Gambia's central bank lowered its policy rate by 50 basis points to 12.0 percent, its fifth rate cut since May 2017, saying it expects inflation to trend lower despite the risks from "the domestic food supply situation in light of the poor harvest, impact of the outbreak of the Coronavirus on food supply chains and the uncertainty surrounding global food prices."
The Central Bank of The Gambia, which has been in a monetary easing cycle in the last three years, added high public debt also poses a significant risk to the country's economy.
Gambia's central bank has cut its rate by a total of 1,100 basis points since May 2017, most recently exactly 12 months ago on Feb. 28, 2019, as inflation has decelerated sharply since hitting almost 9 percent in January 2017, pushed up by a fall in the delasi's exchange rate.
A more stable exchange rate since October 2018 has helped curb inflation though the delasi took a hit last year after travel company Thomas Cook, which accounted for about 40 percent of tourists to the country, collapsed in September 2019.
Gambia's headline inflation rate eased slightly to 7.4 percent in January from 7.7 percent in November and December but was still higher than 6.08 percent a year ago, the central bank said.
"The Committee is of the view that headline inflation will continue to trend downwards in the near-term, premised on the continued stability of the exchange rate and the well-anchored inflation expectations," the central bank said.
While the policy rate was cut 50 basis points, the central bank raised the interest rate on its standing deposit facility by 50 points to 3.0 percent and cut the rate on its standing lending facility to 13.0 percent from 13.50 percent.
Gambia's economy grew 6.5 percent in 2018, and growth in 2019 and 2020 is projected at 6.0 percent and 6.2 percent, respectively, mainly due to strong growth in the services sector, in particular tourism, trade, financial services and insurance, and telecommunication.
Earlier this month staff from the International Monetary Fund (IMF) sealed an agreement with Gambia that underpins the country's request for a 3-year, US$48 million extended credit facility that will support a restructuring of its external debt.
IMF estimated Gambia's economy grew 6 percent in 2019, despite the temporary drop in tourist arrivals in November following the bankruptcy of Thomas Cook and much lower agricultural output due to erratic rainfall.
"The strong performance reflected The Gambia's gaining competitiveness as a tourist destination, strong private sector consumption and investment supported by foreign exchange inflows, greater availability of credit and much-improved reliability of electricity and water supply," IMF said.
It added sound macroeconomic policies will underpin the prospects for sustained economic growth, a strengthening of foreign exchange buffers and inflation moderating from an average of 7.1 percent in 20-19 to the central bank's target of 5 percent.
IMF also said Gambia's fiscal deficit had declined to around 81 percent of gross domestic product in 2019 from nearly 87 percent in 2018.
Gambia's dalasi has firmed this year, although it has eased in the last week as most other currencies, and was trading at 51.0 to the U.S. dollar today, up 0.6 percent this year.
Friday, February 28, 2020
Wednesday, February 26, 2020
UPDATE-South Korea holds rate despite hit to economy from virus
(Following item has been updated with February Economic Outlook)
South Korea's central bank defied expectations and kept its base rate at 1.25 percent while acknowledging domestic and global economic growth has weakened and uncertainties about future growth are high following the outbreak of the coronavirus (COVID-19).
The Bank of Korea (BOK), which has maintained its rate since October 2019, reiterated its guidance from last month that it would maintain its accommodative monetary policy stance in light of moderate growth and low inflationary pressures.
"In this process it will judge whether to adjust the degree of monetary policy accommodation, while thoroughly assessing the severity of the COVID-19 outbreak, its impact on the domestic economy, and changes in financial stability including household debt growth," BOK said.
BOK said consumption in South Korea, with the largest coronavirus outbreak outside China, had slowed from the spread of the virus while sluggishness in facilities investment had eased and employment conditions had continued to improve.
BOK lowered its forecast for growth this year to 2.1 percent from its forecast of 2.3 percent in November, adding "uncertainties regarding the future growth path are high due to the impact of the COVID-19 outbreak."
Hit by the global economic slowdown and uncertainty from the trade conflict between the U.S. and China, South Korea's economy grew only 2.0 percent in 2019, the slowest in 10 years,
In June last year BOK switched tack when it cut its rate only 8 months after raising it and then cut it another time in October for a total easing in 2019 of 50 basis points.
BOK expects the virus outbreak to temporarily slow economic growth as consumption is hit but growth is expected to recover as consumption rebounds, and exports and investments rise amid the continued fiscal expansion.
Growth in the first half of this year is seen slowing to 2.0 percent from November's forecast of 2.2 percent and then recover to 2.2 percent in the second half, slightly below the earlier 2.3 percent forecast.
BOK slashed its forecast for private consumption in the first half to 1.1 percent from an earlier 1.9 percent but raised it to 2.6 percent in the second half from 2.2 percent. For the full 2020 year private consumption is seen rising 1.9 percent, down from November's forecast of 2.2 percent.
For 2021 South Korea's economy is still seen expanding 2.4 percent.
BOK also lowered its forecast for global growth due to slower growth in China, with trade taking a hit in the first quarter from production disruptions and a contraction in global tourism.
Global growth is forecast to slow to 2.8 percent in the first half of 2020, down from 3.2 percent previously projected, with China slowing to 4.9 percent from an earlier 5.9 percent.
In the second half of this year world growth is expected to pick up to 3.2 percent as China's economy rebounds and expands 6.1 percent, and for the full year the global economy is seen growing by 3.0 percent, still down from November's forecast of 3.2 percent.
Like stock markets around the world, South Korea's Kospi index has been hit hard in the last week and is down 8 percent since Feb. 17 while the rise in the safe-haven U.S. dollar has pushed down South Korea's won by 4.8 percent this year to 1,216 per U.S. dollar today.
"Looking ahead, the Board sees global economic growth and the global financial markets as likely to be affected largely by the severity of the COVID-19 outbreak and developments in global trade protectionism and geopolitical risks," BOK said.
South Korea's inflation rate has bounced back in the last three months after zero or negative from August through October, and in January it rose to 1.5 percent from 0.7 percent in December.
BOK said it expects consumer price inflation to run at the lower 1.0 percent level and then fall slightly to around 1.0 percent during the year while core inflation will be in the upper 0 percent level.
BOK targets inflation of 2.0 percent.
South Korea's central bank defied expectations and kept its base rate at 1.25 percent while acknowledging domestic and global economic growth has weakened and uncertainties about future growth are high following the outbreak of the coronavirus (COVID-19).
The Bank of Korea (BOK), which has maintained its rate since October 2019, reiterated its guidance from last month that it would maintain its accommodative monetary policy stance in light of moderate growth and low inflationary pressures.
"In this process it will judge whether to adjust the degree of monetary policy accommodation, while thoroughly assessing the severity of the COVID-19 outbreak, its impact on the domestic economy, and changes in financial stability including household debt growth," BOK said.
BOK said consumption in South Korea, with the largest coronavirus outbreak outside China, had slowed from the spread of the virus while sluggishness in facilities investment had eased and employment conditions had continued to improve.
BOK lowered its forecast for growth this year to 2.1 percent from its forecast of 2.3 percent in November, adding "uncertainties regarding the future growth path are high due to the impact of the COVID-19 outbreak."
Hit by the global economic slowdown and uncertainty from the trade conflict between the U.S. and China, South Korea's economy grew only 2.0 percent in 2019, the slowest in 10 years,
In June last year BOK switched tack when it cut its rate only 8 months after raising it and then cut it another time in October for a total easing in 2019 of 50 basis points.
BOK expects the virus outbreak to temporarily slow economic growth as consumption is hit but growth is expected to recover as consumption rebounds, and exports and investments rise amid the continued fiscal expansion.
Growth in the first half of this year is seen slowing to 2.0 percent from November's forecast of 2.2 percent and then recover to 2.2 percent in the second half, slightly below the earlier 2.3 percent forecast.
