Kyrgyzstan's central bank left its discount rate steady at 4.25 percent, confirming its forecast for inflation to be around 4.0 percent by December this year and then rise further in the medium term to within its target range of 5.0 to 7.0 percent against the backdrop of stable international inflation.
The National Bank of the Kyrgyz Republic (NBKR), which has cut its rate twice this year, most recently in May, added inflation as of Aug. 16 was 1.9 percent, up from 1.5 percent in July, with inflationary dynamics set to remain low until the end of this year in the absence of shocks.
Economic output is rising in all the major sectors in the economy, especially in industry, while there has been a trend of reduced inflow of remittances, which could weaken domestic demand.
Kyrgyzstan's gross domestic product grew an annual 5.3 year percent in the first quarter of this year and NBKR said GDP in the January to July period was up 6.9 percent, but excluding the Kumtor gold mine, GDP grew 3.1 percent.
In June the International Monetary Fund forecast Kyrgyzstan's economy would expand 3.8 percent this year from 3.5 percent in 2018 due gold production and fiscal expansion, and reach about 4 percent in the medium term. However, the IMF also said risks were tilted to the downside due to trade tensions and the regional economic environment.
The IMF also forecast inflation would average 2.2 percent this year, up from 1.5 percent last year, and rise further to 4.9 percent in 2020.
www.CentralBankNews.info
Tuesday, August 27, 2019
Saturday, August 24, 2019
This week in monetary policy: Kyrgyzstan, Hungary, Jamaica, Iceland, Israel, Fiji, Botswana, Gambia, South Korea, Bulgaria, Colombia & Dominican Rep.
This week - August 25 through August 30 - central banks from 12 countries or jurisdictions are scheduled to decide on monetary policy: Kyrgyz Republic, Hungary, Jamaica, Iceland, Israel, Fiji, Botswana, Gambia, South Korea, Bulgaria, Colombia and the 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 35 | ||||||
| AUG 25 - AUG 30, 2019: | ||||||
| KYRGYZ REPUBLIC | 26-Aug | 4.25% | 0 | -50 | 4.75% | |
| HUNGARY | 27-Aug | 0.90% | 0 | 0 | 0.90% | EM |
| JAMAICA | 27-Aug | 0.75% | 0 | -100 | 2.00% | |
| ICELAND | 28-Aug | 3.75% | -25 | -75 | 4.25% | |
| ISRAEL | 28-Aug | 0.25% | 0 | 0 | 1.10% | DM |
| FIJI | 29-Aug | 0.50% | 0 | 0 | 0.50% | |
| BOTSWANA | 29-Aug | 5.00% | 0 | 0 | 5.00% | |
| GAMBIA | 29-Aug | 12.50% | 0 | -100 | 13.50% | |
| SOUTH KOREA | 30-Aug | 1.50% | -25 | -25 | 1.50% | EM |
| BULGARIA | 30-Aug | 0.00% | 0 | 0 | 0.00% | FM |
| COLOMBIA | 30-Aug | 4.25% | 0 | 0 | 4.25% | EM |
| DOMINICAN REPUBLIC | 30-Aug | 4.75% | -25 | -75 | 5.50% | |
Friday, August 23, 2019
Sri Lanka cuts rates another 50 bps, signals pause
Sri Lanka's central bank lowered its policy rates by another 50 basis points but signaled it would now take a pause while it considers the impact of its easing measures, the fiscal performance and global developments, "prior to deciding upon the future trajectory of monetary policy going forward."
The Central Bank of Sri Lanka (CBS) cut its Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) to 7.0 percent and 8.0 percent respectively.
Along with a similar-sized rate cut in May, in the wake of the Easter Sunday suicide bombings that killed more than 250 people, and two cuts to the reserve requirements for banks, the central bank has now lowered its key rates by 100 basis points this year and the reserve ratio by 250 points following cuts in November 2018 and then in February this year.
The central bank said the rate cuts were aimed a supporting a revival of economic activity in the context of low inflation as domestic and global headwinds are likely to delay the recovery of economic growth.
"Therefore, it is essential that the available policy spaces are utilized to support productive economic activity without disrupting the improvements achieved in relation to macroeconomic stability," CBS said.
Sri Lanka's economic slowed to a 17-year low of 3.2 percent in 2018, hit by a political crises, and in July the central bank slashed its 2019 growth forecast to 3.0 percent from 4.0 percent, partly in response to a fall in tourism, the country's third-largest source of foreign currency, after the bombings.
The country is heading for a presidential election later this year and parliamentary elections next year, and earlier this month a central bank official warned Sri Lanka could lose access to global debt markets if a new government moves away from fiscal stability.
Sri Lanka faces foreign debt repayments of over $16 billion in the next four years.
CBS said annual growth in credit to the private sector had continued to decelerate during the first 7 months of the year and "a speedy reduction in market lending rates is needed to revive economic activity."
Although the average weighted call money rate (AWCMR) had shown a notable decline in response to the May rate cut, it had yet to show a decline that is commensurate with the fall in deposit interest rates, the bank said, calling on financial institutions to lower their rates in response to the reduced cost of funds and thus boost credit flows and help revive the economy.
Sri Lanka's inflation rate fell to 3.3 percent in July from 3.8 percent in June and the central bank expects it to remain around the lower bound of its target range of 4.0 to 6.0 percent for the rest of this year even if there are some transitory pressures from the recent rise in fuel prices and administrative changes in prices of certain commodities.
After firming in the first half of this year, supported by the receipt of IMF funds, Sri Lanka's rupee has fallen this week and fell further in response to today's rate cuts.
The central bank said the depreciation pressure seen in the past few days was mainly driven by foreign withdrawals from the government securities market by a few investors and is expected to be short-lived.
The rupee was trading at 180 to the U.S. dollar today, down 1.7 percent since the end of last week but still 1.7 higher than at the start of this year.
The central bank has proposed a series of changes to the laws governing monetary policy, the Monetary Law Act, that are expected to win parliamentary approval.
The new law is aimed at strengthening the independence of the central bank, prevent it from printing money to finance government deficits, and introduce a form of flexible inflation targeting.
The Central Bank of Sri Lanka (CBS) cut its Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) to 7.0 percent and 8.0 percent respectively.
Along with a similar-sized rate cut in May, in the wake of the Easter Sunday suicide bombings that killed more than 250 people, and two cuts to the reserve requirements for banks, the central bank has now lowered its key rates by 100 basis points this year and the reserve ratio by 250 points following cuts in November 2018 and then in February this year.
The central bank said the rate cuts were aimed a supporting a revival of economic activity in the context of low inflation as domestic and global headwinds are likely to delay the recovery of economic growth.
"Therefore, it is essential that the available policy spaces are utilized to support productive economic activity without disrupting the improvements achieved in relation to macroeconomic stability," CBS said.
Sri Lanka's economic slowed to a 17-year low of 3.2 percent in 2018, hit by a political crises, and in July the central bank slashed its 2019 growth forecast to 3.0 percent from 4.0 percent, partly in response to a fall in tourism, the country's third-largest source of foreign currency, after the bombings.
The country is heading for a presidential election later this year and parliamentary elections next year, and earlier this month a central bank official warned Sri Lanka could lose access to global debt markets if a new government moves away from fiscal stability.
Sri Lanka faces foreign debt repayments of over $16 billion in the next four years.
CBS said annual growth in credit to the private sector had continued to decelerate during the first 7 months of the year and "a speedy reduction in market lending rates is needed to revive economic activity."
Although the average weighted call money rate (AWCMR) had shown a notable decline in response to the May rate cut, it had yet to show a decline that is commensurate with the fall in deposit interest rates, the bank said, calling on financial institutions to lower their rates in response to the reduced cost of funds and thus boost credit flows and help revive the economy.
Sri Lanka's inflation rate fell to 3.3 percent in July from 3.8 percent in June and the central bank expects it to remain around the lower bound of its target range of 4.0 to 6.0 percent for the rest of this year even if there are some transitory pressures from the recent rise in fuel prices and administrative changes in prices of certain commodities.
After firming in the first half of this year, supported by the receipt of IMF funds, Sri Lanka's rupee has fallen this week and fell further in response to today's rate cuts.
The central bank said the depreciation pressure seen in the past few days was mainly driven by foreign withdrawals from the government securities market by a few investors and is expected to be short-lived.
The rupee was trading at 180 to the U.S. dollar today, down 1.7 percent since the end of last week but still 1.7 higher than at the start of this year.
The central bank has proposed a series of changes to the laws governing monetary policy, the Monetary Law Act, that are expected to win parliamentary approval.
The new law is aimed at strengthening the independence of the central bank, prevent it from printing money to finance government deficits, and introduce a form of flexible inflation targeting.
Thursday, August 22, 2019
Egypt cuts rate 150 bps as inflation continues to decline
Egypt's central bank cut its key interest rates by a further 150 basis points and said the "pace and magnitude of future policy adjustments will continue to be subject to confirmation that inflation expectations are anchored at target levels that are consistent with disinflation and price stability over the medium term."
The Central Bank of Egypt (CBE) cut its overnight deposit rate, the overnight lending rate, the rate on its main operation and the discount rate by 150 basis points each to 14.25 percent 15.25 percent, 14.75 percent and 14.75 percent, respectively.
