Colombia's central bank left its benchmark interest rate steady, as expected, saying inflation is expected to resume converging to its target while it's staff confirmed its estimate of 2019 economic growth of 3.2 percent and its forecast for 2020 growth of 3.3 percent.
The Central Bank of Colombia (CBC), which has maintained its rate since April 2018, said its board was unanimous in its decision and would carefully monitor inflation, economic activity, the balance of payments and external situation, in particular "the economic effects of the recent declaration of an international health emergency."
Colombia's inflation rate declined slightly to 3.8 percent in December as supply shocks continue to fade, with inflation expected to resume moving toward CBC's target of 3.0 percent, plus/minus 1 percentage point.
Colombia's inflation rate accelerated during the first half of 2019 due to higher food prices and a sharp drop in the peso in the first 9 months of the year.
After bouncing back in December, the peso weakened again this month to trade at 3,419.8 to the U.S. dollar today, down 4 percent this year.
Friday, January 31, 2020
Ghana holds rate on balanced risks to growth, inflation
Ghana's central bank left its monetary policy rate steady at 16.0 percent, citing balanced risks to inflation and economic growth.
The Bank of Ghana (BOG) has maintained its rate since cutting it by 100 basis points in January 2019 as it gradually continued an easing cycle that began in November 2016. Since November 2019 the rate has been lowered by 10 percentage points.
Growth in Ghana's economy remains robust and broad-based although at a moderate pace relative to 2018, with consumer confidence rebounding and business "fairly optimistic,"BOG said.
The latest composite index of economic acuity was up 3.1 percent year-on-year in November 2019 but down from 4,8 percent in the November 2018, with December confidence surveys showing a significant improvement in consumer confidence while business confidence softened due to exchange rate depreciation in November.
Gross domestic product in the first three quarters of 2019 averaged 6.0 percent, almost unchanged from 6.1 percent in the same 2018 period, and overall growth for 2019 is projected to be close to 7.0 percent.
The external sector remains strong, BOG said, noting the trade surplus had risen for the third consecutive year, helping narrow the current account deficit further to 2.5 percent of GDP in 2019 from 3.1 percent in 2018, and helping foreign reserves rise an additional US$1.3 billion to $8.4 billion at the end of December from $7.0 billion in December 2018.
This should help ensure stability in the foreign exchange market where the cedi fell 12.9 percent against the U.S. dollar in 2019 compared with a 8.4 percent fall in 2018.
But as of Jan. 29, BOG said the cedi had recovered, appreciating 0.3 percent compared with depreciation of 2.5 percent in the same 2019 period.
Ghana's inflation rate has been in single digits since June 2018 and recently remained steady around the central path of 8.0 percent, with various measures of underlying inflation well-contained.
In December Ghana's headline inflation rate eased to 7.9 percent from 8.2 percent in November.
The Bank of Ghana (BOG) has maintained its rate since cutting it by 100 basis points in January 2019 as it gradually continued an easing cycle that began in November 2016. Since November 2019 the rate has been lowered by 10 percentage points.
Growth in Ghana's economy remains robust and broad-based although at a moderate pace relative to 2018, with consumer confidence rebounding and business "fairly optimistic,"BOG said.
The latest composite index of economic acuity was up 3.1 percent year-on-year in November 2019 but down from 4,8 percent in the November 2018, with December confidence surveys showing a significant improvement in consumer confidence while business confidence softened due to exchange rate depreciation in November.
Gross domestic product in the first three quarters of 2019 averaged 6.0 percent, almost unchanged from 6.1 percent in the same 2018 period, and overall growth for 2019 is projected to be close to 7.0 percent.
The external sector remains strong, BOG said, noting the trade surplus had risen for the third consecutive year, helping narrow the current account deficit further to 2.5 percent of GDP in 2019 from 3.1 percent in 2018, and helping foreign reserves rise an additional US$1.3 billion to $8.4 billion at the end of December from $7.0 billion in December 2018.
This should help ensure stability in the foreign exchange market where the cedi fell 12.9 percent against the U.S. dollar in 2019 compared with a 8.4 percent fall in 2018.
But as of Jan. 29, BOG said the cedi had recovered, appreciating 0.3 percent compared with depreciation of 2.5 percent in the same 2019 period.
Ghana's inflation rate has been in single digits since June 2018 and recently remained steady around the central path of 8.0 percent, with various measures of underlying inflation well-contained.
In December Ghana's headline inflation rate eased to 7.9 percent from 8.2 percent in November.
Azerbaijan cuts rate 13th time, inflation seen in target
Azerbaijan's central bank cut its benchmark interest rate for the 13th time, saying inflation had slowed since December and its latest forecast shows it will remain within the target range of 4.0 percent, plus/minus 2 percentage points in 2020.
The Central Bank of the Republic of Azerbaijan (CBA) cut its discount rate by another 25 basis points to 7.25 percent and has now lowered it by 7.75 percentage points since February 2018.
In December Azerbaijan's inflation rate of 0.5 percent was lower than expected, with the annual rate falling to 2.4 percent from 2.6 percent in November, according to CBA.
Food price inflation, however, was 4.2 percent but CBA said this was due to higher prices on the global markets, especially for meat products.
Economic activity in Azerbaijan, which is recovering from a banking crises and a prolonged economic downturn, remains positive, with real economic growth in 2019 of 2.2 percent and the non-oil sector expanding 3.5 percent, CBA said.
The country's strategic foreign currency reserves rose US$986 million, or 1.9 percent, in January following at 14 percent rise in 2019 to US$52 billion.
Among the risks to inflation, CBA said the coronavirus along with the slowdown in China is increasing the risk of volatility in global commodity markets, which has the potential to impact the macroeconomic situation.
www.CentralBankNews.info
The Central Bank of the Republic of Azerbaijan (CBA) cut its discount rate by another 25 basis points to 7.25 percent and has now lowered it by 7.75 percentage points since February 2018.
In December Azerbaijan's inflation rate of 0.5 percent was lower than expected, with the annual rate falling to 2.4 percent from 2.6 percent in November, according to CBA.
Food price inflation, however, was 4.2 percent but CBA said this was due to higher prices on the global markets, especially for meat products.
Economic activity in Azerbaijan, which is recovering from a banking crises and a prolonged economic downturn, remains positive, with real economic growth in 2019 of 2.2 percent and the non-oil sector expanding 3.5 percent, CBA said.
The country's strategic foreign currency reserves rose US$986 million, or 1.9 percent, in January following at 14 percent rise in 2019 to US$52 billion.
Among the risks to inflation, CBA said the coronavirus along with the slowdown in China is increasing the risk of volatility in global commodity markets, which has the potential to impact the macroeconomic situation.
www.CentralBankNews.info
Thursday, January 30, 2020
Ukraine cuts rate 6th time, sees rate at 7% end-2020
Ukraine's central bank cut its rate for the sixth time as it reached its inflation target earlier than envisaged and said it expects to lower its rate further to 7.0% percent by the end of 2020, with the fastest pace of rate cuts in the first half of this year.
The National Bank of Ukraine (NBU) cut its key policy rate by 150 basis points to 11.0 percent and has now cut it by a total of 700 points since it began its easing cycle in April 2019.
A steady rise in Ukraine's hryvnia from September 2018 through December 2019 along with low energy and food prices has pushed down Ukraine's inflation rate faster than expected.