BOK slashed its forecast for private consumption in the first half to 1.1 percent from an earlier 1.9 percent but raised it to 2.6 percent in the second half from 2.2 percent. For the full 2020 year private consumption is seen rising 1.9 percent, down from November's forecast of 2.2 percent.
For 2021 South Korea's economy is still seen expanding 2.4 percent.
BOK also lowered its forecast for global growth due to slower growth in China, with trade taking a hit in the first quarter from production disruptions and a contraction in global tourism.
Global growth is forecast to slow to 2.8 percent in the first half of 2020, down from 3.2 percent previously projected, with China slowing to 4.9 percent from an earlier 5.9 percent.
In the second half of this year world growth is expected to pick up to 3.2 percent as China's economy rebounds and expands 6.1 percent, and for the full year the global economy is seen growing by 3.0 percent, still down from November's forecast of 3.2 percent.
Like stock markets around the world, South Korea's Kospi index has been hit hard in the last week and is down 8 percent since Feb. 17 while the rise in the safe-haven U.S. dollar has pushed down South Korea's won by 4.8 percent this year to 1,216 per U.S. dollar today.
"Looking ahead, the Board sees global economic growth and the global financial markets as likely to be affected largely by the severity of the COVID-19 outbreak and developments in global trade protectionism and geopolitical risks," BOK said.
South Korea's inflation rate has bounced back in the last three months after zero or negative from August through October, and in January it rose to 1.5 percent from 0.7 percent in December.
BOK said it expects consumer price inflation to run at the lower 1.0 percent level and then fall slightly to around 1.0 percent during the year while core inflation will be in the upper 0 percent level.
BOK targets inflation of 2.0 percent.
Monday, February 24, 2020
Kyrgyzstan raises rate for 1st time since Sept. 2015
Kyrgyzstan's central bank raised its key rate, the discount rate, by 75 basis points to 5.0 percent, saying higher food prices are continuing to exert upward pressure on inflation in the medium term.
It is the first change in rates by National Bank of the Kyrgyz Republic (NBKR) since May 2019 when paused in its easing cycle after 7 rate cuts starting in March 2016.
Between March 2016 and May 2019 NBKR cut its by a total of 575 basis points but since then inflation has accelerated.
In January consumer price in the Kyrgyz Republic rose for the 10th consecutive month to 3.2 percent and the central bank expects inflation to approach the lower boundary of its target of 5.0 to 7.0 percent in the second quarter.
By December this year, the central bank expects inflation to be about 5.0 percent and to average 4.6 percent in 2020.
NBKR is in the process of transitioning to an inflation targeting monetary policy framework to ensure price stability as the basis for long-term economic growth.
External conditions, especially commodity prices, are the main factors affecting inflation in Kyrgyzstan.
In its monetary policy guidelines for 2020, NBKR said it would be guided by a conservative approach in setting the discount rate to ensure price stability.
The exchange rate of the Kyrgyzstani som has been stable since November 2018, trading around 69.8 to the U.S. dollar.
www.CentralBankNews.info
It is the first change in rates by National Bank of the Kyrgyz Republic (NBKR) since May 2019 when paused in its easing cycle after 7 rate cuts starting in March 2016.
Between March 2016 and May 2019 NBKR cut its by a total of 575 basis points but since then inflation has accelerated.
In January consumer price in the Kyrgyz Republic rose for the 10th consecutive month to 3.2 percent and the central bank expects inflation to approach the lower boundary of its target of 5.0 to 7.0 percent in the second quarter.
By December this year, the central bank expects inflation to be about 5.0 percent and to average 4.6 percent in 2020.
NBKR is in the process of transitioning to an inflation targeting monetary policy framework to ensure price stability as the basis for long-term economic growth.
External conditions, especially commodity prices, are the main factors affecting inflation in Kyrgyzstan.
In its monetary policy guidelines for 2020, NBKR said it would be guided by a conservative approach in setting the discount rate to ensure price stability.
The exchange rate of the Kyrgyzstani som has been stable since November 2018, trading around 69.8 to the U.S. dollar.
www.CentralBankNews.info
Paraguay holds rate, virus seen as new uncertainty
Paraguay's central bank left its monetary policy rate steady at 4.0 percent, saying the data shows the country's economy is expected to continue along the path of recovery in the first months of the year though the outbreak of the coronavirus in China "has become a new factor of uncertainty."
The Central Bank of Paraguay (BCP), which has kept its rate steady since October 2019 after five rate cuts in the preceding months by a total of 125 basis points, added the outbreak has not only led to the temporary closure of some factories in China, lowering production, but the outlook for the local region "has become more complex" considering the challenge of renegotiating debt in Argentina.
On the other hand, economic data from Brazil remains favorable while a greater depreciation of the real has been noted.
"In this scenario, CPM (the monetary policy committee) considers that maintaining the current accommodative profile continues to be compatible with the fulfillment of the medium term inflation target," the central bank said.
Paraguay's economy was hit hard by several shocks last year, including drought and then flooding which cut agricultural output, and then weakness in Argentina and Brazil, which lowered exports.
In the third quarter of 2019 Paraguay's economy bounced back from two consecutive quarters of annual contraction in the first and second quarters of 2019, with gross domestic product expanding by 2.8 percent year-on-year.
Inflation in Paraguay was steady at 2.8 percent in January and December and BCP expects inflation to gradually converge to its target of 4.0 percent, plus/minus 2 percentage points, in the medium term.
www.CentralBankNews.info
The Central Bank of Paraguay (BCP), which has kept its rate steady since October 2019 after five rate cuts in the preceding months by a total of 125 basis points, added the outbreak has not only led to the temporary closure of some factories in China, lowering production, but the outlook for the local region "has become more complex" considering the challenge of renegotiating debt in Argentina.
On the other hand, economic data from Brazil remains favorable while a greater depreciation of the real has been noted.
"In this scenario, CPM (the monetary policy committee) considers that maintaining the current accommodative profile continues to be compatible with the fulfillment of the medium term inflation target," the central bank said.
Paraguay's economy was hit hard by several shocks last year, including drought and then flooding which cut agricultural output, and then weakness in Argentina and Brazil, which lowered exports.
In the third quarter of 2019 Paraguay's economy bounced back from two consecutive quarters of annual contraction in the first and second quarters of 2019, with gross domestic product expanding by 2.8 percent year-on-year.
Inflation in Paraguay was steady at 2.8 percent in January and December and BCP expects inflation to gradually converge to its target of 4.0 percent, plus/minus 2 percentage points, in the medium term.
www.CentralBankNews.info
Israel holds rate, says has range of tools if hit by virus
Israel's central bank left its key interest rate steady at 0.25 percent and confirmed its recent guidance that it expects to maintain this rate for a prolonged period or to reduce it to ensure inflation stabilizes around the midpoint of its target range and the economy continues to grow strongly.
The Bank of Israel (BOI), which has kept its rate steady since raising it in November 2018 for the first time since 2012, also reiterated it was taking additional steps to make monetary policy more accommodative, a reference to its intervention in foreign exchange markets to curb the strong shekel.
While the outbreak of the coronavirus in China is "casting uncertainty regarding future economic activity globally and in Israel," BOI said its baseline scenario is that the spread of the virus will be halted in coming months and the overall impact on the global economy will be limited.
"The Bank of Israel's assessment in this scenario is that no significant macroeconomic impact is expected in Israel," it said.
However, if the crises were to spill over into additional countries and preventative measures are required in Israel, it is expected to have a more significant economic impact.
"In such as scenario, the Monetary Committee has a range of tools to make monetary policy more accommodative," BOI said.
Israel's inflation rate has been below the lower bound of BOI's 1.0 - 3.0 percent target range since June last year and fell to 0.3 percent in January from 0.6 percent in December.
"The moderation of inflation is largely influenced by the appreciation of the shekel," BOI said, adding it is possible the inflation rate may be negative in coming months before moving back toward the lower bound of the target range in the second half of the year.
The shekel has been rising since early 2019 and BOI has a history of intervening to curb it.