CBE has now cut its key rates by a total of 250 basis points this year following a cut in February and by a total of 450 basis points since February 2018 when it shifted into an easing cycle in response to slowing inflation following a surge after the exchange rate of the pound was floated in November 2016 as part of an agreement with the International Monetary Fund (IMF).
"As incoming data continued to confirm the moderation of underlying inflationary pressures, the MPC (monetary policy committee) decided to cut the policy rates by 150 basis points," CBE said, adding this was consistent with its aim of lowering inflation to its target of 9.0 percent, plus/minus 3 percentage points by the fourth quarter of 2020.
Egypt's inflation rate fell to 8.7 percent in July from 9.4 percent in June and 14.1 percent in May but the central bank cautioned the path for future policy rates is based on inflation expectations rather than current inflation rates and future rate changes are based on confirmation that inflation expectations are anchored to its target level.
The larger-than-expected drop in July inflation to the lowest rate in almost four years surprised analysts who had expected inflation to rise following a cut to subsidies that pushed up fuel prices. But it also ignited expectations the central bank would cut its rates by at least 100 basis points today.
CBE said the fall in inflation was supported by a containment of inflationary pressures and by favorable base effects as the recent fiscal consolidation measures were weaker than in the previous year.
Egypt's economy is estimated to have expanded by 5.7 percent in the second quarter of this year, up from 5.6 percent in the first quarter, and by 5.6 percent in fiscal 2018/19, the highest rate in 11 years while unemployment is continuing to declined.
The Central Bank of Egypt (CBE) cut its overnight deposit rate, the overnight lending rate, the rate on its main operation and the discount rate by 150 basis points each to 14.25 percent 15.25 percent, 14.75 percent and 14.75 percent, respectively.
CBE has now cut its key rates by a total of 250 basis points this year following a cut in February and by a total of 450 basis points since February 2018 when it shifted into an easing cycle in response to slowing inflation following a surge after the exchange rate of the pound was floated in November 2016 as part of an agreement with the International Monetary Fund (IMF).
"As incoming data continued to confirm the moderation of underlying inflationary pressures, the MPC (monetary policy committee) decided to cut the policy rates by 150 basis points," CBE said, adding this was consistent with its aim of lowering inflation to its target of 9.0 percent, plus/minus 3 percentage points by the fourth quarter of 2020.
Egypt's inflation rate fell to 8.7 percent in July from 9.4 percent in June and 14.1 percent in May but the central bank cautioned the path for future policy rates is based on inflation expectations rather than current inflation rates and future rate changes are based on confirmation that inflation expectations are anchored to its target level.
The larger-than-expected drop in July inflation to the lowest rate in almost four years surprised analysts who had expected inflation to rise following a cut to subsidies that pushed up fuel prices. But it also ignited expectations the central bank would cut its rates by at least 100 basis points today.
CBE said the fall in inflation was supported by a containment of inflationary pressures and by favorable base effects as the recent fiscal consolidation measures were weaker than in the previous year.
Egypt's economy is estimated to have expanded by 5.7 percent in the second quarter of this year, up from 5.6 percent in the first quarter, and by 5.6 percent in fiscal 2018/19, the highest rate in 11 years while unemployment is continuing to declined.
Indonesia cuts rate 2nd time, to keep easy policy mix
Indonesia's central bank lowered its benchmark interest rates for the second month in a row and going forward it said it would "maintain an accommodative policy mix in line with low inflation expectations, maintained external stability and the need to build economic growth momentum."
Bank Indonesia (BI) cut its key benchmark BI 7-day reverse repo rate by another 25 basis points to 5.50 percent and has now cut it by 50 basis points this year following a similar cut in July.
BI also lowered the rate on its deposit and lending facilities by 25 points to 4.75 percent and 6.25 percent, respectively.
Although the rate cut surprised many analysts, BI in July signaled it was ready to lower rates further to boost economic growth, which slowed in the second quarter, as inflation expectations remained low.
The central bank said today the rate cut was consistent with inflation that is forecast to be below the midpoint of its inflation target, ensuring attractive returns on domestic financial assets and thus supporting external stability as well as a "pre-emptive measure to safeguard economic growth momentum going forward against the impact of global economic moderation."
Last year BI raised its rates six times and by a total of 175 basis points during the U.S. Federal Reserve's four rate hikes to shore up the exchange rate of the rupiah and ensure inflation didn't rise.
This year Indonesia, along with other emerging market economies, is facing a slowing global economy that is suppressing commodity prices and its exports.
But despite the shift in global capital toward safer assets, such as government bonds in the U.S. and Japan as well as gold, the exchange rate of Indonesia's rupiah is holding up well and is expected to remain stable, with BI attributing this to an inflow of foreign capital that is looking for attractive returns amid the impact of looser monetary policy in advanced economies.
"Ongoing trade tensions coupled with geopolitical risks are undermining world trade volume and global economic growth," BI said, noting Indonesia's economic growth slowed in the second quarter to 5.05 percent year-on-year from 5.07 percent due to the ongoing contraction in exports while stronger consumption and stable investment is still underpinning growth.
BI confirmed its forecast for 2019 economic growth to be below the midpoint of the 5.0 to 5.4 percent range and forecast 2020 growth in the middle of a 5.1 to 5.5 percent range.
Inflation in Indonesia remains low and stable, rising slightly to 3.32 percent in July from 3.28 percent in June and BI confirmed its forecast for inflation this year to be below the midpoint of its target corridor of 3.5 percent, plus/minus 1 percentage point.
For 2020 BI forecast inflation would be within its lower target range of 3.0 percent, plus/minus 1 percentage point.
After depreciating during the first 10 months of 2018, the rupiah bounced back from November through January and has been relatively stable since February. Today the rupiah was trading at 14,235 to the U.S. dollar, up 2.3 percent this year.
Last month the International Monetary Fund said Indonesia's economy performed well last year despite the reversal of global capital flows, with economic growth this year and in 2020 seen remaining stable at 5.2 percent as credit growth of 12 percent is sustained and inflation remains within the target band while the current account deficit continues to narrow.
Bank Indonesia (BI) cut its key benchmark BI 7-day reverse repo rate by another 25 basis points to 5.50 percent and has now cut it by 50 basis points this year following a similar cut in July.
BI also lowered the rate on its deposit and lending facilities by 25 points to 4.75 percent and 6.25 percent, respectively.
Although the rate cut surprised many analysts, BI in July signaled it was ready to lower rates further to boost economic growth, which slowed in the second quarter, as inflation expectations remained low.
The central bank said today the rate cut was consistent with inflation that is forecast to be below the midpoint of its inflation target, ensuring attractive returns on domestic financial assets and thus supporting external stability as well as a "pre-emptive measure to safeguard economic growth momentum going forward against the impact of global economic moderation."
Last year BI raised its rates six times and by a total of 175 basis points during the U.S. Federal Reserve's four rate hikes to shore up the exchange rate of the rupiah and ensure inflation didn't rise.
This year Indonesia, along with other emerging market economies, is facing a slowing global economy that is suppressing commodity prices and its exports.
But despite the shift in global capital toward safer assets, such as government bonds in the U.S. and Japan as well as gold, the exchange rate of Indonesia's rupiah is holding up well and is expected to remain stable, with BI attributing this to an inflow of foreign capital that is looking for attractive returns amid the impact of looser monetary policy in advanced economies.
"Ongoing trade tensions coupled with geopolitical risks are undermining world trade volume and global economic growth," BI said, noting Indonesia's economic growth slowed in the second quarter to 5.05 percent year-on-year from 5.07 percent due to the ongoing contraction in exports while stronger consumption and stable investment is still underpinning growth.
BI confirmed its forecast for 2019 economic growth to be below the midpoint of the 5.0 to 5.4 percent range and forecast 2020 growth in the middle of a 5.1 to 5.5 percent range.
Inflation in Indonesia remains low and stable, rising slightly to 3.32 percent in July from 3.28 percent in June and BI confirmed its forecast for inflation this year to be below the midpoint of its target corridor of 3.5 percent, plus/minus 1 percentage point.
For 2020 BI forecast inflation would be within its lower target range of 3.0 percent, plus/minus 1 percentage point.
After depreciating during the first 10 months of 2018, the rupiah bounced back from November through January and has been relatively stable since February. Today the rupiah was trading at 14,235 to the U.S. dollar, up 2.3 percent this year.
Last month the International Monetary Fund said Indonesia's economy performed well last year despite the reversal of global capital flows, with economic growth this year and in 2020 seen remaining stable at 5.2 percent as credit growth of 12 percent is sustained and inflation remains within the target band while the current account deficit continues to narrow.
Wednesday, August 21, 2019
Paraguay cuts rate 4th time as economic activity slows
Paraguay's central bank lowered its policy rate for the fourth time this year, saying economic activity had slowed amid rising uncertainty about a resolution to the trade tensions between the U.S. and China while inflationary pressures are not expected in coming months.
The Central Bank of Paraguay (BCP) cut its monetary policy rate by another 25 basis points to 4.25 percent and has now cut it by 100 points following cuts in February, March and July.
In addition to slower global economic activity, BCP said the regional outlook had become more complex in recent weeks, especially after the primary elections in Argentina, and the latest data show lower rates of growth in the economic activity in Brazil.