In December headline inflation fell to a 6-year low of 4.1 percent from 5.1 percent in November and 9.8 percent in December 2018, in the lower end of NBU's target of 5.0 percent, plus/minus 1 percentage point.
"The strengthening of the hryvnia was the key factor driving the rapid disinflation seen in late 2019, offsetting the effects of robust consumer demand," NBU said.
NBU expects inflation to remain below its target range starting in January and most of this year before accelerating to 4.8 percent in the fourth quarter of 2020, mainly because the rise in the hryvnia will continue to be reflected in import prices, low energy prices will hold back domestic fuel prices, and food price inflation should be insignificant in the absence of supply shocks.
Administered prices, however, will grow somewhat faster than in 2019, mainly as taxes on tobacco products continue to converge to European levels, NBU said.
Based on its expectation of lower interest rates, NBU expects inflation in 2021 and 2022 to remain within its medium-term target, supported by prudent fiscal policy, low energy prices and higher productivity.
If inflation risks materialize, NBU cautioned it could slow the pace of rate cuts and conversely if reforms are implemented faster than expected along with significant inflows of investment, the rate could be cut at an even faster pace.
In 2019 the hryvnia appreciated almost 20 percent but since late December it has given back some of those gains to trade at 24.9 to the U.S. dollar today, down almost 5 percent this year.
Ukraine's economy is expected to continue to strengthen in coming years and NBU confirmed its earlier forecast for growth this year of 3.5 percent, up from 3.3 percent in 2019, rising to around 4.0 percent in following years.
The current account deficit narrowed to only 0.7 percent of gross domestic product in 2019, partly after Ukraine's state-owned gas company Naftogaz received $2.9 billion from Russia's Gazprom after a legal battle was settled.
In 2020-22 NBU expects a current account deficit of 3-4 percent of GDP, a level it described as "acceptable," with the deficit caused by large investment imports and lower revenue from natural gas transit amid greater capital inflows to the private sector.
The National Bank of Ukraine (NBU) cut its key policy rate by 150 basis points to 11.0 percent and has now cut it by a total of 700 points since it began its easing cycle in April 2019.
A steady rise in Ukraine's hryvnia from September 2018 through December 2019 along with low energy and food prices has pushed down Ukraine's inflation rate faster than expected.
In December headline inflation fell to a 6-year low of 4.1 percent from 5.1 percent in November and 9.8 percent in December 2018, in the lower end of NBU's target of 5.0 percent, plus/minus 1 percentage point.
"The strengthening of the hryvnia was the key factor driving the rapid disinflation seen in late 2019, offsetting the effects of robust consumer demand," NBU said.
NBU expects inflation to remain below its target range starting in January and most of this year before accelerating to 4.8 percent in the fourth quarter of 2020, mainly because the rise in the hryvnia will continue to be reflected in import prices, low energy prices will hold back domestic fuel prices, and food price inflation should be insignificant in the absence of supply shocks.
Administered prices, however, will grow somewhat faster than in 2019, mainly as taxes on tobacco products continue to converge to European levels, NBU said.
Based on its expectation of lower interest rates, NBU expects inflation in 2021 and 2022 to remain within its medium-term target, supported by prudent fiscal policy, low energy prices and higher productivity.
If inflation risks materialize, NBU cautioned it could slow the pace of rate cuts and conversely if reforms are implemented faster than expected along with significant inflows of investment, the rate could be cut at an even faster pace.
In 2019 the hryvnia appreciated almost 20 percent but since late December it has given back some of those gains to trade at 24.9 to the U.S. dollar today, down almost 5 percent this year.
Ukraine's economy is expected to continue to strengthen in coming years and NBU confirmed its earlier forecast for growth this year of 3.5 percent, up from 3.3 percent in 2019, rising to around 4.0 percent in following years.
The current account deficit narrowed to only 0.7 percent of gross domestic product in 2019, partly after Ukraine's state-owned gas company Naftogaz received $2.9 billion from Russia's Gazprom after a legal battle was settled.
In 2020-22 NBU expects a current account deficit of 3-4 percent of GDP, a level it described as "acceptable," with the deficit caused by large investment imports and lower revenue from natural gas transit amid greater capital inflows to the private sector.
Wednesday, January 29, 2020
Sri Lanka cuts rates 50 bps to help lower lending rates
Sri Lanka's central bank lowered its two main interest rates by another 50 basis points, saying this would "support a continued reduction in market lending rates, ensuring a broad based and sustained recovery in economic activity."
The Central Bank of Sri Lanka (CBS) cut the Standing Deposit Facility Rate (SDFR) to 6.50 percent and the Standing Lending Facility Rate (SLFR) to 7.50 percent and said it would continue to monitor economic conditions and financial markets "with a view to maintaining aggregate demand conditions at appropriate levels, in the period ahead."
It is the third rate cut by the central bank since May 2019 and both key rates have now been lowered by a total of 150 basis points.
In December the central bank kept the rates steady, saying tax cuts and a moratorium on the repayment of bank loans by small and medium-sized were likely to boost economic activity. In addition, CBS was also waiting for further clarity over the new government's fiscal policy.
While market lending rates in Sri Lanka have declined in response to the central bank's rate cuts, along with other regulatory measures, CBS said the pace of reduction in rates has decelerated and has been less than it had envisaged.
With a removal of caps on deposit rates offered by banks, new deposit rates have risen since September and yields on Treasury bills have trended upward.
"If not addressed, these trends could result in an undesirable turnaround in market lending rates," CBS said.
Sri Lanka's economy is slowing recovering after its tourism sector was hit hard by the 2019 Easter Sunday bombings, which killed more than 250 people.
Economic growth in the third quarter grew an annual 2.7 percent, up from 1.5 percent in the second quarter, and while growth in the fourth quarters remained subdued, the central bank expects a revival this year, helped by fiscal and monetary measures, improved business confidence and political stability.
In December the new governor, Weligamage Don Lakshman, forecast 4.5 percent economic growth in 2020.
Inflation in Sri Lanka rose to 4.8 percent in December from 4.4 percent in November but CBS expects inflation to hover below 5 percent this year and stabilize between 4-6 percent thereafter.
"The Monetary Board will stand ready to respond to any build-up of demand driven price pressures in the foreseeable future," CBS said.
The Central Bank of Sri Lanka (CBS) cut the Standing Deposit Facility Rate (SDFR) to 6.50 percent and the Standing Lending Facility Rate (SLFR) to 7.50 percent and said it would continue to monitor economic conditions and financial markets "with a view to maintaining aggregate demand conditions at appropriate levels, in the period ahead."
It is the third rate cut by the central bank since May 2019 and both key rates have now been lowered by a total of 150 basis points.
In December the central bank kept the rates steady, saying tax cuts and a moratorium on the repayment of bank loans by small and medium-sized were likely to boost economic activity. In addition, CBS was also waiting for further clarity over the new government's fiscal policy.
While market lending rates in Sri Lanka have declined in response to the central bank's rate cuts, along with other regulatory measures, CBS said the pace of reduction in rates has decelerated and has been less than it had envisaged.
With a removal of caps on deposit rates offered by banks, new deposit rates have risen since September and yields on Treasury bills have trended upward.
"If not addressed, these trends could result in an undesirable turnaround in market lending rates," CBS said.
Sri Lanka's economy is slowing recovering after its tourism sector was hit hard by the 2019 Easter Sunday bombings, which killed more than 250 people.
