Colombia's central bank cut its rate for the second time this year to continue what it described as a "countercyclical drive of monetary policy" and said it would increase the amount of currency hedging by conducting new sales of U.S. dollars through forward operations for up to US$1 billion.
The Central Bank of Colombia (CBC) cut its benchmark interest rate by another 50 basis points to 3.25 percent and has now cut it by 100 points this year following a similar cut in March.
The rate cut was expected by analysts who expect the rate to be cut further to 3.0 percent by mid-year.
In April 2014 CBC embarked on a tightening cycle, raising its rate 14 times by 450 basis points to 7.75 percent in July 2016.
But in December 2016 it reversed course, lowering the rate 12 times until it paused in April 2018.
The rate cut in March this year was the first cut since then.
In today's statement, CBC said it would also continue to hold foreign exchange swaps for up to US$400 million.
Earlier this month the International Monetary Fund (IMF) forecast Colombia's economy, which remained resilient last year with growth of 3.3 percent, would contract 2.4 percent this year due to the disruptions from the Covid-19 pandemic and lower oil prices.
This would be Colombia's first economic recession since 1999. Growth in 2021 is expected to rebound and remain around 3.5 percent over the medium term, supported by domestic demand.
Colombia's peso fell sharply at the start of March but has stabilized since then and was trading around 3,958 to the U.S. dollar today, down 17 percent this year.
www.CentralBankNews.info
Thursday, April 30, 2020
ECB leaves rate steady, launches new funding scheme
The European Central Bank (ECB) left its key interest rates steady but launched another emergency funding operation to support liquidity in the financial system and lowered the interest rate on one of its existing long-term funding operations at a time most economic activity worldwide has ground to a halt.
"The euro area is facing an economic contraction of a magnitude and speed that are unprecedented in peacetime," said ECB President Christine Lagarde, estimating the economy of the 19-nations that share the euro currency could shrink between 5 percent and 12 percent this year depending on how long measures to contain the coronavirus remain in place and the success of policies to ease the economic consequences.
The ECB, which has already cut interest rates to the lower bound, lowered the interest rate on its targeted longer-term refinancing operations (TLTRO III), which was launched in March, to 50 basis points below the average rate on refinancing operations during the period from June 2020 to June 2021.
And for financial institutions whose lending to businesses reach the ECB's threshold, the interest rate will be even lower, at 50 basis points below the ECB's deposit rate.
The ECB has maintained its benchmark refinancing rate at 0.0 percent and the lending rate at 0.25 percent since March 2016 but in September 2019 it lowered the deposit rate to minus 0.50 percent.
Lagarde confirmed the ECB's guidance the interest rates will remain at their present or lower levels until inflation "robustly" converges to a level that is sufficiently close to, but below 2 percent.
In addition to its new funding program, the ECB's governing council said it would continue to purchase assets at a monthly pace of 20 billion euros under its asset purchase program (APP) along with a temporary 120 billion envelope until the end of the year.
It also confirmed that it expects these asset purchases to run for as long as necessary and only end shortly before its starts raising key interest rates.
In March the ECB launched a 750 billion euro Pandemic Emergency Purchase Program (PEEP) to help ease its overall monetary policy stance and counter the risk to its monetary policy transmission and the outlook for the euro area economy.
Today the ECB launched another program to boost liquidity in the euro area financial system that will be known as PELTRO (non-targeted pandemic emergency longer-term refinancing operations).
PELTROs comprise seven additional refinancing operations that begin in May and then mature in staggered sequence between July and September 2021, The operations will be carried out as fixed tenders with full allotment with an interest rates that is 25 basis points below the refinancing rate.
The ECB said it was fully prepared to increase the size of the PEPP program "by as much as necessary and for as long as needed."
"In any case, it stands ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner, in line with its commitment to symmetry," ECB said.
Lagarde said the pandemic and containment measures had taken a toll on production and domestic demand in the euro area and the downturn in April activity suggests the impact is "likely to be even more severe in the second quarter."
"Given the highly uncertain duration of the pandemic, the likely extent and duration of the imminent recession and the subsequent recovery are difficult to predict," she said, pointing to initial estimates by staff - ahead of a June forecast - that see gross domestic product falling by between 5.0 percent and 12 percent in 2020.
Inflation in the euro area has also been falling in recent months and fell to 0.4 percent in April from 0.7 percent in March, and the ECB expects its to decline even more in coming months due to the lower prices of oil along with the impact of lower economic activity.
"The euro area is facing an economic contraction of a magnitude and speed that are unprecedented in peacetime," said ECB President Christine Lagarde, estimating the economy of the 19-nations that share the euro currency could shrink between 5 percent and 12 percent this year depending on how long measures to contain the coronavirus remain in place and the success of policies to ease the economic consequences.
The ECB, which has already cut interest rates to the lower bound, lowered the interest rate on its targeted longer-term refinancing operations (TLTRO III), which was launched in March, to 50 basis points below the average rate on refinancing operations during the period from June 2020 to June 2021.
And for financial institutions whose lending to businesses reach the ECB's threshold, the interest rate will be even lower, at 50 basis points below the ECB's deposit rate.
The ECB has maintained its benchmark refinancing rate at 0.0 percent and the lending rate at 0.25 percent since March 2016 but in September 2019 it lowered the deposit rate to minus 0.50 percent.
Lagarde confirmed the ECB's guidance the interest rates will remain at their present or lower levels until inflation "robustly" converges to a level that is sufficiently close to, but below 2 percent.
In addition to its new funding program, the ECB's governing council said it would continue to purchase assets at a monthly pace of 20 billion euros under its asset purchase program (APP) along with a temporary 120 billion envelope until the end of the year.