In November and December last year BOI purchased $3.6 billion in one of its biggest bouts of intervention in nearly a decade, and at the end of January BOI's foreign exchange reserves rose $3.9 billion from end-December to $129.97, mainly due to foreign exchange purchases totaling $2.95 billion.
In its January press conference, BOI Governor Amir Yaron affirmed the banks' readiness to prevent "excessive appreciation of the shekel, by purchasing foreign exchange whenever necessary" as it sees the rise due to short-term financial factors.
But BOI's foreign exchange intervention has not dented the shekel much and today it was trading around 3.43 to the U.S. dollar today, up 0.9 percent this year and close to historic lows seen during the global financial disruptions in January 2018, July 2014 and June 2011.
Since the start of 2019 the shekel has risen almost 10 percent against the U.S. dollar.
Against the euro, the shekel has been hitting record highs since mid-2019 and was trading around 3.72 to the euro today, up 4.3 percent this year and up 16 percent since the start of 2019.
Israel's economy has been growing around its long-term rate in recent months and gross domestic product grew 3.8 percent in the fourth quarter of last year, up from 3.5 percent in the third quarter.
BOI said data from January point to continued growth but the interim budget is expected to have a "markedly contractionary effect" in the first half of 2020.
The Bank of Israel (BOI), which has kept its rate steady since raising it in November 2018 for the first time since 2012, also reiterated it was taking additional steps to make monetary policy more accommodative, a reference to its intervention in foreign exchange markets to curb the strong shekel.
While the outbreak of the coronavirus in China is "casting uncertainty regarding future economic activity globally and in Israel," BOI said its baseline scenario is that the spread of the virus will be halted in coming months and the overall impact on the global economy will be limited.
"The Bank of Israel's assessment in this scenario is that no significant macroeconomic impact is expected in Israel," it said.
However, if the crises were to spill over into additional countries and preventative measures are required in Israel, it is expected to have a more significant economic impact.
"In such as scenario, the Monetary Committee has a range of tools to make monetary policy more accommodative," BOI said.
Israel's inflation rate has been below the lower bound of BOI's 1.0 - 3.0 percent target range since June last year and fell to 0.3 percent in January from 0.6 percent in December.
"The moderation of inflation is largely influenced by the appreciation of the shekel," BOI said, adding it is possible the inflation rate may be negative in coming months before moving back toward the lower bound of the target range in the second half of the year.
The shekel has been rising since early 2019 and BOI has a history of intervening to curb it.
In November and December last year BOI purchased $3.6 billion in one of its biggest bouts of intervention in nearly a decade, and at the end of January BOI's foreign exchange reserves rose $3.9 billion from end-December to $129.97, mainly due to foreign exchange purchases totaling $2.95 billion.
In its January press conference, BOI Governor Amir Yaron affirmed the banks' readiness to prevent "excessive appreciation of the shekel, by purchasing foreign exchange whenever necessary" as it sees the rise due to short-term financial factors.
But BOI's foreign exchange intervention has not dented the shekel much and today it was trading around 3.43 to the U.S. dollar today, up 0.9 percent this year and close to historic lows seen during the global financial disruptions in January 2018, July 2014 and June 2011.
Since the start of 2019 the shekel has risen almost 10 percent against the U.S. dollar.
Against the euro, the shekel has been hitting record highs since mid-2019 and was trading around 3.72 to the euro today, up 4.3 percent this year and up 16 percent since the start of 2019.
Israel's economy has been growing around its long-term rate in recent months and gross domestic product grew 3.8 percent in the fourth quarter of last year, up from 3.5 percent in the third quarter.
BOI said data from January point to continued growth but the interim budget is expected to have a "markedly contractionary effect" in the first half of 2020.
Saturday, February 22, 2020
This week in monetary policy: Israel, Paraguay, Kyrgyzstan, Hungary, Botswana, South Korea, Fiji, Gambia, Mozambique & Bulgaria
This week - February 23 through February 29 - central banks from 9 countries or jurisdictions are scheduled to decide on monetary policy: Israel, Paraguay, Kyrgyz Republic, Hungary, Botswana, South Korea, Fiji, Gambia, Mozambique and Bulgaria.
The central bank of Mauritius was scheduled to hold a monetary policy meeting on Feb. 26 but this has been postponed and a new date will be announced later. Bloomberg reports the government has named a new governor and second deputy governor.
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 9 | ||||||
| FEB 23 - FEB 29, 2020: | ||||||
| ISRAEL | 24-Feb | 0.25% | 0 | 0 | 0.25% | DM |
| PARAGUAY | 24-Feb | 4.00% | 0 | 0 | 5.00% | |
| KYRGYZSTAN | 24-Feb | 4.25% | 0 | 0 | 4.50% | |
| HUNGARY | 25-Feb | 0.90% | 0 | 0 | 0.90% | EM |
| BOTSWANA | 26-Feb | 4.75% | 0 | 0 | 5.00% | |
| SOUTH KOREA | 27-Feb | 1.25% | 0 | 0 | 1.75% | EM |
| FIJI | 27-Feb | 0.50% | 0 | 0 | 0.50% | |
| GAMBIA | 27-Feb | 12.50% | 0 | 0 | 12.50% | |
| MOZAMBIQUE | 27-Feb | 12.75% | 0 | 0 | 14.25% | |
| BULGARIA | 28-Feb | 0.00% | 0 | 0 | 0.00% | FM |
Thursday, February 20, 2020
Egypt maintains rates to achieve inflation target
Egypt's central bank left its key interest rates unchanged for the second consecutive month, saying it had lowered its rates by 350 basis points during the second half of last year and keeping them steady remains consistent with achieving its inflation target and supporting lower inflation in the medium term.
The Central Bank of Egypt (CBE) left its overnight deposit rate, the overnight lending rate, the rate of the main operation and the discount rate steady at 12.25 percent, 13.25 percent, 12.75 percent and 12.75 percent, respectively.
The decision to maintain rates was expected by roughly half of analysts' surveyed as CBE was not considered to be in any rush to lower rates while inflation is picking up.
CBE has cut its rate six times and by a total of 650 basis points since February 2018, including four cuts of 450 basis points in 2019. From August through November the rate was cut 350 points.
Egypt's headline inflation inched up to 7.2 percent in January from 7.1 percent in December, mainly due to higher food prices such as poultry and fresh vegetables, while core inflation rose to 2.7 percent from 2.4 percent.
Despite this recent uptick, inflation still remains well below CBE's target of 9.0 percent, plus/minus 3 percentage points, for the fourth quarter of 2020.
CBE said its monetary policy was still supporting private domestic demand, which has outpaced exports as the main driver of economic activity in the first three quarters of last year, driven by growth in private investments.
Egypt was hit hard by the Arab Spring in 2011, which ended Hosni Mubarak's 30-year rule, as it scared off tourists and foreign investors, resulting in a persistent shortage of foreign currency.
But helped by the appointment of Tarek Amer as CBE governor in November 2015 - he reformed the banking system and the foreign exchange market - and a 2016 agreement with the International Monetary Fund (IMF), Egypt's economy has rebounded.
Egypt's gross domestic product grew an annual 5.6 percent in the third quarter of last year, slightly down from 5.7 percent in the second quarter but up from 5.5 percent in the year ago quarter.
"However, disruptions to global economic activity following the recent coronavirus outbreak could weigh on the global economic outlook, at least in the near term," CBE said, adding oil prices have declined from lower demand but still remain volatile due to geopolitical risks.
Since January last year the Egyptian pound has steadily appreciated, with its rise accelerating this month.
The Central Bank of Egypt (CBE) left its overnight deposit rate, the overnight lending rate, the rate of the main operation and the discount rate steady at 12.25 percent, 13.25 percent, 12.75 percent and 12.75 percent, respectively.
The decision to maintain rates was expected by roughly half of analysts' surveyed as CBE was not considered to be in any rush to lower rates while inflation is picking up.
CBE has cut its rate six times and by a total of 650 basis points since February 2018, including four cuts of 450 basis points in 2019. From August through November the rate was cut 350 points.