Economic growth in the third quarter grew an annual 2.7 percent, up from 1.5 percent in the second quarter, and while growth in the fourth quarters remained subdued, the central bank expects a revival this year, helped by fiscal and monetary measures, improved business confidence and political stability.
In December the new governor, Weligamage Don Lakshman, forecast 4.5 percent economic growth in 2020.
Inflation in Sri Lanka rose to 4.8 percent in December from 4.4 percent in November but CBS expects inflation to hover below 5 percent this year and stabilize between 4-6 percent thereafter.
"The Monetary Board will stand ready to respond to any build-up of demand driven price pressures in the foreseeable future," CBS said.
Chile maintains rate, to assess policy stance in March
Chile's central bank left its monetary policy interest rate steady at 1.75 percent for the second month to safeguard an expansionary policy stance as stated in December, with the policy report in March assessing the economic situation and the implications for inflation and monetary policy.
As in December, the decision by the Central Bank of Chile's board was unanimous in its decision.
Chile's central bank cut its rate three times last year by a total of 125 basis points between June and October but then said in December it would maintain the rate in coming months in light of increased fiscal spending following widespread social unrest and intervention in the foreign exchange market of some $10 billion after the peso fell some 15 percent.
The massive protests over inequality, which led to the death of more than 25 people, had a strong impact on the monthly economic activity index, known as Imacec, in October and November but the central bank said some moderation of this impact could be expected in data for December, as it had anticipated in its latest policy report.
Chile's inflation rate rose for the third month in a row to 3.0 percent, below the central bank's expectation, but upward pressures from the fall in the peso since October remain present.
On the other hand, the outlook for activity remains weak and the recovery of the economy continues to depend on how economic agents respond to the new economic situation, the bank said.
In December the central bank slashed its 2020 growth forecast to a range of 0.5 - 1.5 percent from and earlier 2.75 - 3.75 percent
As in December, the decision by the Central Bank of Chile's board was unanimous in its decision.
Chile's central bank cut its rate three times last year by a total of 125 basis points between June and October but then said in December it would maintain the rate in coming months in light of increased fiscal spending following widespread social unrest and intervention in the foreign exchange market of some $10 billion after the peso fell some 15 percent.
The massive protests over inequality, which led to the death of more than 25 people, had a strong impact on the monthly economic activity index, known as Imacec, in October and November but the central bank said some moderation of this impact could be expected in data for December, as it had anticipated in its latest policy report.
Chile's inflation rate rose for the third month in a row to 3.0 percent, below the central bank's expectation, but upward pressures from the fall in the peso since October remain present.
On the other hand, the outlook for activity remains weak and the recovery of the economy continues to depend on how economic agents respond to the new economic situation, the bank said.
In December the central bank slashed its 2020 growth forecast to a range of 0.5 - 1.5 percent from and earlier 2.75 - 3.75 percent
US Fed holds rate, household spend now only moderate
The U.S. Federal Reserve kept its benchmark target for the federal funds steady at 1.50 - 1.75 percent for the second time but turned slightly dovish by describing house holding spending as rising "at a moderate pace" instead of "a strong pace," as in December.
The Fed's policy-making body, the Federal Open Market Committee (FOMC), reiterated its description of business fixed investments and exports as still weak and inflation continuing to run below the 2.0 percent target.
Countering that weakness the FOMC said the labor market remains strong and economic activity has been rising at a moderate rate.
As in December, the FOMC was unanimous in its decision.
Early last year the Fed carried out a sharp U-turn when it reacted to weakness in the global economy and then cut the fed funds rate three times by a total of 75 basis points, ending in October.
In December the Fed then kept its rate steady and signaled it would keep rates on hold for a while, and it would take a "persistent" and "significant" rise in inflation before it considers any rate hike.
The Fed today reiterated it considers the current policy stance as "appropriate" to support sustained expansion of economic activity and strong labor market conditions and "inflation returning the Committee's symmetric 2 percent objective."
Today's reference to getting inflation to return to 2 percent is slightly different to its December statement when it said the current policy stance was appropriate to support inflation "near" the 2 percent objective.
This reflects the recent uptick in headline inflation to 2.3 percent in December and 2.1 percent in November due to higher energy costs.
As in December, the FOM said it would continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures.
In December the trimmed its forecast for the fed funds rate this year to average 1.6 percent from an earlier 1.9 percent, rising to 1.9 percent in 2021 and 2.1 percent in 2022.
In a separate statement on the implementation of its monetary policy, the FOMC raised its interest rate on excess reserves by 5 basis points to 1.60 percent, or 10 points above the bottom of its target range for fed funds, "to foster trading in the federal funds market at rates well within the FOMC's target range."
The Fed also said it term and overnight repo operations, which it began in October following a spike in money market rates, would continue "at least through April" to ensure the supply of reserves remains ample and mitigate the risk that pressures in money markets affect policy implementation.
The Fed said it would be conducting overnight reverse repurchase operations, and reverse repo operations with maturities of more than one day, at a rate of 1.50 percent in amounts only limited by the value of Treasury securities available for such operations and by a per-counterparty limit of $30 billion per day."
It added that principal payments from agency debt and agency mortgage-backed securities up to $20 billion per month will continue to be reinvested in mortgage-backed securities and it would continue to roll over all principal payments from its holdings of Treasury securities.
The Fed's policy-making body, the Federal Open Market Committee (FOMC), reiterated its description of business fixed investments and exports as still weak and inflation continuing to run below the 2.0 percent target.
Countering that weakness the FOMC said the labor market remains strong and economic activity has been rising at a moderate rate.
As in December, the FOMC was unanimous in its decision.
Early last year the Fed carried out a sharp U-turn when it reacted to weakness in the global economy and then cut the fed funds rate three times by a total of 75 basis points, ending in October.
In December the Fed then kept its rate steady and signaled it would keep rates on hold for a while, and it would take a "persistent" and "significant" rise in inflation before it considers any rate hike.
The Fed today reiterated it considers the current policy stance as "appropriate" to support sustained expansion of economic activity and strong labor market conditions and "inflation returning the Committee's symmetric 2 percent objective."
Today's reference to getting inflation to return to 2 percent is slightly different to its December statement when it said the current policy stance was appropriate to support inflation "near" the 2 percent objective.
This reflects the recent uptick in headline inflation to 2.3 percent in December and 2.1 percent in November due to higher energy costs.
As in December, the FOM said it would continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures.
In December the trimmed its forecast for the fed funds rate this year to average 1.6 percent from an earlier 1.9 percent, rising to 1.9 percent in 2021 and 2.1 percent in 2022.
In a separate statement on the implementation of its monetary policy, the FOMC raised its interest rate on excess reserves by 5 basis points to 1.60 percent, or 10 points above the bottom of its target range for fed funds, "to foster trading in the federal funds market at rates well within the FOMC's target range."
The Fed also said it term and overnight repo operations, which it began in October following a spike in money market rates, would continue "at least through April" to ensure the supply of reserves remains ample and mitigate the risk that pressures in money markets affect policy implementation.
The Fed said it would be conducting overnight reverse repurchase operations, and reverse repo operations with maturities of more than one day, at a rate of 1.50 percent in amounts only limited by the value of Treasury securities available for such operations and by a per-counterparty limit of $30 billion per day."
It added that principal payments from agency debt and agency mortgage-backed securities up to $20 billion per month will continue to be reinvested in mortgage-backed securities and it would continue to roll over all principal payments from its holdings of Treasury securities.