It also confirmed that it expects these asset purchases to run for as long as necessary and only end shortly before its starts raising key interest rates.
In March the ECB launched a 750 billion euro Pandemic Emergency Purchase Program (PEEP) to help ease its overall monetary policy stance and counter the risk to its monetary policy transmission and the outlook for the euro area economy.
Today the ECB launched another program to boost liquidity in the euro area financial system that will be known as PELTRO (non-targeted pandemic emergency longer-term refinancing operations).
PELTROs comprise seven additional refinancing operations that begin in May and then mature in staggered sequence between July and September 2021, The operations will be carried out as fixed tenders with full allotment with an interest rates that is 25 basis points below the refinancing rate.
The ECB said it was fully prepared to increase the size of the PEPP program "by as much as necessary and for as long as needed."
"In any case, it stands ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner, in line with its commitment to symmetry," ECB said.
Lagarde said the pandemic and containment measures had taken a toll on production and domestic demand in the euro area and the downturn in April activity suggests the impact is "likely to be even more severe in the second quarter."
"Given the highly uncertain duration of the pandemic, the likely extent and duration of the imminent recession and the subsequent recovery are difficult to predict," she said, pointing to initial estimates by staff - ahead of a June forecast - that see gross domestic product falling by between 5.0 percent and 12 percent in 2020.
Inflation in the euro area has also been falling in recent months and fell to 0.4 percent in April from 0.7 percent in March, and the ECB expects its to decline even more in coming months due to the lower prices of oil along with the impact of lower economic activity.
Rwanda cuts rate 50 bps to cushion economic shock
Rwanda's central bank cut its Central Bank Rate (CBR) by 50 basis points to 4.50 percent to "mitigate the shock on the Rwandan economy" by further loosening monetary policy, ease liquidity conditions in the banking sector and support a recovery of the economy.
It is the first rate cut by the National Bank of Rwanda (NBR) this year and only the second since December 2017 following a similar-sized rate cut cut in May 2019.
"Considering that inflation is projected to decelerate in the second half of 2020, owed to a drop in aggregate demand, the MPC (monetary policy committee) decided to cut the Central Bank Rate (CBR) from 5.0 percent to 4.5 percent," NBR said.
It added the expected decline in inflation points "out the need for policy measures to support aggregate demand in the economy."
Last month took several initiatives to help mitigate the economic impact from Covid-19, including NBR injecting 23.4 billion Rwandan franc into the banking system by lowering the reserve requirement ratio by 100 basis points to 4.0 percent, setting up a lending facility of 50 billion francs and easing prudential requirements to temporarily allow banks to restructure outstanding loans by borrowers that are facing cash flow challenges.
As of April 10, banks had restructured 7,952 loans, worth 255 billion francs, NBR said.
"The global economic. disruptions caused by the COVID-19 pandemic are weighing on Rwanda's economy," the central bank said, adding the outbreak of the virus had led to a significant slowdown in the services and industry sectors after a strong performance in the first two months of the year.
Demand for loans has also fallen, with new authorized loans down by 10.6 percent in the first quarter. The trade deficit has also worsened by 18.8 percent in the first quarter due to higher imports compared with exports.
However, NBR said the government's policy measures to help raised demand for credit after the virus subsides, contributing to a reduction in the trade deficit and a stable foreign exchange.
Inflation in the first quarter of 220 was 8.2 percent, mainly due to higher food and energy prices, but inflation in now expected to decelerate to an average of 6.0 percent for the year and 1.0 percent in 2021, respectively.
Earlier this month the International Monetary Fund approved the disbursement of $109.4 million to help meet Rwanda's balance of payment needs as the pandemic has ground the economy to a halt.
"A temporary widening of the budget deficit is appropriate to mitigate the health and economic impact of the pandemic," the IMF said, adding once the crises abates, the fiscal adjustment path should be adjusted to preserve debt sustainability in the medium term.
It added that monetary policy should be data driven and NBR should stand ready to provide additional liquidity support if needed.
www.CentralBankNews.info
It is the first rate cut by the National Bank of Rwanda (NBR) this year and only the second since December 2017 following a similar-sized rate cut cut in May 2019.
"Considering that inflation is projected to decelerate in the second half of 2020, owed to a drop in aggregate demand, the MPC (monetary policy committee) decided to cut the Central Bank Rate (CBR) from 5.0 percent to 4.5 percent," NBR said.
It added the expected decline in inflation points "out the need for policy measures to support aggregate demand in the economy."
Last month took several initiatives to help mitigate the economic impact from Covid-19, including NBR injecting 23.4 billion Rwandan franc into the banking system by lowering the reserve requirement ratio by 100 basis points to 4.0 percent, setting up a lending facility of 50 billion francs and easing prudential requirements to temporarily allow banks to restructure outstanding loans by borrowers that are facing cash flow challenges.
As of April 10, banks had restructured 7,952 loans, worth 255 billion francs, NBR said.
"The global economic. disruptions caused by the COVID-19 pandemic are weighing on Rwanda's economy," the central bank said, adding the outbreak of the virus had led to a significant slowdown in the services and industry sectors after a strong performance in the first two months of the year.
Demand for loans has also fallen, with new authorized loans down by 10.6 percent in the first quarter. The trade deficit has also worsened by 18.8 percent in the first quarter due to higher imports compared with exports.
However, NBR said the government's policy measures to help raised demand for credit after the virus subsides, contributing to a reduction in the trade deficit and a stable foreign exchange.
Inflation in the first quarter of 220 was 8.2 percent, mainly due to higher food and energy prices, but inflation in now expected to decelerate to an average of 6.0 percent for the year and 1.0 percent in 2021, respectively.
Earlier this month the International Monetary Fund approved the disbursement of $109.4 million to help meet Rwanda's balance of payment needs as the pandemic has ground the economy to a halt.