Egypt's headline inflation inched up to 7.2 percent in January from 7.1 percent in December, mainly due to higher food prices such as poultry and fresh vegetables, while core inflation rose to 2.7 percent from 2.4 percent.
Despite this recent uptick, inflation still remains well below CBE's target of 9.0 percent, plus/minus 3 percentage points, for the fourth quarter of 2020.
CBE said its monetary policy was still supporting private domestic demand, which has outpaced exports as the main driver of economic activity in the first three quarters of last year, driven by growth in private investments.
Egypt was hit hard by the Arab Spring in 2011, which ended Hosni Mubarak's 30-year rule, as it scared off tourists and foreign investors, resulting in a persistent shortage of foreign currency.
But helped by the appointment of Tarek Amer as CBE governor in November 2015 - he reformed the banking system and the foreign exchange market - and a 2016 agreement with the International Monetary Fund (IMF), Egypt's economy has rebounded.
Egypt's gross domestic product grew an annual 5.6 percent in the third quarter of last year, slightly down from 5.7 percent in the second quarter but up from 5.5 percent in the year ago quarter.
"However, disruptions to global economic activity following the recent coronavirus outbreak could weigh on the global economic outlook, at least in the near term," CBE said, adding oil prices have declined from lower demand but still remain volatile due to geopolitical risks.
Since January last year the Egyptian pound has steadily appreciated, with its rise accelerating this month.
Today the pound eased after the policy decision to trade at 15.57 to the U.S. dollar to be up 2.8 percent since the start of this year and some 22 percent since the pound lost about half its value in the wake of the decision to float the pound in November 2016.
The collapse in the pound in 2016 boosted inflation to 33 percent in July 2017 and CBE quickly raised its key interest rate by 400 basis points that year to curb the pass-through of higher import prices to overall inflation.
After the initial surge in inflation, it began decelerating in the second half of 2017 and fell to 3.1 percent in October last year - the lowest since December 2005 - before picking up speed in the last three months.
The collapse in the pound in 2016 boosted inflation to 33 percent in July 2017 and CBE quickly raised its key interest rate by 400 basis points that year to curb the pass-through of higher import prices to overall inflation.
After the initial surge in inflation, it began decelerating in the second half of 2017 and fell to 3.1 percent in October last year - the lowest since December 2005 - before picking up speed in the last three months.
Indonesia cuts rate to boost growth from virus threat
Indonesia's central bank returned to the easing path after a three month pause by cutting its benchmark 7-day reverse repo rate by another 25 basis points to 4.75 percent "to maintain domestic economic growth momentum in the face of a global economic recovery potentially restrained by the recent Covid-19 outbreak."
It was the first rate cut by Bank Indonesia (BI) since October 2019 and its key rate has now been lowered by 125 basis points since July last year when it began easing its monetary policy stance preemptively in the face of the threat to the global economy from uncertainty over the trade war between China and the U.S.
In addition to cutting its benchmark rate, BI also lowered its deposit rate by 25 basis points to 4.0 percent and the lending rate by the same amount to 5.50 percent.
To ensure adequate liquidity in the banking system and support the transmission of its accommodative policy stance, BI said it would adjust the calculation of its macroprudential intermediation ratio (MIR) by expanding the funding and financing purview of foreign bank branches and strengthen the payment system toward fostering economic growth.
"Moreover, Bank Indonesia will continue to strengthen coordination with the Government and other relevant authorities to maintain economic stability and catalyst domestic demand, while accelerating structural reforms and implementing efforts to mitigate the impact of Covid-19," BI said.
Despite the recent phase 1 trade deal between China and the U.S., which BI said had helped ease global uncertainty, the optimism generated about the global economy has been eroded by the virus, which is expected to dent China's economy and impede the global recovery, "at least during the first quarter of 2020."
BI lowered its forecast for global growth this year to 3.0 percent from an earlier 3.1 percent but raised its forecast for 2021 growth to 3.4 per cent from 3.2 percent.
"Covid-19 has rattled global financial markets, increasing risk and triggering a reversal of global flows from developing countries to safe-have assets and commodities, which has intensified currency risks in emerging market countries," BI said.
Indonesia's economy slowed last year to 5.02 percent from 5.17 percent in 2018 and BI lowered its forecast for this year to a range of 5.0 - 5.4 percent from an earlier forecast of 5.1 - 5.5 percent "due to the potentially muted global economic recovery in light of the recent Covid-19 outbreak, which will impact Indonesia's economy through the tourism, trade and investment channels."
Economic activity in 2021 is expected to accelerate, with growth of 5.2 - 5.6 percent, BI said.
Indonesia's inflation rate has been decelerating for the last five months and fell to 2.68 percent in January due to deflation of administered prices but BI said core inflation remains under control and in line with its policy of anchoring inflation expectations and maintaining an exchange rate of the rupiah that is in line with its fundamental value.
BI expects inflation to remain within its target corridor of 3.0 percent, plus/minus 1 percentage point, in 2020 and 2021.
After falling in the first 10 months of 2019, Indonesia's rupiah bounced back until late January when it, and other emerging market currencies, were hit by the shift in investors' sentiment following the Covid-19 outbreak.
Today the rupiah eased further in response to the rate cut to trade at 13,745 to the U.S. dollar but remains 1.3 percent higher than the start of 2020.
It was the first rate cut by Bank Indonesia (BI) since October 2019 and its key rate has now been lowered by 125 basis points since July last year when it began easing its monetary policy stance preemptively in the face of the threat to the global economy from uncertainty over the trade war between China and the U.S.
In addition to cutting its benchmark rate, BI also lowered its deposit rate by 25 basis points to 4.0 percent and the lending rate by the same amount to 5.50 percent.
To ensure adequate liquidity in the banking system and support the transmission of its accommodative policy stance, BI said it would adjust the calculation of its macroprudential intermediation ratio (MIR) by expanding the funding and financing purview of foreign bank branches and strengthen the payment system toward fostering economic growth.
"Moreover, Bank Indonesia will continue to strengthen coordination with the Government and other relevant authorities to maintain economic stability and catalyst domestic demand, while accelerating structural reforms and implementing efforts to mitigate the impact of Covid-19," BI said.
Despite the recent phase 1 trade deal between China and the U.S., which BI said had helped ease global uncertainty, the optimism generated about the global economy has been eroded by the virus, which is expected to dent China's economy and impede the global recovery, "at least during the first quarter of 2020."
BI lowered its forecast for global growth this year to 3.0 percent from an earlier 3.1 percent but raised its forecast for 2021 growth to 3.4 per cent from 3.2 percent.
"Covid-19 has rattled global financial markets, increasing risk and triggering a reversal of global flows from developing countries to safe-have assets and commodities, which has intensified currency risks in emerging market countries," BI said.
Indonesia's economy slowed last year to 5.02 percent from 5.17 percent in 2018 and BI lowered its forecast for this year to a range of 5.0 - 5.4 percent from an earlier forecast of 5.1 - 5.5 percent "due to the potentially muted global economic recovery in light of the recent Covid-19 outbreak, which will impact Indonesia's economy through the tourism, trade and investment channels."
Economic activity in 2021 is expected to accelerate, with growth of 5.2 - 5.6 percent, BI said.
Indonesia's inflation rate has been decelerating for the last five months and fell to 2.68 percent in January due to deflation of administered prices but BI said core inflation remains under control and in line with its policy of anchoring inflation expectations and maintaining an exchange rate of the rupiah that is in line with its fundamental value.
BI expects inflation to remain within its target corridor of 3.0 percent, plus/minus 1 percentage point, in 2020 and 2021.
After falling in the first 10 months of 2019, Indonesia's rupiah bounced back until late January when it, and other emerging market currencies, were hit by the shift in investors' sentiment following the Covid-19 outbreak.
Today the rupiah eased further in response to the rate cut to trade at 13,745 to the U.S. dollar but remains 1.3 percent higher than the start of 2020.