Domestically, the aggregate indicator of activity showed a smaller decline in recent months while the index that excludes agriculture and electricity showed a slight rebound in June, the bank added.
BCP has forecast 2019 growth of 1.5 percent, down from 3.7 percent in 2018.
Looking ahead, the bank's monetary policy committee CEOMA said it considers flexible monetary conditions to be compatible with the convergence of inflation to its 4.0 percent target and it would continue to monitor domestic and external data to evaluate its next policy decision.
Paraguay's inflation rate rose to 3.1 percent in July from 2.8 percent in June while its gross domestic product shrank 2.0 percent year-on-year in the first quarter of this year from growth of 1.0 percent in the previous quarter.
Paraguay's guarani has been weakening since April last year and was trading at 6,110 to the U.S. dollar today, down 2.7 percent this year.
www.CentralBankNews.info
The Central Bank of Paraguay (BCP) cut its monetary policy rate by another 25 basis points to 4.25 percent and has now cut it by 100 points following cuts in February, March and July.
In addition to slower global economic activity, BCP said the regional outlook had become more complex in recent weeks, especially after the primary elections in Argentina, and the latest data show lower rates of growth in the economic activity in Brazil.
Domestically, the aggregate indicator of activity showed a smaller decline in recent months while the index that excludes agriculture and electricity showed a slight rebound in June, the bank added.
BCP has forecast 2019 growth of 1.5 percent, down from 3.7 percent in 2018.
Looking ahead, the bank's monetary policy committee CEOMA said it considers flexible monetary conditions to be compatible with the convergence of inflation to its 4.0 percent target and it would continue to monitor domestic and external data to evaluate its next policy decision.
Paraguay's inflation rate rose to 3.1 percent in July from 2.8 percent in June while its gross domestic product shrank 2.0 percent year-on-year in the first quarter of this year from growth of 1.0 percent in the previous quarter.
Paraguay's guarani has been weakening since April last year and was trading at 6,110 to the U.S. dollar today, down 2.7 percent this year.
www.CentralBankNews.info
Zambia holds rate but may hike if inflation remains high
Zambia's central bank left its policy rate steady at 10.25 percent, saying inflation is still expected to remain above the upper bound of its target range for much of the forecast horizon but then revert to the range toward the end this period amid a weakening of near-term growth prospects.
However, the Bank of Zambia (BOZ), which raised its rate 50 basis points in May as inflation was forecast to remain above its target range of 6.0 - 8.0 percent, cautioned it "may adjust the Policy Rate upward, if inflation does not revert to the target range."
In addition to recent data that points toward reduced economic growth, BOZ said liquidity challenges and constrained aggregate demand continue to weigh on economic activity, with gross domestic product projected to decline this year due to the effects of drought on agriculture, constrained electricity generation and lower than anticipated output from mining.
BOZ didn't issue a growth forecast but last month the International Monetary Fund said Zambia's growth was projected to slow to 2.0 percent this year from an estimated 3.7 percent last year, reflecting a decline in mining activity and the impact on drought on hydro power production.
BOZ said preliminary data show economic growth easing to 2.6 percent in the first quarter of this year from 2.7 percent in the same 2018 quarter, with data pointing to reduced growth in the second quarter.
Zambia's inflation rate has accelerated this year due to a depreciation of the kwacha and higher food prices, pushing up inflation from an average 7.0 percent in 2018 to to 8.8 percent in July.
BOZ expects inflation to remain above its 8.0 percent inflation limit for much of the forecast period due to a persistent rise in food prices from low agricultural output. But easing pressure on food prices is then expected to lower inflation toward the end of the forecast period.
Key upside risks to this outlook stem from persistent drought, lower electricity generation, higher-than-expected fiscal deficits and elevated debt service payments, which is likely to impact inflation through the exchange rate and expectation channels.
In addition, BOZ said weaker-than-projected global growth, partly due to an escalation of trade tensions between the US and China, is likely to impact copper prices, which may also affect the kwacha's exchange rate.
After falling 15.6 percent against the U.S. dollar last year, the kwacha has continued to weaken this year and was trading at 13.12 to the dollar today, down almost 9 percent this year.
The IMF in July forecast inflation would average 9.9 percent this year and 10.0 percent in 2020.
www.CentralBankNews.info
However, the Bank of Zambia (BOZ), which raised its rate 50 basis points in May as inflation was forecast to remain above its target range of 6.0 - 8.0 percent, cautioned it "may adjust the Policy Rate upward, if inflation does not revert to the target range."
In addition to recent data that points toward reduced economic growth, BOZ said liquidity challenges and constrained aggregate demand continue to weigh on economic activity, with gross domestic product projected to decline this year due to the effects of drought on agriculture, constrained electricity generation and lower than anticipated output from mining.
BOZ didn't issue a growth forecast but last month the International Monetary Fund said Zambia's growth was projected to slow to 2.0 percent this year from an estimated 3.7 percent last year, reflecting a decline in mining activity and the impact on drought on hydro power production.
BOZ said preliminary data show economic growth easing to 2.6 percent in the first quarter of this year from 2.7 percent in the same 2018 quarter, with data pointing to reduced growth in the second quarter.
Zambia's inflation rate has accelerated this year due to a depreciation of the kwacha and higher food prices, pushing up inflation from an average 7.0 percent in 2018 to to 8.8 percent in July.
BOZ expects inflation to remain above its 8.0 percent inflation limit for much of the forecast period due to a persistent rise in food prices from low agricultural output. But easing pressure on food prices is then expected to lower inflation toward the end of the forecast period.
Key upside risks to this outlook stem from persistent drought, lower electricity generation, higher-than-expected fiscal deficits and elevated debt service payments, which is likely to impact inflation through the exchange rate and expectation channels.
In addition, BOZ said weaker-than-projected global growth, partly due to an escalation of trade tensions between the US and China, is likely to impact copper prices, which may also affect the kwacha's exchange rate.
After falling 15.6 percent against the U.S. dollar last year, the kwacha has continued to weaken this year and was trading at 13.12 to the dollar today, down almost 9 percent this year.
The IMF in July forecast inflation would average 9.9 percent this year and 10.0 percent in 2020.
www.CentralBankNews.info
Sunday, August 18, 2019
This week in monetary policy: Zambia, Paraguay, Indonesia, Egypt, Sri Lanka and Jackson Hole
This week - August 18 through August 24 - central banks from 5 countries or jurisdictions are scheduled to decide on monetary policy: Zambia, Paraguay, Indonesia, Egypt and Sri Lanka.
Many central bankers, economists and academics will also be in the small U.S. city of Jackson Hole, Wyoming, to attend the Kansas City Fed's annual economic symposium from Aug. 22 to Aug. 24. The theme of this year's symposium, a decade after the global financial crises, is "Challenges for Monetary Policy," with Federal Reserve Chairman Jerome Powell scheduled to speak on Aug. 23.
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 34 | ||||||
| AUG 18 - AUG 24, 2019: | ||||||
| ZAMBIA | 21-Aug | 10.25% | 50 | 50 | 9.75% | |
| PARAGUAY | 21-Aug | 4.50% | -25 | -75 | 5.25% | |
| INDONESIA | 22-Aug | 5.75% | -25 | -25 | 5.50% | EM |
| EGYPT | 22-Aug | 15.75% | 0 | -100 | 16.75% | EM |
| SRI LANKA | 23-Aug | 7.50% | 0 | -50 | 7.25% | FM |
Thursday, August 15, 2019
Mexico cuts rate 1st time in 62 months on growth risks
Mexico's central bank lowered its policy rate for the first time in 62 months, saying inflation has decreased as it expected but the economy continues to stagnate and uncertainty about the relationship with the United States continues to pose a risk to economic growth.
The Bank of Mexico (Banxico) cut its benchmark target for the overnight interbank interest rate by 25 basis points to 8.0 percent, its first rate cut since June 2014 following 15 rate hikes from December 2015 through December 2018 in response to a weakening peso and inflationary pressures.
But in the wake of the U.S. Federal Reserve's change of course in late January this year to a more dovish stance, which resulted in a rate cut on July 31, Baxico also shifted its policy stance and is now following the Fed and 53 other central banks that have eased their policy stance this year.
Banxico said a majority of its board member had voted to cut the rate, deciding that a lower interest rate is consistent with inflation converging toward its target of 3.0 percent. One board member voted to maintain the rate.
The board added that it would maintain a prudent monetary policy stance during the current environment of uncertainty and closely follow the potential pass-through of fluctuations to the exchange rate to consumer prices along with the behavior of economic slack and price pressures.
Noting the deceleration in world economic activity along with U.S. trade disputes, the central bank said the balance of risks to the world economy had deteriorated, and while the peso has fluctuated, interest rates on government securities have fallen and the latest data suggest weaker demand has widened the economy's slack more than expected so the balance of risks to economic growth remains biased to the downside.
In July Mexico's inflation rate eased to 3.78 percent from 3.95 percent though inflation expectations remained relatively stable while the economy shrank 0.7 percent year-on-year in the second quarter after growth of 1.2 percent in the first quarter.