"A temporary widening of the budget deficit is appropriate to mitigate the health and economic impact of the pandemic," the IMF said, adding once the crises abates, the fiscal adjustment path should be adjusted to preserve debt sustainability in the medium term.
It added that monetary policy should be data driven and NBR should stand ready to provide additional liquidity support if needed.
www.CentralBankNews.info
Wednesday, April 29, 2020
Zimbabwe cuts rate 2nd time in 2020 to ensure growth
Zimbabwe's central bank lowered its policy rate for the second time this year and for the third time in the current easing cycle to ensure the country's economy remains on a path toward grow amid the impact of the Covid-19 pandemic.
The Reserve Bank of Zimbabwe (RBZ) cut its policy rate by another 10 percentage points to 15.0 percent and has now cut it by 20 percentage points this year following a similar-sized cut in March.
Since November 2019, when RBZ halved its policy rate to 35.0 percent from 70.0 percent, the rate has now been cut by 55 percentage points in three steps.
"The MPC (monetary policy committee) noted the compelling need to reinforce the bank's first round of economic policy responses to the Covid-19 pandemic," RBZ said in a statement that was released on April 29 following a meeting of its policy committee on April 24.
In addition to the cut to the policy rate, which will take effect on May 1, RBZ said the interest rate on its medium-term bank accommodation facility will be lowered to 10 percent from 15 percent while the size of the facility has been increased by another 500 million Zimbabwe dollars to 3 billion.
In March, when RBZ cut its policy rate by 10 percentage points, RBZ lowered the statutory reserve ratio by 50 basis points to 4.5 percent and added 1 billion Zimbabwe dollars to the medium term accommodation facility to a total of 2.5 billion.
The Reserve Bank of Zimbabwe (RBZ) cut its policy rate by another 10 percentage points to 15.0 percent and has now cut it by 20 percentage points this year following a similar-sized cut in March.
Since November 2019, when RBZ halved its policy rate to 35.0 percent from 70.0 percent, the rate has now been cut by 55 percentage points in three steps.
"The MPC (monetary policy committee) noted the compelling need to reinforce the bank's first round of economic policy responses to the Covid-19 pandemic," RBZ said in a statement that was released on April 29 following a meeting of its policy committee on April 24.
In addition to the cut to the policy rate, which will take effect on May 1, RBZ said the interest rate on its medium-term bank accommodation facility will be lowered to 10 percent from 15 percent while the size of the facility has been increased by another 500 million Zimbabwe dollars to 3 billion.
In March, when RBZ cut its policy rate by 10 percentage points, RBZ lowered the statutory reserve ratio by 50 basis points to 4.5 percent and added 1 billion Zimbabwe dollars to the medium term accommodation facility to a total of 2.5 billion.
In September 2019 Zimbabwe's finance minster set up the central bank's 9-member monetary policy committee to help stabilize the country's economy and move toward inflation targeting as a monetary policy framework.
That same month RBZ raised its policy rate, the overnight lending rate, to 70 percent from 50 percent to curb rising inflation and support the Zimbabwe dollar, which was reintroduced last year.US Fed holds rate, says virus poses 'considerable risks'
The U.S. Federal Reserve left its benchmark interest rate steady at 0.0 to 0.25 percent, as widely expected, but said the outbreak of the coronavirus is causing "tremendous human and economic hardship across the United States and around the world," and "poses considerable risks to the economic outlook over the medium term."
At two emergency meetings within two weeks in March, U.S. central bank's policy-setting Federal Open Market Committee (FOMC), slashed its federal funds rate by 150 basis points and has cut its five times by a total of 2.25 percentage points since it began easing in July 2019.
In addition, the Fed has launched a vast array of monetary tools to cushion U.S. households and businesses from the damage from the efforts to contain Covid-19.
This includes buying Treasury securities, agency residential and commercial mortgage-backed securities to ensure its easy policy is transmitted to the economy.
The Fed said it would continue with these purchases while its open market desk in New York will continue to offer large-scale overnight and term repurchase agreements and is "prepared to adjust its plans as appropriate."
"The ongoing public health crises will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term," the Fed said.
The impact of the virus is already causing sharp declines in economic activity - the U.S. gross domestic product shrank by 4.8 percent in the first quarter - and pushed up unemployment sharply.
Weaker demand and lower oil prices will hold down inflation, the Fed said, adding it was "committee to using its full range of tools to support the U.S. economy in this challenging time" and expects to maintain its federal funds rate "until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals."
The FOMC was unanimous in its policy decision.
At two emergency meetings within two weeks in March, U.S. central bank's policy-setting Federal Open Market Committee (FOMC), slashed its federal funds rate by 150 basis points and has cut its five times by a total of 2.25 percentage points since it began easing in July 2019.
In addition, the Fed has launched a vast array of monetary tools to cushion U.S. households and businesses from the damage from the efforts to contain Covid-19.
This includes buying Treasury securities, agency residential and commercial mortgage-backed securities to ensure its easy policy is transmitted to the economy.
The Fed said it would continue with these purchases while its open market desk in New York will continue to offer large-scale overnight and term repurchase agreements and is "prepared to adjust its plans as appropriate."
"The ongoing public health crises will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term," the Fed said.
The impact of the virus is already causing sharp declines in economic activity - the U.S. gross domestic product shrank by 4.8 percent in the first quarter - and pushed up unemployment sharply.
Weaker demand and lower oil prices will hold down inflation, the Fed said, adding it was "committee to using its full range of tools to support the U.S. economy in this challenging time" and expects to maintain its federal funds rate "until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals."
The FOMC was unanimous in its policy decision.