Wednesday, February 19, 2020
China cuts key rate 10 bps in 4th cut since August 2019
China's central bank lowered its new policy rate by 10 basis points to 4.05 percent, as expected and signaled through recent policy moves, its fourth cut in the 1-year Loan Prime Rate (LPR) since August 2019.
The 5-year LPR, used as a benchmark to price mortgages, was cut 5 basis points to 4.75 percent, according to a brief statement on its website.
Since August last year, when People's Bank of China (PBOC) designated LPR as its new benchmark lending rate, it has been cut by an effective 30 basis points.
Although PBOC cut its key rate today, it did not conduct any reverse repo operations for the second day in a row, adding "liquidity is reasonable and adequate in the current banking system."
On Feb. 19 PBOC said short-term liquidity that had been injected into the market after the Spring Festival - this year on Jan. 25 - had been soaked up with the maturing of reverse repos.
China's central bank, along with the government, have been tackling the outbreak of the coronavirus, or COVID-19 as it is officially called, since Feb. 4 when PBOC first began injecting liquidity into the banking system and cutting rates on its short-term reverse repurchase facilities to support economic activity that has been hit hard by quarantines and shutdowns of major parts of the economy.
Initially PBOC injected 1.2 trillion through 7-day and 14-day reverse repo operations at a rate that was 10 basis point below the previous rate from November 2019.
Then PBOC launched a 300 billion yuan lending program to provide low-cost loans to companies involved in fighting and affected by the virus, with the government subsidizing half of companies' interest payments to ensure actual financing costs of less than 1.6 percent.
On Monday PBOC lowered its 1-year medium-term-lending (MLF) lending facility by the same 10 basis points to 3.15 percent, foreshadowing today's cut in LPR.
In August 2019, when PBOC designated LPR it as its new benchmark lending rate, it also rejigged its system for deriving LPR and set is as a spread to MLF.
Days after announcing its new method for calculating LPR last year, PBOC set it at 4.25 percent, 6 basis points below the old LPR and 10 points below the previous benchmark lending rate of 4.35 percent.
LPR was cut a further 5 basis points in September 2019 and then another 5 points in November, a few weeks after the MLF rate also was cut 5 points.
PBOC announces LPR on the 20th of each month and it was then maintained in both December and January when the MLF rate was also maintained.
PBOC has effectively lowered its policy rate by 30 basis points since August 2019 while LPR has technically been lowered by 26 points.
www.CentralBankNews.info
The 5-year LPR, used as a benchmark to price mortgages, was cut 5 basis points to 4.75 percent, according to a brief statement on its website.
Since August last year, when People's Bank of China (PBOC) designated LPR as its new benchmark lending rate, it has been cut by an effective 30 basis points.
Although PBOC cut its key rate today, it did not conduct any reverse repo operations for the second day in a row, adding "liquidity is reasonable and adequate in the current banking system."
On Feb. 19 PBOC said short-term liquidity that had been injected into the market after the Spring Festival - this year on Jan. 25 - had been soaked up with the maturing of reverse repos.
China's central bank, along with the government, have been tackling the outbreak of the coronavirus, or COVID-19 as it is officially called, since Feb. 4 when PBOC first began injecting liquidity into the banking system and cutting rates on its short-term reverse repurchase facilities to support economic activity that has been hit hard by quarantines and shutdowns of major parts of the economy.
Initially PBOC injected 1.2 trillion through 7-day and 14-day reverse repo operations at a rate that was 10 basis point below the previous rate from November 2019.
Then PBOC launched a 300 billion yuan lending program to provide low-cost loans to companies involved in fighting and affected by the virus, with the government subsidizing half of companies' interest payments to ensure actual financing costs of less than 1.6 percent.
On Monday PBOC lowered its 1-year medium-term-lending (MLF) lending facility by the same 10 basis points to 3.15 percent, foreshadowing today's cut in LPR.
In August 2019, when PBOC designated LPR it as its new benchmark lending rate, it also rejigged its system for deriving LPR and set is as a spread to MLF.
Days after announcing its new method for calculating LPR last year, PBOC set it at 4.25 percent, 6 basis points below the old LPR and 10 points below the previous benchmark lending rate of 4.35 percent.
LPR was cut a further 5 basis points in September 2019 and then another 5 points in November, a few weeks after the MLF rate also was cut 5 points.
PBOC announces LPR on the 20th of each month and it was then maintained in both December and January when the MLF rate was also maintained.
PBOC has effectively lowered its policy rate by 30 basis points since August 2019 while LPR has technically been lowered by 26 points.
www.CentralBankNews.info
Namibia cuts rate 25 bps to boost growth, keep rand peg
Namibia's central bank cut its benchmark repo rate by another 25 basis points to 6.25 percent, its third rate cut in the current easing cycle, saying this is "to support domestic economic activity and to maintain the one-to-one link between the Namibia Dollar and the South African Rand."
Bank of Namibia's (BOM) rate cut follows that of the South African Reserve Bank's surprise rate cut on Jan. 16 in response to a lower inflation forecast and an improved risk profile.
Namibia's central bank has now cut its rate three times by a total of 75 basis points since it began easing in August 2017 and twice since August 2019
The Namibian dollar trades in a one-to-one rate to the volatile South African rand, which has fallen this year, reversing some of the rise seen from August 2019 to the end of the year.
"The stock of international reserves remained sufficient to support the currency peg," BOM said, adding international reserves were N$31.0 billion as of Jan. 31, down from N$32.5 billion as of Oct. 31, 2019. enough to cover 4.4 months imports.
Namibia's inflation rate has declined steadily since April last year to average 3.7 percent in 2019 from 4.3 percent in 2018.
In January inflation fell further to 2.1 percent as inflation for housing rents turned negative, the central bank said, forecasting average inflation in 2020 of below 5.0 percent.
"Domestic economic activity contracted in 2019 relative to 2018," BOM said, adding growth in private sector credit extension (PSCE) had risen marginally to 6.8 percent during 2019 from 6.3 percent in 2018, with growth to individuals slowing and rising slightly to retail, real estate, financial and other service sectors.
In the third quarter of 2019 Namibia's gross domestic product shrank an annual 0.8 percent, the fourth quarter of contraction on an annual basis, but up from a contraction of 2.9 percent in the second quarter.
In December BOM said the contraction was mainly seen in the mining, and wholesale and retail trade sectors, with the weak performance of mining due to lower output of diamonds, uranium and zinc concentrate.
"The domestic economy is projected to improve in 2020," BOM said today, noting transport and construction sectors had improved in 2019.
www.CentralBankNews.info
Bank of Namibia's (BOM) rate cut follows that of the South African Reserve Bank's surprise rate cut on Jan. 16 in response to a lower inflation forecast and an improved risk profile.
Namibia's central bank has now cut its rate three times by a total of 75 basis points since it began easing in August 2017 and twice since August 2019
The Namibian dollar trades in a one-to-one rate to the volatile South African rand, which has fallen this year, reversing some of the rise seen from August 2019 to the end of the year.
"The stock of international reserves remained sufficient to support the currency peg," BOM said, adding international reserves were N$31.0 billion as of Jan. 31, down from N$32.5 billion as of Oct. 31, 2019. enough to cover 4.4 months imports.
Namibia's inflation rate has declined steadily since April last year to average 3.7 percent in 2019 from 4.3 percent in 2018.
In January inflation fell further to 2.1 percent as inflation for housing rents turned negative, the central bank said, forecasting average inflation in 2020 of below 5.0 percent.
"Domestic economic activity contracted in 2019 relative to 2018," BOM said, adding growth in private sector credit extension (PSCE) had risen marginally to 6.8 percent during 2019 from 6.3 percent in 2018, with growth to individuals slowing and rising slightly to retail, real estate, financial and other service sectors.
In the third quarter of 2019 Namibia's gross domestic product shrank an annual 0.8 percent, the fourth quarter of contraction on an annual basis, but up from a contraction of 2.9 percent in the second quarter.