The Bank of Mexico (Banxico) cut its benchmark target for the overnight interbank interest rate by 25 basis points to 8.0 percent, its first rate cut since June 2014 following 15 rate hikes from December 2015 through December 2018 in response to a weakening peso and inflationary pressures.
But in the wake of the U.S. Federal Reserve's change of course in late January this year to a more dovish stance, which resulted in a rate cut on July 31, Baxico also shifted its policy stance and is now following the Fed and 53 other central banks that have eased their policy stance this year.
Banxico said a majority of its board member had voted to cut the rate, deciding that a lower interest rate is consistent with inflation converging toward its target of 3.0 percent. One board member voted to maintain the rate.
The board added that it would maintain a prudent monetary policy stance during the current environment of uncertainty and closely follow the potential pass-through of fluctuations to the exchange rate to consumer prices along with the behavior of economic slack and price pressures.
Noting the deceleration in world economic activity along with U.S. trade disputes, the central bank said the balance of risks to the world economy had deteriorated, and while the peso has fluctuated, interest rates on government securities have fallen and the latest data suggest weaker demand has widened the economy's slack more than expected so the balance of risks to economic growth remains biased to the downside.
In July Mexico's inflation rate eased to 3.78 percent from 3.95 percent though inflation expectations remained relatively stable while the economy shrank 0.7 percent year-on-year in the second quarter after growth of 1.2 percent in the first quarter.
Norway holds rate but greater uncertainty going forward
Norway's central bank kept its policy rate steady at 1.25 percent, saying the outlook for the policy rate ahead is little changed since June, when it forecast another rate hike would be likely this year, but acknowledged "the global risk outlook entails greater uncertainty about policy rates going forward."
Norges Bank (NB), which raised its rate in June for the third time since September 2018 to contain inflation from strong economic growth, added the upturn in the Norwegian economy was continuing as it had expected though underlying inflation was a little lower than projected and "deepening trade tensions and heightened uncertainty surrounding the UK's relationship with the EU may weigh on growth abroad and in Norway."
"On the other hand, a weaker krone may contribute to higher inflation ahead," NB added, waking a tightrope between inflation close to its target and a strong domestic economy amid a weaker currency and slowing global growth.
NB's decision to retain its rate today was widely expected by analysts who said the bank's executive board normally doesn't change rates during an interim meeting, pencilling in the next rate hike for September when NB updates its quarterly economic forecast.
Propelled by an investment boom in its oil and gas industry, and government spending on infrastructure, such as railways, Norway's economy has defied the slowdown in the global economy and the central bank has remained an outlier amid a sharp easing of global monetary policy.
Recalling its latest monetary policy report on June 20, NB said capacity utilization in the country's economy was somewhat above normal, underlying inflation was a little higher than the bank's 2.0 percent target and the board's assessment was the "policy rate would most likely be increased further in the course of 2019."
In response, analysts expected NB to raise its rate again in September or December, when it publishes its economic forecasts, with only a minority looking for NB to end its tightening campaign.
While today's guidance from NB was balanced, the verdict from the foreign exchange market was one-sided, with Norway's krone continuing its recent decline.
The krone fell 0.3 percent to 8.99 to the U.S. dollar in response to the NB's statement and is now down 3.2 percent this year and down by 8.8 percent since the start of 2018 despite three rate hikes.
Norway's headline inflation rate was steady at 1.9 percent in July and June while gross domestic product shrank 0.1 percent in the first quarter from the previous quarter for annual growth of 2.5 percent, up from 1.9 percent in the previous quarter.
In its June monetary policy report NB forecast its policy rate would average 1.1 percent this year, then 1.6 percent in 2020 and 1.7 percent in 2021 and 2022.
But NB also lowered both its inflation and growth forecasts from its March forecasts.
Consumer price inflation was seen averaging 2.2 percent this year, down from a previous forecast of 2.3 percent, then 1.9 percent in 2020 and 2.0 percent in 2021 and 2022.
The 2019 growth forecast for mainland Norway was lowered to 2.6 percent from a previous 2.7 percent and the 2020 forecast to 1.9 percent from 2.0 percent. In 2021 growth was seen slowing further to 1.2 percent and then remaining at that rate in 2022.
Norges Bank (NB), which raised its rate in June for the third time since September 2018 to contain inflation from strong economic growth, added the upturn in the Norwegian economy was continuing as it had expected though underlying inflation was a little lower than projected and "deepening trade tensions and heightened uncertainty surrounding the UK's relationship with the EU may weigh on growth abroad and in Norway."
"On the other hand, a weaker krone may contribute to higher inflation ahead," NB added, waking a tightrope between inflation close to its target and a strong domestic economy amid a weaker currency and slowing global growth.
NB's decision to retain its rate today was widely expected by analysts who said the bank's executive board normally doesn't change rates during an interim meeting, pencilling in the next rate hike for September when NB updates its quarterly economic forecast.
Propelled by an investment boom in its oil and gas industry, and government spending on infrastructure, such as railways, Norway's economy has defied the slowdown in the global economy and the central bank has remained an outlier amid a sharp easing of global monetary policy.
Recalling its latest monetary policy report on June 20, NB said capacity utilization in the country's economy was somewhat above normal, underlying inflation was a little higher than the bank's 2.0 percent target and the board's assessment was the "policy rate would most likely be increased further in the course of 2019."
In response, analysts expected NB to raise its rate again in September or December, when it publishes its economic forecasts, with only a minority looking for NB to end its tightening campaign.
While today's guidance from NB was balanced, the verdict from the foreign exchange market was one-sided, with Norway's krone continuing its recent decline.
The krone fell 0.3 percent to 8.99 to the U.S. dollar in response to the NB's statement and is now down 3.2 percent this year and down by 8.8 percent since the start of 2018 despite three rate hikes.
Norway's headline inflation rate was steady at 1.9 percent in July and June while gross domestic product shrank 0.1 percent in the first quarter from the previous quarter for annual growth of 2.5 percent, up from 1.9 percent in the previous quarter.
In its June monetary policy report NB forecast its policy rate would average 1.1 percent this year, then 1.6 percent in 2020 and 1.7 percent in 2021 and 2022.
But NB also lowered both its inflation and growth forecasts from its March forecasts.
Consumer price inflation was seen averaging 2.2 percent this year, down from a previous forecast of 2.3 percent, then 1.9 percent in 2020 and 2.0 percent in 2021 and 2022.
The 2019 growth forecast for mainland Norway was lowered to 2.6 percent from a previous 2.7 percent and the 2020 forecast to 1.9 percent from 2.0 percent. In 2021 growth was seen slowing further to 1.2 percent and then remaining at that rate in 2022.
Wednesday, August 14, 2019
Mozambique cuts rate another 50 bps after peace accord
Mozambique's central bank lowered its monetary policy rate, MIMO, by a further 50 basis points to 12.75 percent as inflation continues to decelerate while the outlook has become more favorable following last week's signing of a peace accord.
It is Bank of Mozambique's (BOM) second rate cut this year and the 11th since April 2017 as inflation has steadily fallen since topping 26 percent in November 2016 and the exchange rate of the metical has risen since hitting almost 80 to the U.S. dollar in October 2016.
"The decision to reduce the minimum rate is justified by the continued improvement in the medium-term inflation outlook, which consolidates the stability of this indicator at single-digit levels," BOM said.
BM also lowered its deposit rate by 50 basis points and the rate on its permanent lending facility to 9.75 percent and 15.75 percent, respectively. However, it left the reserve ratio of domestic currency deposits at 14.0 percent and foreign currency deposits at 36.0 percent.
The signing of the Peace and National Reconciliation Agreement on Aug. 6 between Mozambique's president and the leader of the main opposition group, paves the way for peaceful elections on Oct. 15 and ends violence that has persisted since a civil war ended in 1992 that has cost the lives of an estimated 1 million people.
BOM said the outlook for inflation had become more favorable following the peace agreement and the beginning of the disarmament and demobilization process, though uncertainties still justify a conservative stance that should help bring down the cost of financing.
Mozambique's inflation rate fell further to 2.16 percent in June and BOM said its forecast of stable domestic prices is still based on lower pressure in the foreign exchange market given that aggregate demand remains below potential and the favorable movement of oil prices.
As far as Mozambique's economy, the central bank said it expects activity to decelerate further this year but then gradually recover in 2020, albeit it would remain below its potential. Last month BOM said growth in the medium term would be stimulated by post-disaster reconstruction and the completion of natural gas projects.
Mozambique's gross domestic product grew an annual 2.5 percent in the first quarter of this year, down from 3.0 percent in the previous quarter while international reserves remain at a level that covers six months of imports, excluding large projects.
Gross international reserves rose by US$111 million since the June monetary policy meeting to $3.244 billion.
The exchange rate of Mozambique's metical has firmed sharply since late April this year after the country was hit by Tropical Cyclones Idai and Kenneth in March and April, which the International Monetary Fund estimated would dent economic growth this year from 3.3 percent last year.
In April the IMF approved $118 million in emergency assistance to Mozambique, with the death toll from the two cyclones estimated at more than 1,000 people.