Kenya cuts rate 3rd time, ready to take further measures
Kenya's central bank lowered its policy rate for the third time this year due to what it said was a "continuing adverse economic outlook," adding it is closely monitoring the impact of its recent policy measures and is "ready to take additional measures as necessary."
The Central Bank of Kenya (CBK) cut its Central Bank Rate (CBR) by 25 basis points to 7.0 percent and has now cut the rate by 150 points this year following cuts in January and March.
As the impact of these rate cuts are still being transmitted to the economy, CBK said is monetary policy committee is keeping a close eye on the global and domestic economy and will reconvene within a month.
Since May 2016, when CBK began easing its monetary policy, it has now cut its rates eight times by a total of 450 basis points.
In addition to the rate cuts, CBK also lowered its cash reserve ratio in March and said 43.5 percent of the funds released to the banking system had been used so far, mainly by the tourism, real estate, trade and agricultural sectors.
In line with CBK's additional emergency measures announced on March 18, loans amounting to 81.7 billion shilling have been restructured while fiscal measures to cushion the economy from the negative impact of the COVID-19 virus, including spending in the health sector, should result in a fiscal impulse of around 2 percent of gross domestic product in fiscal 2019-20.
CBK added that inflation is expected to remain within its target range in the near term despite the reduction in value-added-tax (VAT) to 14 percent from 16 percent, favorable weather conditions, lower oil prices, and disruptions from the pandemic.
The Central Bank of Kenya (CBK) cut its Central Bank Rate (CBR) by 25 basis points to 7.0 percent and has now cut the rate by 150 points this year following cuts in January and March.
As the impact of these rate cuts are still being transmitted to the economy, CBK said is monetary policy committee is keeping a close eye on the global and domestic economy and will reconvene within a month.
Since May 2016, when CBK began easing its monetary policy, it has now cut its rates eight times by a total of 450 basis points.
In addition to the rate cuts, CBK also lowered its cash reserve ratio in March and said 43.5 percent of the funds released to the banking system had been used so far, mainly by the tourism, real estate, trade and agricultural sectors.
In line with CBK's additional emergency measures announced on March 18, loans amounting to 81.7 billion shilling have been restructured while fiscal measures to cushion the economy from the negative impact of the COVID-19 virus, including spending in the health sector, should result in a fiscal impulse of around 2 percent of gross domestic product in fiscal 2019-20.
CBK added that inflation is expected to remain within its target range in the near term despite the reduction in value-added-tax (VAT) to 14 percent from 16 percent, favorable weather conditions, lower oil prices, and disruptions from the pandemic.
Georgia begins exit from tight policy and cuts rate 50 bps
Georgia's central bank, one of the few central banks to have maintained interest rates this year, said it had now started a "gradual exit" from its tight monetary policy and cut its key interest rate in the face of a sharp decline in demand that will put downward pressure on inflation.
The National Bank of Georgia (NBG) cut its refinancing rate by 50 basis points to 8.50 percent, its first rate cut since September 2019 when it began tightening its monetary policy stance due to growing inflationary pressures from a fall in the lari's exchange rate.
From September last year until January this year NBG raised its rate four times by a total of 200 basis points before pausing.
The four rate hikes helped the lari rebound from December 2019 but on March 19, 2020 - the day after NBG's monetary policy committee kept the rate steady amid an unprecedented spree of rate cuts by central banks worldwide in response to the spread of the virus - the lari plunged.
Although NBG on March 18 acknowledged a decline in external and domestic demand that will create downward pressure on inflation, it left its interest rate and tight monetary policy steady, "considering the high level of uncertainty."
During the next week, the lari lost some 20 percent and hit record lows, forcing NBG to intervene in the foreign exchange markets and sell some US$60 million at two auctions as it acknowledged the impact of the "economic shock" that will be caused by the coronavirus on the country's economy.
The interventions helped calm foreign exchange markets and on April 8 NBG announced a series of emergency measures in response to the impact of COVID-19, including providing commercial banks and microfinance institutions with US$400 million through swaps.
By mid-April the lari had clawed back some of its losses in March but in the last week it has depreciated further and was trading at 3.2 to the U.S. dollar today, down 10.6 percent this year.
"Given the expected reduction in the demand, there is no need to further maintain such tightened policy stance," NBG said today.
The National Bank of Georgia (NBG) cut its refinancing rate by 50 basis points to 8.50 percent, its first rate cut since September 2019 when it began tightening its monetary policy stance due to growing inflationary pressures from a fall in the lari's exchange rate.
From September last year until January this year NBG raised its rate four times by a total of 200 basis points before pausing.
The four rate hikes helped the lari rebound from December 2019 but on March 19, 2020 - the day after NBG's monetary policy committee kept the rate steady amid an unprecedented spree of rate cuts by central banks worldwide in response to the spread of the virus - the lari plunged.
Although NBG on March 18 acknowledged a decline in external and domestic demand that will create downward pressure on inflation, it left its interest rate and tight monetary policy steady, "considering the high level of uncertainty."
During the next week, the lari lost some 20 percent and hit record lows, forcing NBG to intervene in the foreign exchange markets and sell some US$60 million at two auctions as it acknowledged the impact of the "economic shock" that will be caused by the coronavirus on the country's economy.
The interventions helped calm foreign exchange markets and on April 8 NBG announced a series of emergency measures in response to the impact of COVID-19, including providing commercial banks and microfinance institutions with US$400 million through swaps.
By mid-April the lari had clawed back some of its losses in March but in the last week it has depreciated further and was trading at 3.2 to the U.S. dollar today, down 10.6 percent this year.
"Given the expected reduction in the demand, there is no need to further maintain such tightened policy stance," NBG said today.