In December BOM said the contraction was mainly seen in the mining, and wholesale and retail trade sectors, with the weak performance of mining due to lower output of diamonds, uranium and zinc concentrate.
"The domestic economy is projected to improve in 2020," BOM said today, noting transport and construction sectors had improved in 2019.
www.CentralBankNews.info
Turkey cuts rate 6th time as inflation largely as forecast
Turkey's central bank lowered its policy rate by another 50 basis points, the smallest cut in the current easing cycle, and said the path of inflation is broadly in line with its forecast and the current monetary policy stance is consistent with this path.
The Central Bank of the Republic of Turkey's (CBRT) cut its one-week repo auction rate to 10.75 percent and it has now been cut six times and by a total of 13.25 percentage points since July 2019.
It is CBRT's second rate cut this year, with the size of the cut smaller than the 75 basis point cut in January, a 200 point cut in December 2019, a 325 point cut in September, and a 425 point cut in July.
Reflecting the smaller size of today's rate cut, CBRT's monetary policy committee said it was "a more measured cut" in light of the inflation outlook.
In January CBRT described its cut as "measured."
CBRT reiterated that keeping the process of disinflation on track requires a continued "cautious" monetary stance and this stance would be determined by the trend of underlying inflation.
Despite a rise in inflation in the last three months, CBRT said an improvement in "macroeconomic indicators, inflation in particular, supports the fall in country risk premium and helps contain cost pressures."
It added inflation expectations, domestic demand and producer prices had contributed to a mild trend in core inflation indicators.
After falling to 8.55 percent in October last year, Turkey's headline inflation rate has been rising in recent months and rose to a higher-than-expected 12.15 percent in January from 11.8 percent in December.
Core inflation, which excludes volatile items such as energy, food, some beverages, tobacco and gold, rose to 9.88 percent in January from 9.81 percent in December and 9.25 percent in November.
CBRT has said it expects inflation to remain elevated in the first quarter of this year around 11.5 percent and then start decelerating in the second quarter and drop to single digits in the second half of the year.
In its latest quarterly inflation report from January, CBRT maintained its forecast for inflation in 2020 of 8.2 percent, falling to 5.4 percent by the end of 2021.
After rising from May to mid-August 2019, the Turkish lira has resumed its decade-long downtrend and weakened further to 6.075 to the U.S. dollar after the rate cut to be down 2 percent since the start of this year - partly in response to escalation of violence in Syria - and down 13 percent since the start of 2019.
Turkey's lira has suffered several bouts of dramatic falls in value in recent years, including the fallout from an attempted coup in 2016 and then a financial crises in 2018, partly in response to President Recep Tayyip Erdogan's firmer grip on power and unusual views on interest rates.
In 2018 the central bank responded to a 30 percent plunge in the lira in July and August by raising its rate by 16 percentage points to push down inflation, raising the ire of Erdogan who believes high interest rates lead to higher inflation.
To ensure inflation would decelerate from a high of over 25 percent in October 2018 and protect the exchange rate of the lira, CBRT maintained its rate at 24.0 percent despite Erdogan's frequent pressure to lower them.
By June 2019 Erdogan had run out of patience and in July he fired the governor, Murat Cetinkaya, for failing to cut rates, the first time a governor had been dismissed since a 1980 military coup.
Ironically, Cetinkaya's dismissal came just as analysts were starting to pencil in rate cuts as inflation was finally declining. Erdogan replaced Cetinkaya with the current governor, Murat Uysal.
Last week Erdogan told lawmakers in the parliament the trend of falling interest rates in Turkey would continue and he was hopeful inflation would be below the government's end-year target of 8.5 percent.
After shrinking on an annual basis for three quarters, Turkey's economy expanded by 0.9 percent in the third quarter of 2019 and CBRT said "recent data indicator that recovery in economic activity continues," and the recovery should be sustained with the help of the ongoing disinflation and improved financial conditions.
However, it also said investment and employment remain weak, and the weaker global economic outlook tempers external demand despite the favorable effects of an improved competitiveness.
The Central Bank of the Republic of Turkey's (CBRT) cut its one-week repo auction rate to 10.75 percent and it has now been cut six times and by a total of 13.25 percentage points since July 2019.
It is CBRT's second rate cut this year, with the size of the cut smaller than the 75 basis point cut in January, a 200 point cut in December 2019, a 325 point cut in September, and a 425 point cut in July.
Reflecting the smaller size of today's rate cut, CBRT's monetary policy committee said it was "a more measured cut" in light of the inflation outlook.
In January CBRT described its cut as "measured."
CBRT reiterated that keeping the process of disinflation on track requires a continued "cautious" monetary stance and this stance would be determined by the trend of underlying inflation.
Despite a rise in inflation in the last three months, CBRT said an improvement in "macroeconomic indicators, inflation in particular, supports the fall in country risk premium and helps contain cost pressures."
It added inflation expectations, domestic demand and producer prices had contributed to a mild trend in core inflation indicators.
After falling to 8.55 percent in October last year, Turkey's headline inflation rate has been rising in recent months and rose to a higher-than-expected 12.15 percent in January from 11.8 percent in December.
Core inflation, which excludes volatile items such as energy, food, some beverages, tobacco and gold, rose to 9.88 percent in January from 9.81 percent in December and 9.25 percent in November.
CBRT has said it expects inflation to remain elevated in the first quarter of this year around 11.5 percent and then start decelerating in the second quarter and drop to single digits in the second half of the year.
In its latest quarterly inflation report from January, CBRT maintained its forecast for inflation in 2020 of 8.2 percent, falling to 5.4 percent by the end of 2021.
After rising from May to mid-August 2019, the Turkish lira has resumed its decade-long downtrend and weakened further to 6.075 to the U.S. dollar after the rate cut to be down 2 percent since the start of this year - partly in response to escalation of violence in Syria - and down 13 percent since the start of 2019.
Turkey's lira has suffered several bouts of dramatic falls in value in recent years, including the fallout from an attempted coup in 2016 and then a financial crises in 2018, partly in response to President Recep Tayyip Erdogan's firmer grip on power and unusual views on interest rates.
In 2018 the central bank responded to a 30 percent plunge in the lira in July and August by raising its rate by 16 percentage points to push down inflation, raising the ire of Erdogan who believes high interest rates lead to higher inflation.
To ensure inflation would decelerate from a high of over 25 percent in October 2018 and protect the exchange rate of the lira, CBRT maintained its rate at 24.0 percent despite Erdogan's frequent pressure to lower them.
By June 2019 Erdogan had run out of patience and in July he fired the governor, Murat Cetinkaya, for failing to cut rates, the first time a governor had been dismissed since a 1980 military coup.
Ironically, Cetinkaya's dismissal came just as analysts were starting to pencil in rate cuts as inflation was finally declining. Erdogan replaced Cetinkaya with the current governor, Murat Uysal.
Last week Erdogan told lawmakers in the parliament the trend of falling interest rates in Turkey would continue and he was hopeful inflation would be below the government's end-year target of 8.5 percent.
After shrinking on an annual basis for three quarters, Turkey's economy expanded by 0.9 percent in the third quarter of 2019 and CBRT said "recent data indicator that recovery in economic activity continues," and the recovery should be sustained with the help of the ongoing disinflation and improved financial conditions.
However, it also said investment and employment remain weak, and the weaker global economic outlook tempers external demand despite the favorable effects of an improved competitiveness.
Tuesday, February 18, 2020
What happened to eFinancialNews.com - guest column
(Following article was written by Jen M. of Dane County Credit Union in Madison, Wisconsin. Central Bank News will occasionally carry articles by guest contributors if they are of interest to our readers.)
The website eFinancialNews.com was a financial news service whose target readership was the investment banking, fund management, and securities community.
However, if you visit the eFinancialNews.com website today the site no longer exists.
Why would a site that was making substantial revenue stop publishing?