The metical was trading at 60.49 to the U.S. dollar today, up 7 percent since late April and 1.8 percent since the start of this year.
www.CentralBankNews.info
It is Bank of Mozambique's (BOM) second rate cut this year and the 11th since April 2017 as inflation has steadily fallen since topping 26 percent in November 2016 and the exchange rate of the metical has risen since hitting almost 80 to the U.S. dollar in October 2016.
"The decision to reduce the minimum rate is justified by the continued improvement in the medium-term inflation outlook, which consolidates the stability of this indicator at single-digit levels," BOM said.
BM also lowered its deposit rate by 50 basis points and the rate on its permanent lending facility to 9.75 percent and 15.75 percent, respectively. However, it left the reserve ratio of domestic currency deposits at 14.0 percent and foreign currency deposits at 36.0 percent.
The signing of the Peace and National Reconciliation Agreement on Aug. 6 between Mozambique's president and the leader of the main opposition group, paves the way for peaceful elections on Oct. 15 and ends violence that has persisted since a civil war ended in 1992 that has cost the lives of an estimated 1 million people.
BOM said the outlook for inflation had become more favorable following the peace agreement and the beginning of the disarmament and demobilization process, though uncertainties still justify a conservative stance that should help bring down the cost of financing.
Mozambique's inflation rate fell further to 2.16 percent in June and BOM said its forecast of stable domestic prices is still based on lower pressure in the foreign exchange market given that aggregate demand remains below potential and the favorable movement of oil prices.
As far as Mozambique's economy, the central bank said it expects activity to decelerate further this year but then gradually recover in 2020, albeit it would remain below its potential. Last month BOM said growth in the medium term would be stimulated by post-disaster reconstruction and the completion of natural gas projects.
Mozambique's gross domestic product grew an annual 2.5 percent in the first quarter of this year, down from 3.0 percent in the previous quarter while international reserves remain at a level that covers six months of imports, excluding large projects.
Gross international reserves rose by US$111 million since the June monetary policy meeting to $3.244 billion.
The exchange rate of Mozambique's metical has firmed sharply since late April this year after the country was hit by Tropical Cyclones Idai and Kenneth in March and April, which the International Monetary Fund estimated would dent economic growth this year from 3.3 percent last year.
In April the IMF approved $118 million in emergency assistance to Mozambique, with the death toll from the two cyclones estimated at more than 1,000 people.
The metical was trading at 60.49 to the U.S. dollar today, up 7 percent since late April and 1.8 percent since the start of this year.
www.CentralBankNews.info
Namibia cuts rate 1st time in 2 years as economy slows
Namibia's central bank lowered its benchmark repo rate by 25 basis points to 6.50 percent, saying economic growth, inflation and growth in credit to individuals slowed during the first six months and "key risks to the global outlook remain, amongst others, escalating trade and geopolitical tensions and higher policy uncertainty across many countries, including Brexit."
It is Bank of Namibia's (BON) first rate cut since August 2017 and brings the rate back to its level in January 2016 before the central bank embarked on a tightening cycle that lasted 17 months.
The bank's monetary policy committee said the decision to cut the rate was "to support domestic economic activity and to maintain the one-to-one link between the Namibia Dollar and the South African Rand."
Since BON's previous policy meeting in June, the South African Reserve Bank (SARB) on July 18 lowered its policy rate by 25 basis points, its first cut since March 2018 and one of 31 central banks that lowered their rates in the third quarter of this year in response to slowing global growth.
As of July 31, Namibia's stock of international reserves rose to N$35.2 billion from N$34.1 billion in June, enough to cover 4.8 months of imports, and a level BON said was sufficient to protect the peg of the Namibia Dollar to the Rand and to meet its international financial obligations.
The Namibian dollar trades at a rate of 1:1 to the rand, which has fallen against the U.S. dollar since SARB's rate cut. This has pulled down the Namibian dollar, which fell 1.4 percent today after the rate cut to 15.34 to the U.S. dollar to be down 5.9 percent this year.
In April BON lowered its forecast for economic growth this year to 0.3 percent from December's forecast of 1.5 percent and said today the domestic economy was projected to remain weak in 2019.
Last year Namibia's economy shrank for the second consecutive year and in June the International Monetary Fund said it expected growth to "remain mildly negative in 2019, as a poor rain season and reduced diamond production continued to weigh on a tentative recovery."
The central bank said the slowdown in the first six months of this year was reflected in the mining, construction, electricity, and wholesale and retail trade, while the sectors of manufacturing, transport and communication improved as compared to the same 2018 period.
Namibia's gross domestic product contracted 2.0 percent year-on-year in the first quarter of this year, up from 1.9 percent fall in the fourth quarter of 2018 and a 0.2 percent decline in the third quarter of 2018 for a 2018 decline of 0.1 percent after a 0.9 percent fall in 2017.
Inflation in Nambia slowed to 3.9 percent in June from 4.1 percent in May and averaged 4.4 percent in the first half, with BON attributing the moderation to a decline in housing inflation.
BON forecast average inflation of 4.3 percent in 2019, down from its June forecast of 4.5 percent.
While average growth in private sector credit extension (PSCE) rose to 6.9 percent in the first half from 5.9 percent in the same 2018 period, BON said this was mainly due to higher uptake by credit in the retail, real estate, financial and mining sectors.
But growth in credit to individuals "slowed somewhat" during the first half, BON added.
Together with the country's ministry of finance, BON revised the country's loan-to-value (LTV) ratios, with the new maximum LTV for the first, non-primary residence raised to 90 percent from a previous 80 percent. The ratios for second, third and fourth residences were also raised.
"At these adjusted levels, the Bank believes that LTVs will continue to shield the financial system from undue risks going forward," BON said.
BON began implementing the macroeconomic tool of LTVs in 2017 to mitigate the impact of an overheating housing market on the financial system.
Since then, BON said, there have been developments that warranted a review of this policy, including a significant slowdown in the economy and a sharp correction in the housing market.
www.CentralBankNews.info
It is Bank of Namibia's (BON) first rate cut since August 2017 and brings the rate back to its level in January 2016 before the central bank embarked on a tightening cycle that lasted 17 months.
The bank's monetary policy committee said the decision to cut the rate was "to support domestic economic activity and to maintain the one-to-one link between the Namibia Dollar and the South African Rand."
Since BON's previous policy meeting in June, the South African Reserve Bank (SARB) on July 18 lowered its policy rate by 25 basis points, its first cut since March 2018 and one of 31 central banks that lowered their rates in the third quarter of this year in response to slowing global growth.
As of July 31, Namibia's stock of international reserves rose to N$35.2 billion from N$34.1 billion in June, enough to cover 4.8 months of imports, and a level BON said was sufficient to protect the peg of the Namibia Dollar to the Rand and to meet its international financial obligations.
The Namibian dollar trades at a rate of 1:1 to the rand, which has fallen against the U.S. dollar since SARB's rate cut. This has pulled down the Namibian dollar, which fell 1.4 percent today after the rate cut to 15.34 to the U.S. dollar to be down 5.9 percent this year.
In April BON lowered its forecast for economic growth this year to 0.3 percent from December's forecast of 1.5 percent and said today the domestic economy was projected to remain weak in 2019.
Last year Namibia's economy shrank for the second consecutive year and in June the International Monetary Fund said it expected growth to "remain mildly negative in 2019, as a poor rain season and reduced diamond production continued to weigh on a tentative recovery."
The central bank said the slowdown in the first six months of this year was reflected in the mining, construction, electricity, and wholesale and retail trade, while the sectors of manufacturing, transport and communication improved as compared to the same 2018 period.
Namibia's gross domestic product contracted 2.0 percent year-on-year in the first quarter of this year, up from 1.9 percent fall in the fourth quarter of 2018 and a 0.2 percent decline in the third quarter of 2018 for a 2018 decline of 0.1 percent after a 0.9 percent fall in 2017.
Inflation in Nambia slowed to 3.9 percent in June from 4.1 percent in May and averaged 4.4 percent in the first half, with BON attributing the moderation to a decline in housing inflation.
BON forecast average inflation of 4.3 percent in 2019, down from its June forecast of 4.5 percent.
While average growth in private sector credit extension (PSCE) rose to 6.9 percent in the first half from 5.9 percent in the same 2018 period, BON said this was mainly due to higher uptake by credit in the retail, real estate, financial and mining sectors.
But growth in credit to individuals "slowed somewhat" during the first half, BON added.
Together with the country's ministry of finance, BON revised the country's loan-to-value (LTV) ratios, with the new maximum LTV for the first, non-primary residence raised to 90 percent from a previous 80 percent. The ratios for second, third and fourth residences were also raised.
"At these adjusted levels, the Bank believes that LTVs will continue to shield the financial system from undue risks going forward," BON said.
BON began implementing the macroeconomic tool of LTVs in 2017 to mitigate the impact of an overheating housing market on the financial system.
Since then, BON said, there have been developments that warranted a review of this policy, including a significant slowdown in the economy and a sharp correction in the housing market.
www.CentralBankNews.info
Saturday, August 10, 2019
Honduras holds rate, inflation seen in tolerance range
The Central Bank of Honduras left its monetary policy rate steady at 5.75 percent, saying inflation is expected to remain within the bank's tolerance range by the end of this year and then converge to its middle point by the end of 2020.