Despite today's rate cut, NBG said its monetary policy remains tight to help ensure inflation returns to its target and it will "exit the tight monetary policy stance gradually and further steps will depend on how quickly inflation expectations recede."
Georgia's inflation rate eased to 6.1 percent in March from 6.4 percent in February and January but the central bank said inflation will remain high for several months before gradually declining and reaching its target level in the first half of next year.
"It should be noted that the reduction in aggregate demand is transmitted to the inflation with a lag, while supply-side factors affect inflation faster," said NBG, which targets inflation of 3.0 percent.
Georgia's economy, which expanded 5.1 percent in 2019, is seen contracting around 4 percent, with exports in March already down 22 percent, revenue from tourism down almost 70 percent, remittances down 9 percent and imports down 13 percent from weaker domestic demand.
The estimate for the decline in growth mirrors that of the International Monetary Fund (IMF), which on April 14 also forecast a 4 percent contraction this year while the deterioration in trade is expected to widen its current account deficit on reduced financial flows and investment, and the fiscal deficit to about 8.5 percent of GDP.
Urgent balance of payments needs from the Covid-19 shock are estimated at about US$1.6 billion in 2020-21 and IMF staff has recommended $375 million in additional funds so total disbursements will amount to some $450 million.
"With the Covid-19 pandemic, Georgia's economic outlook has significantly deteriorated," the IMF said.
Tuesday, April 28, 2020
Tajikistan reverses course and cuts rate 1st time in 2020
Tajikistan's central bank lowered its key interest rate for the first time this year, more than reversing a rate hike in January, to support the country's economy from damages from the coronavirus pandemic, ensure liquidity in the banking system and achieve stable inflation.
The National Bank of Tajikistan (NBT) cut its refinancing rate by 100 basis points to 11.75 percent, its first cut this year after raising the rate in January by 50 basis points.
NBT was one of only five central banks to raise rates this year but three of these - the Czech Republic, Kazakhstan and now Tajikistan - have more than reversed the earlier cuts and switched to accommodative monetary policy to ease the negative economic impact of the virus.
Inflation in Tajikistan rose to 9.3 percent in March from 7.8 percent in February but NBT said the risks of inflation in the next quarter are now lower.
Just as the spread of COVID-19 has negatively impacted the global economy, Tajikistan's economy has also been affected from reduced trade and investment, the limitation of cross-border relations, lower income, higher financial risks in financial institutions along with a deprecation of the somoni currency.
Tajikistan's currency, the Somoni, which replaced the Tajikistani ruble in 2000, has been steadily deprecating since 2014 and on March 30 NBT made what it said was a one-time correction in the official U.S. dollar rate by up to 5.0 percent to ease the pressure in foreign exchange markets.
Today the somoni is trading around 10.25 to the dollar, down just over 5 percent from around 9.70 at the start of the year.
NBT has been steadily lowering its rate since January 2018 in synch with falling inflation but a pickup in inflationary pressures last year forced the central bank - which is moving toward inflation targeting - to pause in its easing and raise the rate in February 2019.
It then lowered the rate a few months later, in May and then November last year.
But once again, inflation began trending upwards in the first quarter and in January this year the central bank raised the rate 50 basis points.
The hike came a few weeks after the International Monetary Fund (IMF) said tighter monetary policy might be needed to mitigate possible second-round effects from a rise in inflation due to base effects and higher food prices.
On April 8 NBT lowered its reserve requirements for financial institutions temporarily by 200 basis points to 1 percent from April 1 to Dec. 31, injecting 241.7 million somoni into the banking system.
The reserve ratio for foreign currencies was lowered by 400 points to 5.0 percent.
www.CentralBankNews.info
The National Bank of Tajikistan (NBT) cut its refinancing rate by 100 basis points to 11.75 percent, its first cut this year after raising the rate in January by 50 basis points.
NBT was one of only five central banks to raise rates this year but three of these - the Czech Republic, Kazakhstan and now Tajikistan - have more than reversed the earlier cuts and switched to accommodative monetary policy to ease the negative economic impact of the virus.
Inflation in Tajikistan rose to 9.3 percent in March from 7.8 percent in February but NBT said the risks of inflation in the next quarter are now lower.
Just as the spread of COVID-19 has negatively impacted the global economy, Tajikistan's economy has also been affected from reduced trade and investment, the limitation of cross-border relations, lower income, higher financial risks in financial institutions along with a deprecation of the somoni currency.
Tajikistan's currency, the Somoni, which replaced the Tajikistani ruble in 2000, has been steadily deprecating since 2014 and on March 30 NBT made what it said was a one-time correction in the official U.S. dollar rate by up to 5.0 percent to ease the pressure in foreign exchange markets.
Today the somoni is trading around 10.25 to the dollar, down just over 5 percent from around 9.70 at the start of the year.
NBT has been steadily lowering its rate since January 2018 in synch with falling inflation but a pickup in inflationary pressures last year forced the central bank - which is moving toward inflation targeting - to pause in its easing and raise the rate in February 2019.
It then lowered the rate a few months later, in May and then November last year.
But once again, inflation began trending upwards in the first quarter and in January this year the central bank raised the rate 50 basis points.
The hike came a few weeks after the International Monetary Fund (IMF) said tighter monetary policy might be needed to mitigate possible second-round effects from a rise in inflation due to base effects and higher food prices.
On April 8 NBT lowered its reserve requirements for financial institutions temporarily by 200 basis points to 1 percent from April 1 to Dec. 31, injecting 241.7 million somoni into the banking system.
The reserve ratio for foreign currencies was lowered by 400 points to 5.0 percent.
www.CentralBankNews.info
Armenia cuts rate 2nd time in 2020 to boost stimulus
Armenia's central bank lowered its key policy rate for the second time this year and for the fourth time since February 2019 to boost monetary stimulus as the coronavirus will have a negative impact on the country's economy.