Sunday, February 16, 2020
This week in monetary policy: Turkey, Zambia, Namibia, Jamaica, China, Indonesia & Egypt
This week - February 16 through February 22 - central banks from 7 countries or jurisdictions are scheduled to decide on monetary policy: Turkey, Zambia, Namibia, Jamaica, China, Indonesia and Egypt.
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 8 | ||||||
| FEB 16 - FEB 22, 2020: | ||||||
| TURKEY | 19-Feb | 11.25% | -75 | -75 | 24.00% | EM |
| ZAMBIA | 19-Feb | 11.50% | 0 | 0 | 9.75% | |
| NAMIBIA | 19-Feb | 6.50% | 0 | 0 | 6.75% | |
| JAMAICA | 19-Feb | 0.50% | 0 | 0 | 1.50% | |
| CHINA 1) | 20-Feb | 4.15% | 0 | 0 | 4.35% | EM |
| INDONESIA | 20-Feb | 5.00% | 0 | 0 | 6.00% | EM |
| EGYPT | 20-Feb | 12.25% | 0 | 0 | 15.75% | EM |
| 1) As of Aug. 17, 2019 Loan Prime Rate is benchmark | ||||||
Thursday, February 13, 2020
Mexico cuts rate 5th time, global risks still to downside
Mexico's central bank lowered its benchmark interest rate for the fifth time, saying the balance of risks to the global economy remain to the downside due to a range of uncertainties, "including the effects of the recent coronavirus outbreak," despite a further easing of global financial conditions.
The Bank of Mexico, known as Banxico, cut its target for the overnight interbank interest rate by 25 basis points to 7.0 percent and has now cut it five times and by a total of 125 points since July 2019 when it began to unwind some of the 500-point rate hikes in the three years from December 2015 to December 2018.
"Economic slowdown, low inflation, accommodative monetary policies, and lower interest rates continue to prevail in the world economy," said the central bank, adding the bank's board was unanimous in its decision.
In a new and more concise policy statement, aimed at getting is message more easily across to the public, Banxico said the prevalence of external and domestic risks could affect domestic financial markets, adding the peso's exchange rate and yields on government securities had fallen in recent weeks.
Economic activity in Mexico has stagnated for several quarters, and the economy is is now seen growing less than forecast in the third quarter quarterly report, the central bank said, without providing further details.
In its quarterly inflation report released in November Banxico lowered its estimate of 2019 economic growth to between a contraction of 0.2 percent and growth of 0.2 percent, down from an earlier forecast of 0.2 - 0.7 percent growth.
In the fourth quarter of 2019, Mexico's gross domestic product shrank an annual 0.3 percent, the same as in the third quarter, with growth for the full year estimated to contract 0.1 percent, sharply down from 2018 growth of 2.1 percent.
For 2020 Banxico cut its growth forecast to 0.8 - 1.8 percent from 1.5 - 2.5 percent and forecast growth in 2021 of 1.3 - 2.3 percent.
In January Mexico's consumer price inflation rate rose 3.24 percent, within the central bank's target of 3.0 percent, plus/minus 1 percentage point.
The central bank has recently warned that a 20 percent hike in minimum wages by Mexico's government in December, the second major increase in as many years, could push up inflation and make it difficult to bring inflation down to its target this year.
Mexico's peso has been rising this year and rose further after the rate cut to 18.63 to the U.S. dollar, up 1.6 percent this year.
The Bank of Mexico, known as Banxico, cut its target for the overnight interbank interest rate by 25 basis points to 7.0 percent and has now cut it five times and by a total of 125 points since July 2019 when it began to unwind some of the 500-point rate hikes in the three years from December 2015 to December 2018.
"Economic slowdown, low inflation, accommodative monetary policies, and lower interest rates continue to prevail in the world economy," said the central bank, adding the bank's board was unanimous in its decision.
In a new and more concise policy statement, aimed at getting is message more easily across to the public, Banxico said the prevalence of external and domestic risks could affect domestic financial markets, adding the peso's exchange rate and yields on government securities had fallen in recent weeks.
Economic activity in Mexico has stagnated for several quarters, and the economy is is now seen growing less than forecast in the third quarter quarterly report, the central bank said, without providing further details.
In its quarterly inflation report released in November Banxico lowered its estimate of 2019 economic growth to between a contraction of 0.2 percent and growth of 0.2 percent, down from an earlier forecast of 0.2 - 0.7 percent growth.
In the fourth quarter of 2019, Mexico's gross domestic product shrank an annual 0.3 percent, the same as in the third quarter, with growth for the full year estimated to contract 0.1 percent, sharply down from 2018 growth of 2.1 percent.
For 2020 Banxico cut its growth forecast to 0.8 - 1.8 percent from 1.5 - 2.5 percent and forecast growth in 2021 of 1.3 - 2.3 percent.
In January Mexico's consumer price inflation rate rose 3.24 percent, within the central bank's target of 3.0 percent, plus/minus 1 percentage point.
The central bank has recently warned that a 20 percent hike in minimum wages by Mexico's government in December, the second major increase in as many years, could push up inflation and make it difficult to bring inflation down to its target this year.
Mexico's peso has been rising this year and rose further after the rate cut to 18.63 to the U.S. dollar, up 1.6 percent this year.
Wednesday, February 12, 2020
Belarus cuts rate another 25 bps to keep neutral stance
The central bank of Belarus continued its 4-year easing cycle and lowered its key rate further to maintain a neutral monetary policy stance and keep inflation near its 5.0 percent target in 2020.
The National Bank of the Republic of Belarus cut its benchmark refinancing rate by another 25 basis points to 8.75 percent, its first cut this year.
Since April 2016, when it embarked on the current easing cycle, the rate has now been cut by 16.25 percentage points from 25.0 percent.
Future policy decisions will continue to rest on achieving the inflation target, the bank added.
The central bank said its vision of inflation in 2020 had not changed since November and it still expects inflation to fall within its 5.0 percent target, taking into account the planned rise in regulated prices and tariffs, low inflation in Russia and Europe, and a largely neutral impact on prices from domestic economic activity.
The decision to lower the rate takes into account any risks and uncertainties that could create inflationary pressures, the central bank said, pointing to the volatility of international financial markets and events in China, a reference to the current outbreak of the coronavirus that is adding uncertainty to the global economic outlook.
Headline inflation in Belarus was steady at 4.7 percent in January and December, slightly lower than the central bank had expected, but close to its target.
The Belarus ruble is also expected to be near equilibrium, the central bank said.
The government and central bank in January adopted a major strategy to improve trust in the Belarusian ruble by pursuing a coordinated policy to reduce the reliance of foreign currency in the country and ensure the Belarusian ruble occupies a leading role in the domestic economy.
Government debt commitments are around 97 percent denominated in foreign currency.
Among the features of this strategy is for the central bank to fully transition to inflation targeting by 2021, a reduced footprint by the central bank in the foreign exchange market, reduced monopolies in the economy over the next few years, a reduction in state debt, regular issues of government debt in Belarusian rubles starting this year with various periods of maturity, the creation of alternative forms of savings to procure long-term sources of funding in the ruble, and ensure that all taxes, rents, tariffs and prices by state-run organizations are set in Belarusian rubles.
After rising from February 2019 to July 2019, the Belarusian ruble has eased since November and fell further to 2.19 to the U.S. dollar today, down 4.1 percent this year.
www.CentralBankNews.info
The National Bank of the Republic of Belarus cut its benchmark refinancing rate by another 25 basis points to 8.75 percent, its first cut this year.
Since April 2016, when it embarked on the current easing cycle, the rate has now been cut by 16.25 percentage points from 25.0 percent.
Future policy decisions will continue to rest on achieving the inflation target, the bank added.
The central bank said its vision of inflation in 2020 had not changed since November and it still expects inflation to fall within its 5.0 percent target, taking into account the planned rise in regulated prices and tariffs, low inflation in Russia and Europe, and a largely neutral impact on prices from domestic economic activity.