Georgia holds rate after 4 hikes but to keep tight stance
Georgia's central bank left its benchmark refinancing rate steady for the first time since after four consecutive rate hikes after the exchange rate of the lari strengthened but said it would maintain a tight monetary policy stance inflation expectations decline to its 3.0 percent target.
The National Bank of Georgia (NBG) raised its rate four times from September to December last year by a total of 250 basis points to curb inflation from the fall in the lari, which depreciated 10 percent from the start of 2019 until late November.
But in early December the lari began to strengthen, taking some of the pressure off inflation, but NBG said the "nominal effective exchange rate remains undervalued."
After rising 4 percent between Dec. 8 and Dec. 14, the lari eased again and was trading around 2.90 to the U.S. dollar today, down 1.4 percent since the start of this year.
"In recent periods, economic growth accelerated and lending is robust," NBG said, adding "if these dynamics create additional inflationary pressure, the tight monetary policy stance may be maintained for more extended period."
Georgia's inflation rate was steady at 7.0 percent in December and November but is still the highest rate since June 2016.
The central bank expects inflation to decline at the start of 2020 but first begin to approach its 3.0 percent inflation target by the end of the year, a decline it said "will be ensured by the monetary policy which will remain tight until the medium term inflation expectations decline to the three percent target."
In December the International Monetary Fund (IMF) approved another $41.4 million loan to Georgia, its sixth under a 3-year program of just under $300 million, saying this should help authorities maintain policy discipline and help advance structural reforms.
The IMF said the recent rise in inflation reflected both temporary factors and the impact of the lari's depreciations, and said the NBG's tightening was appropriate as it addressed inflationary pressures.
But IMF also said exchange rate flexibility remains "vital as a shock absorber" for Georgia's economy and interventions should be limited to addressing excessive volatility or building reserves.
The IMF forecasts average inflation this year of 4.5 percent, down from 4.9 percent in 2019, and economic growth of 4.3 percent in 2020, down from 4.6 percent in 2019.
The National Bank of Georgia (NBG) raised its rate four times from September to December last year by a total of 250 basis points to curb inflation from the fall in the lari, which depreciated 10 percent from the start of 2019 until late November.
But in early December the lari began to strengthen, taking some of the pressure off inflation, but NBG said the "nominal effective exchange rate remains undervalued."
After rising 4 percent between Dec. 8 and Dec. 14, the lari eased again and was trading around 2.90 to the U.S. dollar today, down 1.4 percent since the start of this year.
"In recent periods, economic growth accelerated and lending is robust," NBG said, adding "if these dynamics create additional inflationary pressure, the tight monetary policy stance may be maintained for more extended period."
Georgia's inflation rate was steady at 7.0 percent in December and November but is still the highest rate since June 2016.
The central bank expects inflation to decline at the start of 2020 but first begin to approach its 3.0 percent inflation target by the end of the year, a decline it said "will be ensured by the monetary policy which will remain tight until the medium term inflation expectations decline to the three percent target."
In December the International Monetary Fund (IMF) approved another $41.4 million loan to Georgia, its sixth under a 3-year program of just under $300 million, saying this should help authorities maintain policy discipline and help advance structural reforms.
The IMF said the recent rise in inflation reflected both temporary factors and the impact of the lari's depreciations, and said the NBG's tightening was appropriate as it addressed inflationary pressures.
But IMF also said exchange rate flexibility remains "vital as a shock absorber" for Georgia's economy and interventions should be limited to addressing excessive volatility or building reserves.
The IMF forecasts average inflation this year of 4.5 percent, down from 4.9 percent in 2019, and economic growth of 4.3 percent in 2020, down from 4.6 percent in 2019.
Tuesday, January 28, 2020
Pakistan holds rate 3rd time on steady inflation outlook
Pakistan's central bank left its policy rate steady at 13.25 percent, as expected, saying it considers "the current monetary policy stance as appropriate to bring inflation down to the medium-term target range of 5-7 percent over the next six to eight quarters."
It is the third time in a row the State Bank of Pakistan (SBP) has maintained its rate after raising it 9 times and by a total of 7.50 percentage points from January 2018 until July 2019 when it changed tack and said it was finished raising rates in response to the fall in the rupee.
Since then SBP has linked its policy stance to the outlook for inflation and said today its outlook was largely unchanged since its last monetary policy meeting in November and on balance it still sees average inflation at 11-12 percent for fiscal 2020, which began July 1, 2019, up from an average of 7.3 percent in fiscal 2019.
Pakistan's inflation rate rose to what SBP described as "the higher side" of 12.42 percent in December from 12.3 percent in November reflecting sharp rises in some food items due to temporary supply disruptions and increases in administered prices.
"If sustained, high food price inflation could lead to demands for faster wage growth and to possible risks of a wage-price inflation spiral," SBP said, adding such second-round effects have not materialized so far so it considers the latest rise in inflation transitory and inflation expectations remain broadly anchored.
In addition, the recent rise in the Pakistani rupee after the introduction of the market-based exchange rate and the ongoing fiscal consolidation should gradually the upward pressure on inflation.
Supported by a 75 percent contraction in the current account deficit to US$ 2.15 billion in the first half of fiscal 2020 due to lower imports and higher exports, SBP boosted its foreign exchange reserves to $11.73 billion as of Jan. 17 from $7.28 billion at the end of June 2019 while it said recent portfolio inflows "reflected international investors improved perceptions of Pakistan's credit worthiness."
"Such inflows reduce the interest rate on government debt due to the greater demand for government securities, deepen capital markets and free up domestic banks' resources for lending to the private sector," SBP added.
Prior to an agreement with the International Monetary Fund (IMF) in May 2019, Pakistan had followed a "strong rupee" exchange rate policy, effectively pegging it to the U.S. dollar at a rate that was too high, forcing SPB to burn through reserves to defend it.
After the deal with the IMF, which included a $6.0 billion support package and $38 billion from international partners, the rupee slowly stabilized and has been moving higher since August 2019.
Today the rupee was trading at 154.6 to the U.S. dollar, marginally higher than 154.8 at the start of the year but up 4 percent since August 2019. Compared with December 2017, the rupee has depreciated some 30 percent.
It is the third time in a row the State Bank of Pakistan (SBP) has maintained its rate after raising it 9 times and by a total of 7.50 percentage points from January 2018 until July 2019 when it changed tack and said it was finished raising rates in response to the fall in the rupee.
Since then SBP has linked its policy stance to the outlook for inflation and said today its outlook was largely unchanged since its last monetary policy meeting in November and on balance it still sees average inflation at 11-12 percent for fiscal 2020, which began July 1, 2019, up from an average of 7.3 percent in fiscal 2019.
Pakistan's inflation rate rose to what SBP described as "the higher side" of 12.42 percent in December from 12.3 percent in November reflecting sharp rises in some food items due to temporary supply disruptions and increases in administered prices.
"If sustained, high food price inflation could lead to demands for faster wage growth and to possible risks of a wage-price inflation spiral," SBP said, adding such second-round effects have not materialized so far so it considers the latest rise in inflation transitory and inflation expectations remain broadly anchored.
In addition, the recent rise in the Pakistani rupee after the introduction of the market-based exchange rate and the ongoing fiscal consolidation should gradually the upward pressure on inflation.