The Central Bank of Armenia (CBA) cut its refinancing rate by another 25 basis points to 5.0 percent and has now cut it by 50 points this year following a cut in March.
CBA has been steadily lowering its interest rates since August 2015 when it rapidly cut rates 12 times by 450 points until the rate hit 6.0 by February 2017.
The central bank then paused for two years until February 2019 when it returned to the path of easing and has now cut the rate four times since then by a total of 100 basis points.
"Given the current and projected external and internal developments, the weakening demand, the current low inflation environment and the stabilization of financial markets, the CB board considers it expedient to increase the amount of monetary stimulus by reducing the refinancing rate," CBA said.
"The council also considers that in the current situation it will be necessary to maintain the stimulus position in the medium term," CBA said, adding inflation is expected to remain low.
The predominant risk is that inflation will deviate from its expected trajectory in a downward direction, CBA said, adding it "is ready to adjust the policy accordingly as needed."
Economic activity in almost all sectors of Armenia's declined in March from last year and this decline will deepen in the second quarter due to reduced supply and demand, the bank said, adding aggregate demand will remain weak in the future though this will be mitigated to some extent by the government's stimulus.
At the same time, the uncertainties over the timing of the contagion and the economic recovery has risen to some extent and only after this eases, will it be possible to assess the longer-term changes in the structure and prospects of the country's economy.
"It is estimated that all of this will continue to have a deflationary effect on the Armenian economy," the central bank said, adding
Armenia's inflation rate was negative for the second consecutive month in March at minus 0.1 percent after minus 0.5 percent in February.
www.CentralBankNews.info
The Central Bank of Armenia (CBA) cut its refinancing rate by another 25 basis points to 5.0 percent and has now cut it by 50 points this year following a cut in March.
CBA has been steadily lowering its interest rates since August 2015 when it rapidly cut rates 12 times by 450 points until the rate hit 6.0 by February 2017.
The central bank then paused for two years until February 2019 when it returned to the path of easing and has now cut the rate four times since then by a total of 100 basis points.
"Given the current and projected external and internal developments, the weakening demand, the current low inflation environment and the stabilization of financial markets, the CB board considers it expedient to increase the amount of monetary stimulus by reducing the refinancing rate," CBA said.
"The council also considers that in the current situation it will be necessary to maintain the stimulus position in the medium term," CBA said, adding inflation is expected to remain low.
The predominant risk is that inflation will deviate from its expected trajectory in a downward direction, CBA said, adding it "is ready to adjust the policy accordingly as needed."
Economic activity in almost all sectors of Armenia's declined in March from last year and this decline will deepen in the second quarter due to reduced supply and demand, the bank said, adding aggregate demand will remain weak in the future though this will be mitigated to some extent by the government's stimulus.
At the same time, the uncertainties over the timing of the contagion and the economic recovery has risen to some extent and only after this eases, will it be possible to assess the longer-term changes in the structure and prospects of the country's economy.
"It is estimated that all of this will continue to have a deflationary effect on the Armenian economy," the central bank said, adding
Armenia's inflation rate was negative for the second consecutive month in March at minus 0.1 percent after minus 0.5 percent in February.
www.CentralBankNews.info
Monday, April 27, 2020
BOJ boosts asset purchases as economy seen shrinking
Facing what it said was "an increasingly severe situation" from the spread of the coronavirus, Japan's central bank enhanced its monetary easing by boosting its purchases of commercial paper, corporate bonds, exchange-traded funds and real estate trusts, and will buy an unlimited amount of government bonds to ensure their yield remains around zero percent.
The Bank of Japan (BOJ) slashed its outlook for economic growth and inflation, and now sees the economy shrinking between 0.4 percent and 0.1 percent in the current 2019 fiscal year, which began on April 1, and then shrinking a further 5.0 percent to 3.0 percent in fiscal 2020.
"Japan's economy is likely to remain in a severe situation for the time being due to the impact of the spread of the novel coronavirus (COVID-19) at home and abroad," BOJ said.
In January BOJ forecast growth of 0.8-0.9 percent in fiscal 2019 and then 0.8-1.1 percent in fiscal 2020. For fiscal 2021 BOJ sees growth of 2.8-3.9 percent and then 0.8-1.6 percent in 2022.
In the fourth quarter of 2019 Japan's economy contracted 0.7 percent year-on-year.
BOJ added it "will not hesitate to take additional easing measures if necessary, and also it expects short- and long-term interest rates to remain at their present levels or lower levels."
While BOJ will continue with its current monetary policy framework of "quantitative and qualitative monetary easing (QQE) with yield cure control to boost inflation to its 2.0 percent target, there is still no prospect of meeting this target for the time being.
Consumer price inflation in the current fiscal year is now seen averaging 0.6 percent, slightly below its January forecast of 0.6-0.7 percent, but in fiscal 2020 consumer prices are seen falling by 0.7-0.3 percent before rising to between 0.0-0.7 percent in fiscal 2021.
In January BOJ forecast inflation of 1.0-1.1 percent in fiscal 2020 and 1.2-1.6 percent in fiscal 2021. For fiscal 2022 BOJ sees inflation of 0.4-1.0 percent.
In March and February Japan's inflation rate was steady at 0.4 percent.
BOJ has used a combination of negative interest rates and "yield curve control" since September 2016 and will continue to apply a minus 0.10 percent interest rate on banks' excess reserves.
But its asset purchases, also known as quantitative easing, will expand greatly, and as far as Japanese government bonds, known as JGBs, it will be buying "a necessary amount of JGB's without setting an upper limits so that 10-year JBB yields will remain at around zero percent."