Inflation in Honduras eased for the second consecutive month to 4.69 percent in July from to 4.8 percent in June and 5.14 percent in May to within the central bank's target range of 4.0 percent, plus/minus 1 percentage point.
In a statement issued on Aug. 9, following a meeting of the open market commission on Aug.5, the bank added core inflation also slowed from the previous two months, partly due to the lower impact of indirect changes in residential electricity rates.
Domestic economic activity continued to slow in June, according to the monthly IMAE index, mainly due to a moderation of growth in the manufacturing industry which was partly offset by a good performance by the financial intermediation and telecommunications sector.
As of July 31, Honduras' net international reserves eased to $5.068.3 billion, or the equivalent of 5.08 months of imports, from $5.071.6 billion on June 12, but were up $200 million on an annual basis due to higher remittances and the lower cost of imports, the bank said.
Last month the International Monetary Fund (IMF) forecast inflation in Honduras would end this year at 4.4 percent and then ease to 4.2 percent by the end of 2020 while the outlook remains subject to downside risks from lower global growth, terms of trade shocks, tighter global financial conditions and uncertainties from trade tensions and U.S. immigration policies.
The IMF's executive board, which in July approved a 2-year standby credit facility for Honduras, commended authorities' recent measures to modernize the central bank's policy framework and make the exchange rate regime more flexible by reducing foreign exchange surrender requirements.
The IMF also encouraged the central bank to gradually move toward exchange rate flexibility and efforts to strengthen the bank's operational autonomy and governance with a view toward transitioning to inflation targeting.
The IMF forecast economic growth in Honduras this year of 3.4 percent, down from an estimated 3.7 percent last year, and 3.5 percent in 2020.
The Honduran lempira trades around 24.5 to the U.S. dollar and has gradually depreciated in recent years.
www.CentralBankNews.info
Inflation in Honduras eased for the second consecutive month to 4.69 percent in July from to 4.8 percent in June and 5.14 percent in May to within the central bank's target range of 4.0 percent, plus/minus 1 percentage point.
In a statement issued on Aug. 9, following a meeting of the open market commission on Aug.5, the bank added core inflation also slowed from the previous two months, partly due to the lower impact of indirect changes in residential electricity rates.
Domestic economic activity continued to slow in June, according to the monthly IMAE index, mainly due to a moderation of growth in the manufacturing industry which was partly offset by a good performance by the financial intermediation and telecommunications sector.
As of July 31, Honduras' net international reserves eased to $5.068.3 billion, or the equivalent of 5.08 months of imports, from $5.071.6 billion on June 12, but were up $200 million on an annual basis due to higher remittances and the lower cost of imports, the bank said.
Last month the International Monetary Fund (IMF) forecast inflation in Honduras would end this year at 4.4 percent and then ease to 4.2 percent by the end of 2020 while the outlook remains subject to downside risks from lower global growth, terms of trade shocks, tighter global financial conditions and uncertainties from trade tensions and U.S. immigration policies.
The IMF's executive board, which in July approved a 2-year standby credit facility for Honduras, commended authorities' recent measures to modernize the central bank's policy framework and make the exchange rate regime more flexible by reducing foreign exchange surrender requirements.
The IMF also encouraged the central bank to gradually move toward exchange rate flexibility and efforts to strengthen the bank's operational autonomy and governance with a view toward transitioning to inflation targeting.
The IMF forecast economic growth in Honduras this year of 3.4 percent, down from an estimated 3.7 percent last year, and 3.5 percent in 2020.
The Honduran lempira trades around 24.5 to the U.S. dollar and has gradually depreciated in recent years.
www.CentralBankNews.info
This week in monetary policy: Namibia, Mozambique, Norway, Uganda & Mexico
This week - August 11 through August 17 - central banks from 5 countries or jurisdictions are scheduled to decide on monetary policy: Namibia, Mozambique, Norway, Uganda and Mexico.
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 33 | ||||||
| AUG 11 - AUG 17, 2019: | ||||||
| NAMIBIA | 14-Aug | 6.75% | 0 | 0 | 6.75% | |
| MOZAMBIQUE | 14-Aug | 13.25% | -100 | -100 | 15.00% | |
| NORWAY | 15-Aug | 1.25% | 25 | 50 | 0.50% | DM |
| UGANDA | 15-Aug | 10.00% | 0 | 0 | 10.00% | |
| MEXICO | 15-Aug | 8.25% | 0 | 0 | 7.75% | EM |
Friday, August 9, 2019
Mauritius cuts rate 1st time in 23 months, inflation slows
The central bank of the island of Mauritius lowered its key repo rate by 15 basis points to 3.35 percent, saying easing price pressures "provides room for a reduction in the policy rate as a pre-emptive move against the risks associated with weakening global growth."
It is the first rate cut by the Bank of Mauritius (BOM) since September 2017 and a majority of its monetary policy committee voted for the cut.
Although BOM said the underlying growth momentum in the Indian Ocean island remains positive, as a small, open economy Mauritius has to "further enhance its resilience to be able to withstand the worsening external environment."
The gross domestic product of Mauritius slowed to year-year 3.3 percent growth in the first quarter of this year from 4.1 percent in the previous quarter, but BOM still maintained its forecast for full year growth of 3.9 percent and 4.0 percent for 2020.
But inflation remains low and BOM said headline inflation fell further to 0.9 percent in July from 1.2 percent in April and again lowered its forecast for 2019 average inflation of 0.5 percent from May's forecast of 1.5 percent and the February forecast of 2.1 percent.
In April the International Monetary Fund forecast 2019 inflation of 2.1 percent, down from 3.2 percent in 2018 and 2020 inflation of 3.9 percent.
Today, BOM forecast average 2020 inflation of 1.5 percent.
The exchange rate of the Mauritian rupee has risen this month after depreciating steadily since February and was trading at 35.67 to the U.S. dollar today, down 3.4 percent this year.
It is the first rate cut by the Bank of Mauritius (BOM) since September 2017 and a majority of its monetary policy committee voted for the cut.
Although BOM said the underlying growth momentum in the Indian Ocean island remains positive, as a small, open economy Mauritius has to "further enhance its resilience to be able to withstand the worsening external environment."
The gross domestic product of Mauritius slowed to year-year 3.3 percent growth in the first quarter of this year from 4.1 percent in the previous quarter, but BOM still maintained its forecast for full year growth of 3.9 percent and 4.0 percent for 2020.
But inflation remains low and BOM said headline inflation fell further to 0.9 percent in July from 1.2 percent in April and again lowered its forecast for 2019 average inflation of 0.5 percent from May's forecast of 1.5 percent and the February forecast of 2.1 percent.
In April the International Monetary Fund forecast 2019 inflation of 2.1 percent, down from 3.2 percent in 2018 and 2020 inflation of 3.9 percent.
Today, BOM forecast average 2020 inflation of 1.5 percent.
The exchange rate of the Mauritian rupee has risen this month after depreciating steadily since February and was trading at 35.67 to the U.S. dollar today, down 3.4 percent this year.
Thursday, August 8, 2019
Peru cuts rate 1st time in 17 months, global risks persist
Peru's central bank lowered its monetary policy rate for the first time in 17 months but said this did "not necessarily imply additional reductions in the policy rate" as the annual inflation rate is still expected to remain within the target range and close to 2 percent albeit with a downside bias due to a possible lower-than-expected increase in domestic demand.
The Central Reserve Bank of Peru (BCRP) cut its policy rate by 25 basis points to 2.50 percent, its first rate cut since March 2018. Between March 2017 and March last year BCRP lowered its rate by 150 basis points and the last time the rate was raised was in February 2016.
In its statement, the central bank's board said the rate was lowered in light of inflation in July that was within its target range, one-year ahead expected inflation was 2.32 percent, primary industries showed a weak performance and non-primary industries showed slowing growth momentum while "global growth risks persist and the recent escalation in trade tensions exacerbated international financial volatility."
Peru's inflation rate eased to 2.11 percent in July from 2.29 percent in June but still within BCRP's target range of 2.0 percent, plus/ minus 1 percentage point.
The Central Reserve Bank of Peru (BCRP) cut its policy rate by 25 basis points to 2.50 percent, its first rate cut since March 2018. Between March 2017 and March last year BCRP lowered its rate by 150 basis points and the last time the rate was raised was in February 2016.
In its statement, the central bank's board said the rate was lowered in light of inflation in July that was within its target range, one-year ahead expected inflation was 2.32 percent, primary industries showed a weak performance and non-primary industries showed slowing growth momentum while "global growth risks persist and the recent escalation in trade tensions exacerbated international financial volatility."
Peru's inflation rate eased to 2.11 percent in July from 2.29 percent in June but still within BCRP's target range of 2.0 percent, plus/ minus 1 percentage point.
Philippines cuts rate 2nd time as price pressures ease
The central bank of the Philippines lowered the rate on its benchmark overnight reverse repurchase (RRP) facility by 25 basis points to 4.25 percent as it returned to the path of easing after pausing in June as "weaker global economic prospects continue to temper the inflation outlook."
In May Bangko Sentral Ng Pilipinas (BSP) began to unwind last year's rate hikes that totaled 175 basis points by cutting the rate by 25 points. But the central bank then took what it described as a "prudent pause" in June to asses the impact of the rate cut and its phased 2 percentage point reduction in reserve requirements that was completed in late July.