Supported by a 75 percent contraction in the current account deficit to US$ 2.15 billion in the first half of fiscal 2020 due to lower imports and higher exports, SBP boosted its foreign exchange reserves to $11.73 billion as of Jan. 17 from $7.28 billion at the end of June 2019 while it said recent portfolio inflows "reflected international investors improved perceptions of Pakistan's credit worthiness."
"Such inflows reduce the interest rate on government debt due to the greater demand for government securities, deepen capital markets and free up domestic banks' resources for lending to the private sector," SBP added.
Prior to an agreement with the International Monetary Fund (IMF) in May 2019, Pakistan had followed a "strong rupee" exchange rate policy, effectively pegging it to the U.S. dollar at a rate that was too high, forcing SPB to burn through reserves to defend it.
After the deal with the IMF, which included a $6.0 billion support package and $38 billion from international partners, the rupee slowly stabilized and has been moving higher since August 2019.
Today the rupee was trading at 154.6 to the U.S. dollar, marginally higher than 154.8 at the start of the year but up 4 percent since August 2019. Compared with December 2017, the rupee has depreciated some 30 percent.
Monday, January 27, 2020
Kenya cuts rate 25 bps, sees space to boost economy
Kenya's central bank lowered its benchmark interest rate for the second time in a row, saying there is room for "further accommodative monetary policy to support economic activity" as inflation expectations remain well anchored within the target range, the economy is continuing to operate below its potential level and fiscal policy is being tightened.
The Central Bank of Kenya (CBK) said the impact of its 50-basis-point rate cut in November last year - in the wake of the repeal of the cap on commercial banks' interest rates - was still being transmitted to the economy so there was room for another cut and lowered the Central Bank Rate (CBR) by 25 points to 8.25 percent.
Since CBK embarked on an easing cycle in May 2016, the rate has been cut by 325 basis points.
The central bank said the meeting of its monetary policy committee was "held against a backdrop of domestic macroeconomic stability, potential risks to food supply and increased global uncertainties" despite the positive impact on financial markets from progress in trade talks and Brexit, and the impact of accommodative monetary policy on growth in advanced economies.
Kenya's inflation rate rose for the fourth month in a row to 5.82 percent in December but CBK said it remains within its target range and the rise mainly reflects the temporary effect on higher food and transport costs during the festive season.
In the near term CBK expects inflation to remain within its target range due to lower prices of fast-growing food items following continuing rains and lower electricity prices.
CBK targets inflation of 5.0 percent, plus/minus 2.50 percentage points.
Kenya's economy continued to slow last year with gross domestic product expanding an annual 5.1 percent in the third quarter, the slowest growth rate since the third quarter of 2017.
But CBK expects growth to pick up in 2020 due to a recovery of the agricultural sector, robust private sector growth, continued implementation of the Big 4 agenda and a stable macroeconomic environment.
Private sector credit grew 7.1 percent in the 12 months to December, with growth to micro, small and medium-sized enterprises (MSMEs) see growing due to the deployment of credit products, the repeal of the interest rate cap and easing credit risks.
Kenya's shilling has firmed in recent months and was trading at 100.9 to the U.S. dollar today, up 0.5 percent since the start of this year.
The Central Bank of Kenya (CBK) said the impact of its 50-basis-point rate cut in November last year - in the wake of the repeal of the cap on commercial banks' interest rates - was still being transmitted to the economy so there was room for another cut and lowered the Central Bank Rate (CBR) by 25 points to 8.25 percent.
Since CBK embarked on an easing cycle in May 2016, the rate has been cut by 325 basis points.
The central bank said the meeting of its monetary policy committee was "held against a backdrop of domestic macroeconomic stability, potential risks to food supply and increased global uncertainties" despite the positive impact on financial markets from progress in trade talks and Brexit, and the impact of accommodative monetary policy on growth in advanced economies.
Kenya's inflation rate rose for the fourth month in a row to 5.82 percent in December but CBK said it remains within its target range and the rise mainly reflects the temporary effect on higher food and transport costs during the festive season.
In the near term CBK expects inflation to remain within its target range due to lower prices of fast-growing food items following continuing rains and lower electricity prices.
CBK targets inflation of 5.0 percent, plus/minus 2.50 percentage points.
Kenya's economy continued to slow last year with gross domestic product expanding an annual 5.1 percent in the third quarter, the slowest growth rate since the third quarter of 2017.
But CBK expects growth to pick up in 2020 due to a recovery of the agricultural sector, robust private sector growth, continued implementation of the Big 4 agenda and a stable macroeconomic environment.
Private sector credit grew 7.1 percent in the 12 months to December, with growth to micro, small and medium-sized enterprises (MSMEs) see growing due to the deployment of credit products, the repeal of the interest rate cap and easing credit risks.
Kenya's shilling has firmed in recent months and was trading at 100.9 to the U.S. dollar today, up 0.5 percent since the start of this year.
Sunday, January 26, 2020
UPDATE-This week in monetary policy: Kyrgyzstan, Kenya, Angola, Pakistan, Hungary, Tajikistan, Georgia, Moldova, USA, Chile, Sri Lanka, Fiji, Ukraine, Malawi, UK, Azerbaijan, Bulgaria, Ghana & Colombia
(Following item is updated with Armenia removed after the Central Bank of Armenia announced its policy decision on Friday, Jan. 24 instead of Jan. 27 as earlier scheduled. It kept its rate steady.)
This week - January 26 through February 1 - central banks from 19 countries or jurisdictions are scheduled to decide on monetary policy: Kyrgyzstan, Kenya, Angola, Pakistan, Hungary, Tajikistan, Georgia, Moldova, USA, Chile, Sri Lanka, Fiji, Ukraine, Malawi, UK, Azerbaijan, Bulgaria, Ghana and Colombia.
This week - January 26 through February 1 - central banks from 19 countries or jurisdictions are scheduled to decide on monetary policy: Kyrgyzstan, Kenya, Angola, Pakistan, Hungary, Tajikistan, Georgia, Moldova, USA, Chile, Sri Lanka, Fiji, Ukraine, Malawi, UK, Azerbaijan, Bulgaria, Ghana 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 5 | ||||||
| JAN 26- FEB 1, 2020: | ||||||
| KYRGYZSTAN | 27-Jan | 4.25% | 0 | 0 | 4.75% | |
| KENYA | 27-Jan | 8.50% | 0 | 0 | 9.00% | |
| ANGOLA | 27-Jan | 15.50% | 0 | 0 | 15.75% | |
| PAKISTAN | 28-Jan | 13.25% | 0 | 0 | 10.25% | EM |
| HUNGARY | 28-Jan | 0.90% | 0 | 0 | 0.90% | EM |
| TAJJIKISTAN | 28-Jan | 12.25% | 0 | 0 | 14.00% | |
| GEORGIA | 29-Jan | 9.00% | 0 | 0 | 6.75% | |
| MOLDOVA | 29-Jan | 5.50% | 0 | 0 | 6.50% | |
| USA | 29-Jan | 1.75% | 0 | 0 | 2.50% | DM |
| CHILE | 29-Jan | 1.75% | 0 | 0 | 3.00% | EM |
| SRI LANKA | 30-Jan | 7.00% | 0 | 0 | 8.00% | FM |
| FIJI | 30-Jan | 0.50% | 0 | 0 | 0.50% | |
| UKRAINE | 30-Jan | 13.50% | 0 | 0 | 18.00% | FM |
| MALAWI | 30-Jan | 13.50% | 0 | 0 | 14.50% | |
| UK | 30-Jan | 0.75% | 0 | 0 | 0.75% | DM |
| AZERBAIJAN | 31-Jan | 7.50% | 0 | 0 | 9.75% | |
| BULGARIA | 31-Jan | 0.00% | 0 | 0 | 0.00% | FM |
| GHANA | 31-Jan | 16.00% | 0 | 0 | 16.00% | FM |
| COLOMBIA | 31-Jan | 4.25% | 0 | 0 | 4.25% | EM |
Wednesday, January 22, 2020
Europe banks continue to boost cross-border loans - BIS
International lending by European banks, especially French banks, continued to rise in the third quarter, suggesting the contraction seen following the 2007-2009 global financial crises has now been reversed, according to the Bank for International Settlements (BIS).