This unlimited purchase of government bonds compares with BOJ's previous aim of buying about 80 trillion yen annually and mirrors the U.S. Federal Reserve's policy of buying enough U.S. Treasury securities to ensure an effective transmission of its policy.
It also decided to boost its purchases of commercial paper and corporate bonds to 7.5 trillion for each asset class from an earlier limit of 1 trillion, with the upper limit on outstanding holdings of 20 trillion. The additional purchases will continue until the end of September 2020.
The amount of exchange traded funds (ETFs) and Japanese real estate trusts (J-REITs) to be purchased will rise to an upper limit of 12 trillion and 180 billion yen, respectively, from an earlier limit of 6 trillion and 90 billion yen.
BOJ will also expand a special coronavirus fund set up in March aimed at facilitating corporate financing.
The range of collateral will now include private debt, including household debt, of up to 23 trillion yen from an earlier 8 trillion, boost the number of eligible counterparties and a positive interest rate of 0.1 percent will be applied to the outstanding balances of the current accounts of financial institutions that equal their outstanding loans under this operation.
The Bank of Japan (BOJ) slashed its outlook for economic growth and inflation, and now sees the economy shrinking between 0.4 percent and 0.1 percent in the current 2019 fiscal year, which began on April 1, and then shrinking a further 5.0 percent to 3.0 percent in fiscal 2020.
"Japan's economy is likely to remain in a severe situation for the time being due to the impact of the spread of the novel coronavirus (COVID-19) at home and abroad," BOJ said.
In January BOJ forecast growth of 0.8-0.9 percent in fiscal 2019 and then 0.8-1.1 percent in fiscal 2020. For fiscal 2021 BOJ sees growth of 2.8-3.9 percent and then 0.8-1.6 percent in 2022.
In the fourth quarter of 2019 Japan's economy contracted 0.7 percent year-on-year.
BOJ added it "will not hesitate to take additional easing measures if necessary, and also it expects short- and long-term interest rates to remain at their present levels or lower levels."
While BOJ will continue with its current monetary policy framework of "quantitative and qualitative monetary easing (QQE) with yield cure control to boost inflation to its 2.0 percent target, there is still no prospect of meeting this target for the time being.
Consumer price inflation in the current fiscal year is now seen averaging 0.6 percent, slightly below its January forecast of 0.6-0.7 percent, but in fiscal 2020 consumer prices are seen falling by 0.7-0.3 percent before rising to between 0.0-0.7 percent in fiscal 2021.
In January BOJ forecast inflation of 1.0-1.1 percent in fiscal 2020 and 1.2-1.6 percent in fiscal 2021. For fiscal 2022 BOJ sees inflation of 0.4-1.0 percent.
In March and February Japan's inflation rate was steady at 0.4 percent.
BOJ has used a combination of negative interest rates and "yield curve control" since September 2016 and will continue to apply a minus 0.10 percent interest rate on banks' excess reserves.
But its asset purchases, also known as quantitative easing, will expand greatly, and as far as Japanese government bonds, known as JGBs, it will be buying "a necessary amount of JGB's without setting an upper limits so that 10-year JBB yields will remain at around zero percent."
This unlimited purchase of government bonds compares with BOJ's previous aim of buying about 80 trillion yen annually and mirrors the U.S. Federal Reserve's policy of buying enough U.S. Treasury securities to ensure an effective transmission of its policy.
It also decided to boost its purchases of commercial paper and corporate bonds to 7.5 trillion for each asset class from an earlier limit of 1 trillion, with the upper limit on outstanding holdings of 20 trillion. The additional purchases will continue until the end of September 2020.
The amount of exchange traded funds (ETFs) and Japanese real estate trusts (J-REITs) to be purchased will rise to an upper limit of 12 trillion and 180 billion yen, respectively, from an earlier limit of 6 trillion and 90 billion yen.
BOJ will also expand a special coronavirus fund set up in March aimed at facilitating corporate financing.
The range of collateral will now include private debt, including household debt, of up to 23 trillion yen from an earlier 8 trillion, boost the number of eligible counterparties and a positive interest rate of 0.1 percent will be applied to the outstanding balances of the current accounts of financial institutions that equal their outstanding loans under this operation.
Sunday, April 26, 2020
This week in monetary policy: Japan, Kazakhstan, Tajikistan, Sweden, Hungary, Armenia, Georgia, Kenya, USA, Fiji, Rwanda, ECB, Malawi, Botswana, Bulgaria, Colombia & Azerbaijan
This week - April 26 through May 2 - central banks from 17 countries or jurisdictions are scheduled to decide on monetary policy: Japan, Kazakhstan, Tajikistan, Sweden, Hungary, Armenia, Georgia, Kenya, USA, Fiji, Rwanda, euro area, Malawi, Botswana, Bulgaria, Colombia and Azerbaijan.
Following table includes the name of the country, the date of the next policy decision, the current policy rate, the result of the last policy decision, the change in the policy rate year to date, and the rate one year ago.