But data for the second quarter of this year showed a continued deceleration in economic growth to the slowest pace since the first quarter of 2015 while inflation for July slowed further to 2.4 percent from 2.7 percent in June.
"The Monetary Board's decision is based on its assessment that price pressures have continued to ease since the previous meeting," BSP said, adding the benign outlook for inflation provided room for a further cut to the rate "as a pre-emptive move against the risks associated with weakening global growth."
BSP still expects inflation to settle within its target range of 3.0 percent, plus/minus 1 percentage point for 2019 to 2021 but said inflation expectations had moderated further and while the risks to its inflation outlook are broadly balanced for 2019 and 2020, they tilt to the downside for 2021.
In addition to lowering its benchmark rate, BSP also cut the rate on its overnight deposit and lending facilities to 3.75 percent and 4.75 percent, respectively.
The rate cut was widely expected after data earlier today showed the Philippines' gross domestic product decelerated to a lower-than-expected 5.5 percent annual rate in the second quarter from 5.6 percent in the first quarter and 6.3 percent in the fourth quarter of last year.
In addition, the central bank's governor, Benjamin Diokno, earlier this week told Bloomberg that he expects to cut the rate by another 50 basis points this year, with the timing of the cuts dependent on economic data.
Diokno also said he expects inflation to average 2.6 percent this year, down from an earlier forecast of 2.7 percent, and 2.9 percent in 2020, down from 3.0 percent previously expected.
In today's statement, BSP said the prospects for global economic activity were likely to remain weak amid sustained trade tensions and going forward it would continue to monitor price and output to ensure its policy stance is "appropriately supporting of sustained non-inflationary economic growth over the medium term."
In May Bangko Sentral Ng Pilipinas (BSP) began to unwind last year's rate hikes that totaled 175 basis points by cutting the rate by 25 points. But the central bank then took what it described as a "prudent pause" in June to asses the impact of the rate cut and its phased 2 percentage point reduction in reserve requirements that was completed in late July.
But data for the second quarter of this year showed a continued deceleration in economic growth to the slowest pace since the first quarter of 2015 while inflation for July slowed further to 2.4 percent from 2.7 percent in June.
"The Monetary Board's decision is based on its assessment that price pressures have continued to ease since the previous meeting," BSP said, adding the benign outlook for inflation provided room for a further cut to the rate "as a pre-emptive move against the risks associated with weakening global growth."
BSP still expects inflation to settle within its target range of 3.0 percent, plus/minus 1 percentage point for 2019 to 2021 but said inflation expectations had moderated further and while the risks to its inflation outlook are broadly balanced for 2019 and 2020, they tilt to the downside for 2021.
In addition to lowering its benchmark rate, BSP also cut the rate on its overnight deposit and lending facilities to 3.75 percent and 4.75 percent, respectively.
The rate cut was widely expected after data earlier today showed the Philippines' gross domestic product decelerated to a lower-than-expected 5.5 percent annual rate in the second quarter from 5.6 percent in the first quarter and 6.3 percent in the fourth quarter of last year.
In addition, the central bank's governor, Benjamin Diokno, earlier this week told Bloomberg that he expects to cut the rate by another 50 basis points this year, with the timing of the cuts dependent on economic data.
Diokno also said he expects inflation to average 2.6 percent this year, down from an earlier forecast of 2.7 percent, and 2.9 percent in 2020, down from 3.0 percent previously expected.
In today's statement, BSP said the prospects for global economic activity were likely to remain weak amid sustained trade tensions and going forward it would continue to monitor price and output to ensure its policy stance is "appropriately supporting of sustained non-inflationary economic growth over the medium term."
Serbia cuts rate second time, inflation seen in control
Serbia's central bank trimmed its policy rate for the second month in a row to provide additional support to the domestic economy while inflation is firmly under control at a time of slower global trade and growth that is leading to easier monetary policy by leading central banks.
The National Bank of Serbia (NBS) cut its policy rate by another 25 basis points to 2.50 percent, a new low since the central bank adopted inflation targeting as its monetary strategy in January 2009.
NBS has now lowered its main rate by 50 basis points this year, with the cut last month the first since April 2018.
"By cutting the rate to a new lowest level in the inflation targeting regime, the NBS provides addition support to credit and economic growth," the central bank said, adding the decision was made in the context of the new August inflation report, which will be presented Aug. 14.
Inflation is forecast to trend within the bound's of NBS' target tolerance band of 3.0 percent, plus/minus 1.5 percentage points over the next two years, most probably in the lower part of the band.
Serbia's inflation rate decelerated to 1.5 percent in June from 2.2 percent in May and in June the NBS also forecast that inflation would move within the lower part of its target range this year and next year.
In addition to low inflation, the NBS said its decision was made in the light of international developments, mainly the slowdown in global trade and growth that is being accompanied by "increasingly clear signals hinting at monetary policy accommodation, followed by actual measures by leading central banks," which should help maintain favorable global financial conditions longer than initially expected and thus have a positive impact on capital flows to emerging economies.
However, NBS again said there were still factors warranting caution in monetary policy, pointing to global trade tensions and the possibility that decisions by leading central banks may deviate from market expectations as well as movements in oil prices and other commodities.
Serbia's economy slowed in the first quarter of this year to 2.5 percent annual growth from 3.4 percent in the previous quarter but NBS expects growth this year to be led by domestic demand, i.e. investment and consumption, foreign direct investment and exports, that will continue to narrow external imbalances.
After Serbia's economy took a hit from drought in 2017, growth rebounded to 4.3 percent in 2018 - its fastest pace in 10 years - and fiscal discipline has now taken root with the general government budget in surplus for two consecutive years and public debt falling by about 15 percent of gross domestic product since 2017.
Last month the International Monetary Fund said Serbia's near-term outlook remained positive, with growth this year seen at 3.5 percent, and activity improving in the second half due to strong foreign direct investment, continued public investment and an assumed recovery in trading partners.
The IMF forecast average inflation this year of 2.4 percent, up from 2.1 percent in 2018.
The National Bank of Serbia (NBS) cut its policy rate by another 25 basis points to 2.50 percent, a new low since the central bank adopted inflation targeting as its monetary strategy in January 2009.
NBS has now lowered its main rate by 50 basis points this year, with the cut last month the first since April 2018.
"By cutting the rate to a new lowest level in the inflation targeting regime, the NBS provides addition support to credit and economic growth," the central bank said, adding the decision was made in the context of the new August inflation report, which will be presented Aug. 14.
Inflation is forecast to trend within the bound's of NBS' target tolerance band of 3.0 percent, plus/minus 1.5 percentage points over the next two years, most probably in the lower part of the band.
Serbia's inflation rate decelerated to 1.5 percent in June from 2.2 percent in May and in June the NBS also forecast that inflation would move within the lower part of its target range this year and next year.
In addition to low inflation, the NBS said its decision was made in the light of international developments, mainly the slowdown in global trade and growth that is being accompanied by "increasingly clear signals hinting at monetary policy accommodation, followed by actual measures by leading central banks," which should help maintain favorable global financial conditions longer than initially expected and thus have a positive impact on capital flows to emerging economies.
However, NBS again said there were still factors warranting caution in monetary policy, pointing to global trade tensions and the possibility that decisions by leading central banks may deviate from market expectations as well as movements in oil prices and other commodities.
Serbia's economy slowed in the first quarter of this year to 2.5 percent annual growth from 3.4 percent in the previous quarter but NBS expects growth this year to be led by domestic demand, i.e. investment and consumption, foreign direct investment and exports, that will continue to narrow external imbalances.
After Serbia's economy took a hit from drought in 2017, growth rebounded to 4.3 percent in 2018 - its fastest pace in 10 years - and fiscal discipline has now taken root with the general government budget in surplus for two consecutive years and public debt falling by about 15 percent of gross domestic product since 2017.
Last month the International Monetary Fund said Serbia's near-term outlook remained positive, with growth this year seen at 3.5 percent, and activity improving in the second half due to strong foreign direct investment, continued public investment and an assumed recovery in trading partners.
The IMF forecast average inflation this year of 2.4 percent, up from 2.1 percent in 2018.
Wednesday, August 7, 2019
India cuts rate 4th time, maintains accommodative stance
India's central bank cut its policy repo rate for the fourth time this year and retained its accommodative monetary policy stance in response to slowing economic growth and continued downside risks from "the global slowdown and escalating trade tensions."
The Reserve Bank of India (RBI) cut its repo rate by a further 35 basis points to 5.40 percent and has now cut the rate by a total of 110 points this year following cuts in June, April and February.
The RBI, which was expected to lower its rate between 25 and 50 basis points, signaled it would be ready to lower rates further to boost economic growth as the inflation outlook remains benign.
"Addressing growth concerns by boosting aggregate demand, especially private investment, assumes the highest priority at this juncture while remaining consistent with the inflation mandate," RBI said, adding private consumption and investment activity remain "sluggish."
Reflecting a contraction of merchandise exports in June and a moderation in industrial production, RBI lowered its forecast for economic growth in the 2019-20 financial year, which began April 1, to 6.9 percent from a previous forecast of 7.0 percent, with risks somewhat to the downside.