The expansion of European banks' cross-border lending comes amid an overall 9 percent rise global cross-border claims in the third quarter to $31 trillion at the end of September, the highest growth rate since end-March 2008, according to the latest International banking statistics by BIS, the Swiss-based forum for central bank cooperation.
The global expansion in lending was mainly driven by activity in advanced economies, which rose 10 percent year-on-year in the third quarter, while claims on emerging and developing economies contracted by 3 percent, with the biggest falls seen in claims on China, Turkey and Mexico.
As in recent quarters, lending to non-bank financial institutions continued to expand rapidly, rising by an annual 17 percent in the third quarter, outpacing the growth in claims on all other sectors.
One of the effects of the global financial crises was that banking regulators worldwide tightened their supervision of major banks, forcing them to retreat from riskier financing operations.
Non-bank financial firms, such as insurance companies, specialized lenders, leasing firms or institutional investors, such as pension funds and brokerage firms, took advantage of this hole in the market place.
Following the global financial crises, European banks retreated from international lending whereas U.S. and Japanese banks continued to expand their presence, BIS said.
For example, between mid-2008 and end-2017 German banks' cross-border claims on non-banks fell an average annual rate of 5 percent while those of Japanese and U.S. banks' claims rose an average 7.0 percent and 4.0 percent, respectively.
But since 2018 European banks' cross-border lending has been expanding again, with an average annual growth rate of cross-border claims 9 percent by euro area banks and 11 percent by UK banks.
French banks have been particularly active, with their claims expanding at an average annual rate of 21 percent while the claims of German banks has remained virtually unchanged, BIS said.
To read the full BIS report, please click here.
www.CentralBankNews.info
The expansion of European banks' cross-border lending comes amid an overall 9 percent rise global cross-border claims in the third quarter to $31 trillion at the end of September, the highest growth rate since end-March 2008, according to the latest International banking statistics by BIS, the Swiss-based forum for central bank cooperation.
The global expansion in lending was mainly driven by activity in advanced economies, which rose 10 percent year-on-year in the third quarter, while claims on emerging and developing economies contracted by 3 percent, with the biggest falls seen in claims on China, Turkey and Mexico.
As in recent quarters, lending to non-bank financial institutions continued to expand rapidly, rising by an annual 17 percent in the third quarter, outpacing the growth in claims on all other sectors.
One of the effects of the global financial crises was that banking regulators worldwide tightened their supervision of major banks, forcing them to retreat from riskier financing operations.
Non-bank financial firms, such as insurance companies, specialized lenders, leasing firms or institutional investors, such as pension funds and brokerage firms, took advantage of this hole in the market place.
Following the global financial crises, European banks retreated from international lending whereas U.S. and Japanese banks continued to expand their presence, BIS said.
For example, between mid-2008 and end-2017 German banks' cross-border claims on non-banks fell an average annual rate of 5 percent while those of Japanese and U.S. banks' claims rose an average 7.0 percent and 4.0 percent, respectively.
But since 2018 European banks' cross-border lending has been expanding again, with an average annual growth rate of cross-border claims 9 percent by euro area banks and 11 percent by UK banks.
French banks have been particularly active, with their claims expanding at an average annual rate of 21 percent while the claims of German banks has remained virtually unchanged, BIS said.
To read the full BIS report, please click here.
www.CentralBankNews.info
Malaysia unexpectedly cuts rate in pre-emptive move
Malaysia's central bank surprised financial markets by cutting its benchmark Overnight Policy Rate (OPR) by 25 basis points to 2.75 percent in what it described as a "pre-emptive measure to secure growth trajectory and price stability."
It was the first rate cut by Bank Negara Malaysia (BNM) since May 2019 when it was among the first wave of central banks to loosen their monetary policy in response to the slowing global economy alongside the Philippines, New Zealand and India.
Since May last year BNM had maintained its rate as the global pace of easing accelerated month-by-month with 67 central banks cutting rates a total of 159 times in 2019.
BNM's monetary policy committee signaled today's rate cut likely was a one-off, saying "the MPC considers the stance of monetary policy to be appropriate in sustaining economic growth with price stability."
Economists had expected BNM to hold off on any easing until the effects of the government's fiscal tightening, aimed at lowering the deficit and debt, on consumption becomes clearer.
Although BNM was relatively upbeat about the outlook for the both the global and domestic economy, it said downside risks remain due to geopolitical tensions and policy uncertainty in a number of countries that could trigger financial market volatility and weigh on global growth.
Looking at Malaysia's economy, the central bank said economic activity in the fourth quarter of 2019 expanded moderately and growth for the year would be within the projected range and then gradually improve in 2020, with continued support from household spending, better exports and a modest recover in investments, both in the public and private sectors.
In the third quarter of 2019 Malaysia's gross domestic product grew by an annual 4.4 percent, down from 4.9 percent in the second quarter and the government has estimated 2019 growth of 4.7 percent, rising to 4.8 percent in 2020.
Last month the International Monetary Fund estimated 2019 growth of 4.5 percent and the same rate in 2020 but cautioned the risks to the growth outlook remain to the downside as continued tensions between the U.S. and China affect Malaysia's growth.
Malaysia's inflation rate averaged 0.7 percent last year, down from 1.0 percent in 2018, and BNM forecast it would rise this year but still "remain modest."
Malaysia's ringgit has been appreciating since December last year though it gave back some its gains in the last few days. But in response to the rate cut, the ringgit rose to 4.06 to the U.S. dollar to be up 0.7 percent since the start of the year.
It was the first rate cut by Bank Negara Malaysia (BNM) since May 2019 when it was among the first wave of central banks to loosen their monetary policy in response to the slowing global economy alongside the Philippines, New Zealand and India.
Since May last year BNM had maintained its rate as the global pace of easing accelerated month-by-month with 67 central banks cutting rates a total of 159 times in 2019.
BNM's monetary policy committee signaled today's rate cut likely was a one-off, saying "the MPC considers the stance of monetary policy to be appropriate in sustaining economic growth with price stability."
Economists had expected BNM to hold off on any easing until the effects of the government's fiscal tightening, aimed at lowering the deficit and debt, on consumption becomes clearer.
Although BNM was relatively upbeat about the outlook for the both the global and domestic economy, it said downside risks remain due to geopolitical tensions and policy uncertainty in a number of countries that could trigger financial market volatility and weigh on global growth.
Looking at Malaysia's economy, the central bank said economic activity in the fourth quarter of 2019 expanded moderately and growth for the year would be within the projected range and then gradually improve in 2020, with continued support from household spending, better exports and a modest recover in investments, both in the public and private sectors.