The decision to lower the rate takes into account any risks and uncertainties that could create inflationary pressures, the central bank said, pointing to the volatility of international financial markets and events in China, a reference to the current outbreak of the coronavirus that is adding uncertainty to the global economic outlook.
Headline inflation in Belarus was steady at 4.7 percent in January and December, slightly lower than the central bank had expected, but close to its target.
The Belarus ruble is also expected to be near equilibrium, the central bank said.
The government and central bank in January adopted a major strategy to improve trust in the Belarusian ruble by pursuing a coordinated policy to reduce the reliance of foreign currency in the country and ensure the Belarusian ruble occupies a leading role in the domestic economy.
Government debt commitments are around 97 percent denominated in foreign currency.
Among the features of this strategy is for the central bank to fully transition to inflation targeting by 2021, a reduced footprint by the central bank in the foreign exchange market, reduced monopolies in the economy over the next few years, a reduction in state debt, regular issues of government debt in Belarusian rubles starting this year with various periods of maturity, the creation of alternative forms of savings to procure long-term sources of funding in the ruble, and ensure that all taxes, rents, tariffs and prices by state-run organizations are set in Belarusian rubles.
After rising from February 2019 to July 2019, the Belarusian ruble has eased since November and fell further to 2.19 to the U.S. dollar today, down 4.1 percent this year.
www.CentralBankNews.info
Tuesday, February 11, 2020
New Zealand holds rate, time to adjust if coronavirus hits
New Zealand's central bank left its policy rate steady, saying it assumes the economic impact of the coronavirus outbreak will be of short duration, but if the impact turns out to be larger and more persistent "monetary policy has time to adjust if needed as more information becomes available."
The Reserve Bank of New Zealand (RBNZ) left its Official Cash Rate (OCR) at a record low of 1.0 percent, unchanged since August last year.
In 2019 it cut the rate twice by a total of 75 basis points, starting in May when it became the first central bank among developed economies to slash its interest rate and provide a dose of monetary stimulus in response to slowing global growth, hit by uncertainty amid trade conflicts.
Since the second rate cut in August 2019, RBNZ has kept the rate steady, saying it would remain at a low level for a prolonged period and it would add further monetary stimulus if needed to achieve its inflation and employment objectives.
In today's policy statement, RBNZ's monetary policy committee dropped the earlier reference to adding further stimulus if needed, noting additional fiscal stimulus is helping reduce the burden on monetary policy and economic growth is expected to accelerate over the second half of 2020.
In December New Zealand's government announced an investment package of $12 billion, or around 4 percent of gross domestic product, with some $8 billion to be spent between June 2022 and June 2024, mainly on infrastructure.
However, policy makers still agreed low interest rates were needed to keep inflation and employment close to the targets and the outbreak of the coronavirus in China is "an emerging downside risk."
At this point, RBNZ said it assumes the economic impact on New Zealand from the coronavirus will be short and mostly felt in the first half of 2020.
But it also acknowledged that some sectors of the economy, such as tourism and trade, were being significantly affected and although the understanding of the duration and impact of the outbreak was changing quickly, it agreed "the coronavirus outbreak was a risk global growth in 2020."
"The Committee discussed the monetary policy implications if the impacts of the outbreak were larger and more persistent than assumed and agreed that monetary policy had time to adjust if needed as more information became available," RBNZ said.
New Zealand's dollar, known as the kiwi, has eased this year but jumped 0.6 percent in response to RBNZ's decision to 1.55 to the U.S. dollar. But it remains 3.9 percent down from the start of this year.
In an update to its economic projections, RBNZ maintained its forecast for OCR to average 1.2 percent this year but raised it to 1.0 percent in 2021 from November's forecast of 0.9 percent, implying rates will be held steady.
For 2022 OCR is seen rising to 1.3 percent, from an earlier 1.1 percent, and then to 1.7 percent in 2023.
Headline inflation is seen averaging 2.2 percent this year, up from 1.5 percent in 2019, but then easing to 1.7 percent in 2021, before rising back to 2.1 percent in 2022 and 2.0 percent in 2023.
Gross domestic product is seen averaging 1.9 percent this year, down from November's forecast of 2.1 percent and down from 2019's 3.1 percent.
In 2021 New Zealand's economy is seen growing 2.9 percent, then 2.6 percent in 2022 and 2.0 percent in 2023.
The Reserve Bank of New Zealand (RBNZ) left its Official Cash Rate (OCR) at a record low of 1.0 percent, unchanged since August last year.
In 2019 it cut the rate twice by a total of 75 basis points, starting in May when it became the first central bank among developed economies to slash its interest rate and provide a dose of monetary stimulus in response to slowing global growth, hit by uncertainty amid trade conflicts.
Since the second rate cut in August 2019, RBNZ has kept the rate steady, saying it would remain at a low level for a prolonged period and it would add further monetary stimulus if needed to achieve its inflation and employment objectives.
In today's policy statement, RBNZ's monetary policy committee dropped the earlier reference to adding further stimulus if needed, noting additional fiscal stimulus is helping reduce the burden on monetary policy and economic growth is expected to accelerate over the second half of 2020.
In December New Zealand's government announced an investment package of $12 billion, or around 4 percent of gross domestic product, with some $8 billion to be spent between June 2022 and June 2024, mainly on infrastructure.
However, policy makers still agreed low interest rates were needed to keep inflation and employment close to the targets and the outbreak of the coronavirus in China is "an emerging downside risk."
At this point, RBNZ said it assumes the economic impact on New Zealand from the coronavirus will be short and mostly felt in the first half of 2020.
But it also acknowledged that some sectors of the economy, such as tourism and trade, were being significantly affected and although the understanding of the duration and impact of the outbreak was changing quickly, it agreed "the coronavirus outbreak was a risk global growth in 2020."
"The Committee discussed the monetary policy implications if the impacts of the outbreak were larger and more persistent than assumed and agreed that monetary policy had time to adjust if needed as more information became available," RBNZ said.
New Zealand's dollar, known as the kiwi, has eased this year but jumped 0.6 percent in response to RBNZ's decision to 1.55 to the U.S. dollar. But it remains 3.9 percent down from the start of this year.
In an update to its economic projections, RBNZ maintained its forecast for OCR to average 1.2 percent this year but raised it to 1.0 percent in 2021 from November's forecast of 0.9 percent, implying rates will be held steady.
For 2022 OCR is seen rising to 1.3 percent, from an earlier 1.1 percent, and then to 1.7 percent in 2023.
Headline inflation is seen averaging 2.2 percent this year, up from 1.5 percent in 2019, but then easing to 1.7 percent in 2021, before rising back to 2.1 percent in 2022 and 2.0 percent in 2023.
Gross domestic product is seen averaging 1.9 percent this year, down from November's forecast of 2.1 percent and down from 2019's 3.1 percent.
In 2021 New Zealand's economy is seen growing 2.9 percent, then 2.6 percent in 2022 and 2.0 percent in 2023.
Sunday, February 9, 2020
This week in monetary policy: New Zealand, Sweden, Belarus, Serbia, Uganda, Mexico & Peru
This week - February 9 through February 15 - central banks from 7 countries or jurisdictions are scheduled to decide on monetary policy: New Zealand, Sweden, Belarus, Serbia, Uganda, Mexico and Peru.
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 7 | ||||||
| FEB 9 - FEB 15, 2020: | ||||||
| NEW ZEALAND | 12-Feb | 1.00% | 0 | 0 | 1.75% | DM |
| SWEDEN | 12-Feb | 4.50% | 0 | 0 | 5.50% | DM |
| BELARUS | 12-Feb | 9.00% | 0 | 0 | 10.00% | |
| SERBIA | 13-Feb | 2.25% | 0 | 0 | 3.00% | FM |
| UGANDA | 13-Feb | 9.00% | 0 | 0 | 10.00% | |
| MEXICO | 13-Feb | 7.25% | 0 | 0 | 8.25% | EM |
| PERU | 13-Feb | 2.25% | 0 | 0 | 2.75% | EM |
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