%
INDONESIA	21-Mar	6.00%	0	0	4.25%
PHILIPPINES	21-Mar	4.75%	0	0	3.00%
NORWAY	21-Mar	0.75%	0	0	0.50%
SWITZERLAND	21-Mar	-0.75%	0	0	-0.75%
TAIWAN	21-Mar	1.375%	0	0	1.375%
UNITED KINGDOM	21-Mar	0.75%	0	0	0.50%
RUSSIA	22-Mar	7.75%	0	0	7.25%
PARAGUAY	22-Mar	5.00%	-25	-25	5.25%
COLOMBIA	22-Mar	4.25%	0	0	4.50%

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