In the third quarter of 2019 Malaysia's gross domestic product grew by an annual 4.4 percent, down from 4.9 percent in the second quarter and the government has estimated 2019 growth of 4.7 percent, rising to 4.8 percent in 2020.
Last month the International Monetary Fund estimated 2019 growth of 4.5 percent and the same rate in 2020 but cautioned the risks to the growth outlook remain to the downside as continued tensions between the U.S. and China affect Malaysia's growth.
Malaysia's inflation rate averaged 0.7 percent last year, down from 1.0 percent in 2018, and BNM forecast it would rise this year but still "remain modest."
Malaysia's ringgit has been appreciating since December last year though it gave back some its gains in the last few days. But in response to the rate cut, the ringgit rose to 4.06 to the U.S. dollar to be up 0.7 percent since the start of the year.
Sunday, January 19, 2020
China maintains LPR at 4.15% for 2nd month
China's central bank left its new benchmark interest rate, the one-year Loan Prime Rate (LPR), steady at 4.15 percent for the second month in a row as expected after the rate on the medium-term lending facility (MLF) was maintained on Jan. 14.
The People's Bank of China (PBOC) also kept the rate on the 5-year LPR, used to price mortgages, at 4.80 percent.
After reforming its method for calculating LPR and designating it as its new benchmark rate for all loans on August 17, 2019, PBOC set it as 4.25 percent on Aug. 20, 6 basis points below the old LPR and 10 basis points below the previous benchmark lending rate.
LPR was then cut a further 5 basis points in September and November last year for a total effective easing of 20 points in the benchmark lending rate since August.
Under the revised method for calculating the benchmark lending rate, LPR is expressed as a spread to the rate on MLF, which last week was maintained at 3.25 percent.
www.CentralBankNews.info
The People's Bank of China (PBOC) also kept the rate on the 5-year LPR, used to price mortgages, at 4.80 percent.
After reforming its method for calculating LPR and designating it as its new benchmark rate for all loans on August 17, 2019, PBOC set it as 4.25 percent on Aug. 20, 6 basis points below the old LPR and 10 basis points below the previous benchmark lending rate.
LPR was then cut a further 5 basis points in September and November last year for a total effective easing of 20 points in the benchmark lending rate since August.
Under the revised method for calculating the benchmark lending rate, LPR is expressed as a spread to the rate on MLF, which last week was maintained at 3.25 percent.
www.CentralBankNews.info
This week in monetary policy: China, Japan, Malaysia, Canada, Norway, Indonesia, ECB, Paraguay & Nigeria
This week - January 19 through January 25 - central banks from 9 countries or jurisdictions are scheduled to decide on monetary policy: China, Japan, Malaysia, Canada, Norway, Indonesia, the euro area, Paraguay and Nigeria.
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 4 | ||||||
| JAN 19- JAN 25, 2020: | ||||||
| CHINA | 20-Jan | 4.15% | 0 | 0 | 4.35% | EM |
| JAPAN | 21-Jan | -0.10% | 0 | 0 | -0.10% | DM |
| MALAYSIA | 22-Jan | 3.00% | 0 | 0 | 3.25% | EM |
| CANADA | 22-Jan | 1.75% | 0 | 0 | 1.75% | DM |
| NORWAY | 23-Jan | 1.50% | 0 | 0 | 0.75% | DM |
| INDONESIA | 23-Jan | 5.00% | 0 | 0 | 6.00% | EM |
| EURO AREA | 23-Jan | 0.00% | 0 | 0 | 0.00% | DM |
| PARAGUAY | 23-Jan | 4.00% | 0 | 0 | 5.25% | |
| NIGERIA | 24-Jan | 13.50% | 0 | 0 | 14.00% | FM |
Thursday, January 16, 2020
South Korea keeps rate and easy monetary policy stance
South Korea's central bank left its base rate steady at 1.25 percent and said it would maintain its accommodative monetary policy stance as economic growth is expected to be moderate, restraining any upward pressure on inflation.
The Bank of Korea (BOK), which cut its rate twice last year, most recently in October, also reiterated its guidance from November that it is still ready to "adjust the degree of monetary policy accommodation" while it carefully monitors global trade disputes, the economies of major countries, household debt and how geopolitical risks affect the domestic economy.
BOK said the pace of global economic growth had continued to slow but "sluggishness in the domestic economy has eased somewhat" as investment in facilities had risen slightly and consumption growth had expanded while investment in construction continued to decline.
BOK said South Korea's economy is forecast to grow at the "lower-2% level" this year, as it projected in November, as the sluggishness in exports and facilities investment gradually eases and consumption rises while construction investment remains depressed.
In 2019 South Korea's economy is estimated to have expanded 2.0 percent and in November BOK forecast growth of 2.3 percent in 2020.
Two of the monetary policy board's seven members dissented, and voted for a rate cut. The terms of four board members expire in April.
The Bank of Korea (BOK), which cut its rate twice last year, most recently in October, also reiterated its guidance from November that it is still ready to "adjust the degree of monetary policy accommodation" while it carefully monitors global trade disputes, the economies of major countries, household debt and how geopolitical risks affect the domestic economy.
BOK said the pace of global economic growth had continued to slow but "sluggishness in the domestic economy has eased somewhat" as investment in facilities had risen slightly and consumption growth had expanded while investment in construction continued to decline.
BOK said South Korea's economy is forecast to grow at the "lower-2% level" this year, as it projected in November, as the sluggishness in exports and facilities investment gradually eases and consumption rises while construction investment remains depressed.
In 2019 South Korea's economy is estimated to have expanded 2.0 percent and in November BOK forecast growth of 2.3 percent in 2020.
Two of the monetary policy board's seven members dissented, and voted for a rate cut. The terms of four board members expire in April.
Uzbekistan holds rate but sees possible slight rate cut
Uzbekistan's central bank left its refinancing rate steady at 16.0 percent but said a slight decrease in the rate was possible in the next monetary policy meetings.
The Central Bank of the Republic of Uzbekistan (CBU), which has maintained its rate since raising it in September 2018 due to high inflation, said the decision to maintain the rate today was to strengthen its confidence that inflation would decelerate along with persistent uncertainties over changes to regulated prices.
Uzbekistan's inflation rate at the end of 2019 was 15.2 percent, near the upper boundary of CBU's forecast corridor of 13.5 to 15.5 percent, with a rise in the second half of last year mainly caused by a liberalization of some regulated prices (an uptick fo 21.6 percent in prices) along with a fall in the exchange rate of the sum in August 2019, the bank said.
But in the fourth quarter of last year, the quarterly inflation rate slowed to 5.0 percent from 5.7 percent in the same 2018 period and CBU is forecasting inflation of 12.0 to 13.5 percent in 2020.
This forecast is based on the assumptions of a slower rise in food prices, an expansion of agricultural output, better supply of textiles and construction, moderate credit growth, the exhaustion of some of the inflationary impulses that arose last year along with a fiscal stance that should prevent excess demand, thus easing the upward pressure on inflation and pressure on the exchange rate.
Last year the sum lost 12.3 percent of its value against the U.S. dollar but this year the depreciation has slowed with sum trading at 9,550 today, down 0.5 percent since January 1.