India's gross domestic product has slowed in the last three quarters, with annual growth in the first quarter of this year of 5.8 percent, down from 6.6 percent in the fourth quarter of last year and 7.0 percent in the third quarter of 2018.
For the first quarter of the 2020-21 year, - or the second calendar quarter of 2020 - RBI forecast growth of 7.4 percent.
Low inflation is allowing the RBI to ease its monetary policy stance in an attempt to boost inflation to its target of 4.0 percent, plus/minus 2 percentage points.
In June retail inflation rose to 3.18 percent from 3.05 percent in May but excluding food and fuel inflation was unchanged in June after falling to 4.1 percent in May from 4.6 percent in April.
RBI's inflation forecast was largely unchanged from June, with headline inflation seen at 3.5-3.7 percent in the second half of the 2019-20 year compared with the previous forecast of 3.4-3.7 percent.
As in June, RBI's monetary policy committee was unanimous in its policy decision.
The Reserve Bank of India (RBI) cut its repo rate by a further 35 basis points to 5.40 percent and has now cut the rate by a total of 110 points this year following cuts in June, April and February.
The RBI, which was expected to lower its rate between 25 and 50 basis points, signaled it would be ready to lower rates further to boost economic growth as the inflation outlook remains benign.
"Addressing growth concerns by boosting aggregate demand, especially private investment, assumes the highest priority at this juncture while remaining consistent with the inflation mandate," RBI said, adding private consumption and investment activity remain "sluggish."
Reflecting a contraction of merchandise exports in June and a moderation in industrial production, RBI lowered its forecast for economic growth in the 2019-20 financial year, which began April 1, to 6.9 percent from a previous forecast of 7.0 percent, with risks somewhat to the downside.
India's gross domestic product has slowed in the last three quarters, with annual growth in the first quarter of this year of 5.8 percent, down from 6.6 percent in the fourth quarter of last year and 7.0 percent in the third quarter of 2018.
For the first quarter of the 2020-21 year, - or the second calendar quarter of 2020 - RBI forecast growth of 7.4 percent.
Low inflation is allowing the RBI to ease its monetary policy stance in an attempt to boost inflation to its target of 4.0 percent, plus/minus 2 percentage points.
In June retail inflation rose to 3.18 percent from 3.05 percent in May but excluding food and fuel inflation was unchanged in June after falling to 4.1 percent in May from 4.6 percent in April.
RBI's inflation forecast was largely unchanged from June, with headline inflation seen at 3.5-3.7 percent in the second half of the 2019-20 year compared with the previous forecast of 3.4-3.7 percent.
As in June, RBI's monetary policy committee was unanimous in its policy decision.
New Zealand cuts rate larger-than-expected 50 bps
New Zealand's central bank lowered its benchmark Official Cash Rate (OCR) by a larger-than-expected 50 basis points to 1.0 percent to boost employment and inflation as "global economic growth continues to weaken, easing demand for New Zealand's goods and services."
In May the Reserve Bank of New Zealand (RBNZ) became the first developed market central bank to cut its rate in the current global monetary cycle, and the central bank has now cut its policy rate by a total of 75 basis points this year.
"In the absence of additional monetary stimulus, employment and inflation would like ease relative to our targets," the RBNZ said, adding "heightened uncertainty and declining international trade have contributed to lower trading partner growth."
Members of the central bank's monetary policy committee discussed the relative benefits of lowering the policy rate by 25 basis points now along with an easing bias as compared with cutting the rate by 50 points right away.
In the end, the committee agreed to lower the rate by 50 basis points as it had "agreed that the larger monetary stimulus would best ensure the Committee continues to meet its inflation and employment objectives."
In May the Reserve Bank of New Zealand (RBNZ) became the first developed market central bank to cut its rate in the current global monetary cycle, and the central bank has now cut its policy rate by a total of 75 basis points this year.
"In the absence of additional monetary stimulus, employment and inflation would like ease relative to our targets," the RBNZ said, adding "heightened uncertainty and declining international trade have contributed to lower trading partner growth."
Members of the central bank's monetary policy committee discussed the relative benefits of lowering the policy rate by 25 basis points now along with an easing bias as compared with cutting the rate by 50 points right away.
In the end, the committee agreed to lower the rate by 50 basis points as it had "agreed that the larger monetary stimulus would best ensure the Committee continues to meet its inflation and employment objectives."
Thailand cuts rate 25 bps to boost growth, inflation
Thailand's central bank surprisingly cut its policy rate by 25 basis points to 1.50 percent to boost economic growth, which is expected to be slower than expected due to a decline in exports, and support the rise of inflation, which is projected to be below the lower bound of the target range.
It is the first rate cut by the Bank of Thailand (BOT) since April 2015 and reverses the bank's interest rate hike in December last year that was carried out to help build more room for easier policy in the event of a economic slowdown and also curb the risks of financial instability.
BOT's monetary policy committee voted 5-2 to lower the policy rate, with 2 members voting to maintain the rate, arguing for the need to preserve policy space.
In its statement, the policy committee said the Thai economy is expected to "expand at a lower rate than previously assessed due to a contraction in merchandise exports, which started to affect domestic demand."
In June BOT cut its 2019 economic growth forecast to 3.3 percent from an earlier 3.8 percent compared with 2018 growth of 4.1 percent.
"Inflation was projected to be lower than the lower bound of the inflation target," BOT said, as energy prices had declined at a fast pace while core inflation is expected to ease due to "subdued demand-pull inflationary pressures."
Structural changes, such as an expansion of e-commerce, rising price competitions and technological developments that lowers the cost of production, is also curbing inflation, BOT said.
Thailand's inflation rate rose to 0.98 percent in July from 0.87 percent in June and the BOT had earlier expected inflation to return to its target range of 1.0 to 4.0 percent this year.
"The Committee would monitor external risks from intensifying trade tensions, the economic outlook of China and advanced economies that could affect domestic demand, as well as geopolitical risks," BOT said.
It is the first rate cut by the Bank of Thailand (BOT) since April 2015 and reverses the bank's interest rate hike in December last year that was carried out to help build more room for easier policy in the event of a economic slowdown and also curb the risks of financial instability.
BOT's monetary policy committee voted 5-2 to lower the policy rate, with 2 members voting to maintain the rate, arguing for the need to preserve policy space.
In its statement, the policy committee said the Thai economy is expected to "expand at a lower rate than previously assessed due to a contraction in merchandise exports, which started to affect domestic demand."
In June BOT cut its 2019 economic growth forecast to 3.3 percent from an earlier 3.8 percent compared with 2018 growth of 4.1 percent.
"Inflation was projected to be lower than the lower bound of the inflation target," BOT said, as energy prices had declined at a fast pace while core inflation is expected to ease due to "subdued demand-pull inflationary pressures."
Structural changes, such as an expansion of e-commerce, rising price competitions and technological developments that lowers the cost of production, is also curbing inflation, BOT said.
Thailand's inflation rate rose to 0.98 percent in July from 0.87 percent in June and the BOT had earlier expected inflation to return to its target range of 1.0 to 4.0 percent this year.
"The Committee would monitor external risks from intensifying trade tensions, the economic outlook of China and advanced economies that could affect domestic demand, as well as geopolitical risks," BOT said.
Belarus cuts rate 50 bps as inflation slowdown intensifies
Belarus' central bank lowered its benchmark refinancing rate by 50 basis points to 9.50 percent to ensure interest rates remain neutral and inflation meets the target this year in light of a more intense slowdown of inflation in the second quarter of this year.
It is the first rate cut by the National Bank of the Republic of Belarus since June 2018 but extends the easing cycle that was begun in April 2016. Since then the bank's repo rate has been lowered by a total of 15.50 percentage points.
In addition to the cut to the refinancing rate, the central bank's board said the rate on overnight credit would be cut by 75 basis points to 10.75 percent while the rate on overnight deposits would be cut by 25 basis points to 8.25 percent.
All the central bank's new and lower interest rates will take effect from Aug. 14.
Inflation in Belarus slowed to 5.7 percent in June from 6.2 percent in May and the central bank said its assessment of consumer price growth, which excludes seasonal changes, shows a decline in inflation to below its target of 5.0 percent.
In the previous three quarters, inflation was higher than this indicator, the bank added.
"Further decisions in the field of the National Bank's key interest rates will depend on the correlation between the inflationary and deflationary factors," the central bank said.
It is the first rate cut by the National Bank of the Republic of Belarus since June 2018 but extends the easing cycle that was begun in April 2016. Since then the bank's repo rate has been lowered by a total of 15.50 percentage points.
In addition to the cut to the refinancing rate, the central bank's board said the rate on overnight credit would be cut by 75 basis points to 10.75 percent while the rate on overnight deposits would be cut by 25 basis points to 8.25 percent.
All the central bank's new and lower interest rates will take effect from Aug. 14.
Inflation in Belarus slowed to 5.7 percent in June from 6.2 percent in May and the central bank said its assessment of consumer price growth, which excludes seasonal changes, shows a decline in inflation to below its target of 5.0 percent.
In the previous three quarters, inflation was higher than this indicator, the bank added.
"Further decisions in the field of the National Bank's key interest rates will depend on the correlation between the inflationary and deflationary factors," the central bank said.
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