Uzbekistan's economy expanded last year by an estimated 5.5 to 5.6 percent and the central bank said conditions for this year, especially in the first half, remain favorable due to stimulating fiscal and credit policies and the positive outlook for major export commodities.
www.CentralBankNews.info
The Central Bank of the Republic of Uzbekistan (CBU), which has maintained its rate since raising it in September 2018 due to high inflation, said the decision to maintain the rate today was to strengthen its confidence that inflation would decelerate along with persistent uncertainties over changes to regulated prices.
Uzbekistan's inflation rate at the end of 2019 was 15.2 percent, near the upper boundary of CBU's forecast corridor of 13.5 to 15.5 percent, with a rise in the second half of last year mainly caused by a liberalization of some regulated prices (an uptick fo 21.6 percent in prices) along with a fall in the exchange rate of the sum in August 2019, the bank said.
But in the fourth quarter of last year, the quarterly inflation rate slowed to 5.0 percent from 5.7 percent in the same 2018 period and CBU is forecasting inflation of 12.0 to 13.5 percent in 2020.
This forecast is based on the assumptions of a slower rise in food prices, an expansion of agricultural output, better supply of textiles and construction, moderate credit growth, the exhaustion of some of the inflationary impulses that arose last year along with a fiscal stance that should prevent excess demand, thus easing the upward pressure on inflation and pressure on the exchange rate.
Last year the sum lost 12.3 percent of its value against the U.S. dollar but this year the depreciation has slowed with sum trading at 9,550 today, down 0.5 percent since January 1.
Uzbekistan's economy expanded last year by an estimated 5.5 to 5.6 percent and the central bank said conditions for this year, especially in the first half, remain favorable due to stimulating fiscal and credit policies and the positive outlook for major export commodities.
www.CentralBankNews.info
Turkey cuts rate "measured" 75 bps, sees inflation easing
Turkey's central bank lowered its policy rate by another 75 basis points to 11.25 percent and reiterated its monetary policy stance is consistent with the projected path of slowing inflation but it still needs to maintain a "cautious" policy stance to ensure inflation declines.
It is the first rate cut by the Central Bank of the Republic of Turkey (CBRT) this year but continues the rapid pace of easing since July last year when the current governor, Murat Uysal, took over from Murat Cetinkay, who was fired for failing to follow President Recep Tayyip Erdogan's instructions to lower rates.
Since July 2019 CBRT has cut its key rate by 12.75 percentage points but inflation has also come down sharply since topping 25 percent in October 2018 following a currency crises that sent import prices soaring.
In 2019 Turkey's inflation rate decelerated from just over 20 percent in January to a low of 8.55 percent in October before rising in November and further in December to 11.84 percent, fueling expectations the central bank may trim the size of today's rate cut to around 50 basis points.
CBRT has forecast inflation of 12 percent by the end of 2019 and expects it to decline further to 8.5 percent by the end of 2020, with a decision in December to scrap an automatic tax increase on alcohol and tobacco products in the first half of this year helping curb inflation further.
"The course of inflation is considered to be broadly in line with the year-end inflation projection," CBRT said, adding the exchange rate, domestic demand and producer prices have contributed to a mild trend in core inflation.
The central bank repeated its guidance that the monetary policy stance would be determined by considering the underlying trend in inflation to ensure it continues to decline.
In December the International Monetary Fund (IMF) forecast inflation would remain largely stable at around 12 percent in both 2020 and 2021, adding "the recent monetary policy easing has gone too far," given the still-high inflation expectations and rapid credit growth in state-owned banks.
Turkey's lira, which fell 33 percent in 2018 and another 11 percent in 2019, has bounced back in the last week and rose further today following the central bank's decision.
The lira rose 0.5 percent to 5.85 per U.S. dollar today to be up 1.7 percent this year, helped by the recent rise in emerging market assets.
It is the first rate cut by the Central Bank of the Republic of Turkey (CBRT) this year but continues the rapid pace of easing since July last year when the current governor, Murat Uysal, took over from Murat Cetinkay, who was fired for failing to follow President Recep Tayyip Erdogan's instructions to lower rates.
Since July 2019 CBRT has cut its key rate by 12.75 percentage points but inflation has also come down sharply since topping 25 percent in October 2018 following a currency crises that sent import prices soaring.
In 2019 Turkey's inflation rate decelerated from just over 20 percent in January to a low of 8.55 percent in October before rising in November and further in December to 11.84 percent, fueling expectations the central bank may trim the size of today's rate cut to around 50 basis points.
CBRT has forecast inflation of 12 percent by the end of 2019 and expects it to decline further to 8.5 percent by the end of 2020, with a decision in December to scrap an automatic tax increase on alcohol and tobacco products in the first half of this year helping curb inflation further.
"The course of inflation is considered to be broadly in line with the year-end inflation projection," CBRT said, adding the exchange rate, domestic demand and producer prices have contributed to a mild trend in core inflation.
The central bank repeated its guidance that the monetary policy stance would be determined by considering the underlying trend in inflation to ensure it continues to decline.
In December the International Monetary Fund (IMF) forecast inflation would remain largely stable at around 12 percent in both 2020 and 2021, adding "the recent monetary policy easing has gone too far," given the still-high inflation expectations and rapid credit growth in state-owned banks.
Turkey's lira, which fell 33 percent in 2018 and another 11 percent in 2019, has bounced back in the last week and rose further today following the central bank's decision.
The lira rose 0.5 percent to 5.85 per U.S. dollar today to be up 1.7 percent this year, helped by the recent rise in emerging market assets.
Monday, January 13, 2020
The Fed protects gamblers at the expense of the economy
Following article is written by Ellen Brown, author, attorney, activist and founder of the Public Banking Institute, for Central Bank News.
Central Bank News will occasionally carry articles by guest contributors if they are of interest to our readers.
Central Bank News will occasionally carry articles by guest contributors if they are of interest to our readers.
"Although the repo market is little known to most people, it is a $1-trillion-a-day credit machine, in which not just banks but hedge funds and other “shadow banks” borrow to finance their trades. Under the Federal Reserve Act, the central bank’s lending window is open only to licensed depository banks; but the Fed is now pouring billions of dollars into the repo (repurchase agreements) market, in effect making risk-free loans to speculators at less than 2%.
This does not serve the real economy, in which products, services and jobs are created. However, the Fed is trapped into this speculative monetary expansion to avoid a cascade of defaults of the sort it was facing with the long-term capital management crisis in 1998 and the Lehman crisis in 2008. The repo market is a fragile house of cards waiting for a strong wind to blow it down, propped up by misguided monetary policies that have forced central banks to underwrite its highly risky ventures.
Sunday, January 12, 2020
This week in monetary policy: Turkey, South Africa, Egypt, South Korea & Zimbabwe
This week - January 12 through January 18 - central banks from 5 countries or jurisdictions are scheduled to decide on monetary policy: Turkey, South Africa, Egypt, South Korea and Zimbabwe.
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 3 | ||||||
| JAN 12- JAN 18, 2020: | ||||||
| TURKEY | 16-Jan | 12.00% | 0 | 0 | 24.00% | EM |
| SOUTH AFRICA | 16-Jan | 6.50% | 0 | 0 | 6.75% | EM |
| EGYPT | 16-Jan | 12.25% | -100 | -450 | 16.75% | EM |
| SOUTH KOREA | 17-Jan | 1.25% | 0 | 0 | 1.75% | EM |
| ZIMBABWE | 17-Jan | 35.00% | 0 | 0 | N/A | |
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