The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.
| WEEK 18 | ||||||
| APR 26 - MAY 2, 2020: | ||||||
| JAPAN | 27-Apr | -0.10% | 0 | 0 | -0.10% | DM |
| KAZAKHSTAN | 27-Apr | 9.50% | -250 | 25 | 9.00% | FM |
| TAJIKISTAN | 27-Apr | 12.75% | 50 | 50 | 14.75% | |
| SWEDEN | 28-Apr | 0.00% | 0 | 0 | -0.25% | DM |
| HUNGARY | 28-Apr | 0.90% | 0 | 0 | 0.90% | EM |
| ARMENIA | 28-Apr | 5.25% | -25 | -25 | 5.75% | |
| GEORGIA | 29-Apr | 9.00% | 0 | 0 | 6.50% | |
| KENYA | 29-Apr | 7.25% | -100 | -125 | 9.00% | FM |
| UNITED STATES | 29-Apr | 0.25% | -100 | -150 | 2.50% | DM |
| FIJI | 30-Apr | 0.25% | -25 | -25 | 0.50% | |
| RWANDA | 30-Apr | 5.00% | 0 | 0 | 5.50% | |
| EURO AREA | 30-Apr | 0.00% | 0 | 0 | 0.00% | DM |
| MALAWI | 30-Apr | 13.50% | 0 | 0 | 14.50% | |
| BOTSWANA | 30-Apr | 4.75% | 0 | 0 | 5.00% | |
| BULGARIA | 30-Apr | 0.00% | 0 | 0 | 0.00% | FM |
| COLOMBIA | 30-Apr | 3.75% | -50 | -50 | 4.25% | EM |
| AZERBAIJAN | 1-May | 7.25% | 0 | -25 | 8.75% | |
Friday, April 24, 2020
Russia cuts rate 7th time and ready to cut further
Russia's central bank cut its rate for the second time this year, as widely expected, as it switched to an accommodative monetary policy stance and said it was ready to cut the rate further if the situation develops as it expects.
The Bank of Russia cut its key rate by 50 basis points to 5.50 percent and has now cut the rate 75 basis points this year following a cut in February.
Since June 2019, when it began easing its policy stance in light of slowing inflation, it has cut the rate seven times and by a total of 225 basis points.
Since its last policy meeting in March, when the central bank left the rate unchanged, "the situation has changed dramatically," the bank said, pointing to what it said was a "profound" revision of its view of economic developments and inflation trends over the next three years.
Elvira Nabiullina, the bank's governor, said three major events had happened in the last month, including the spread of the coronavirus, which drastically slowed the global economy, a slump in oil prices, and the introduction of nation-wide restrictions to limit the spread of the virus.
Surveys show over 80 percent of Russian businesses are experiencing the influence of the pandemic and the government's restrictions to contain the spread of Covid-19.
The combined effect of these changes is to create "material and prolonged disinflationary" effects on prices that are offsetting any temporary upward pressure on inflation from lower oil prices.
The Bank of Russia now expects Russia's economy to contract by between 4.0 and 6.0 percent this year, a sharp change from its February forecast of 1.5 to 2.0 percent growth, mainly due to a 10 to 15 percent fall in exports.
"In these conditions, GDP will shrink year-on-year in the third and fourth quarters, that is the annual rate of economic growth will be negative," Nabiullina said, adding:
"The economic situation will be returning by normal step-by-step," Nabiullina said, as restrictions are gradually lifted in the second quarter and economic activity recovers in the third and fourth quarters.
However, the secondary effects will continue to manifest in the future, she cautioned, expecting economic growth of between 2.8 and 4.8 percent in 2021 and then 1.5 to 3.5 percent in 2022.
Last year Russia's gross domestic product grew 1.3 percent after 2.5 percent in 2018.
The forecast is based on what it said was a "conservative" view of oil prices, especially this year, assuming they will slowly rise to average $25 per barrel in the fourth quarter from an average of $15 in the second quarter as the large stocks of oil will limit any price rise even if there are new OPEC+ agreements.
Next year oil prices are seen rising to an average of $35 per barrel from an average of $27 this year - sharply down from 2019's average of $64 - and then to $45 in 2022 as global demand picks up and oil stocks decline.
The collapse in domestic and global demand will have a significant disinflationary effect, with the central bank now expecting inflation to average 3.1 to 3.9 percent this year, down from 2019's 4.5 percent and the previous forecast of 3.5 to 4.0 percent.
Inflation in March and April will still reflect the temporary response of consumer prices to the weaker ruble and higher demand for certain products, and as of April 20, inflation was around 3.1 percent compared with 2.5 percent in March.
"Inflation expectations of households and businesses have increased, but in the face of falling demand their change will be of short-term nature," the central bank said.
In 2021 and 2022 inflation is then seen settling at the bank's 4.0 percent target.
After slowly rising from September 2018 to January, Russia's ruble tumbled from February to mid-March but has been rising in the last week.
Today the ruble was trading at 74.4 to the U.S. dollar, down 16.7 percent this year.
The Bank of Russia cut its key rate by 50 basis points to 5.50 percent and has now cut the rate 75 basis points this year following a cut in February.
Since June 2019, when it began easing its policy stance in light of slowing inflation, it has cut the rate seven times and by a total of 225 basis points.
Since its last policy meeting in March, when the central bank left the rate unchanged, "the situation has changed dramatically," the bank said, pointing to what it said was a "profound" revision of its view of economic developments and inflation trends over the next three years.
Elvira Nabiullina, the bank's governor, said three major events had happened in the last month, including the spread of the coronavirus, which drastically slowed the global economy, a slump in oil prices, and the introduction of nation-wide restrictions to limit the spread of the virus.
Surveys show over 80 percent of Russian businesses are experiencing the influence of the pandemic and the government's restrictions to contain the spread of Covid-19.
The combined effect of these changes is to create "material and prolonged disinflationary" effects on prices that are offsetting any temporary upward pressure on inflation from lower oil prices.
The Bank of Russia now expects Russia's economy to contract by between 4.0 and 6.0 percent this year, a sharp change from its February forecast of 1.5 to 2.0 percent growth, mainly due to a 10 to 15 percent fall in exports.
"In these conditions, GDP will shrink year-on-year in the third and fourth quarters, that is the annual rate of economic growth will be negative," Nabiullina said, adding:
"The economic situation will be returning by normal step-by-step," Nabiullina said, as restrictions are gradually lifted in the second quarter and economic activity recovers in the third and fourth quarters.
However, the secondary effects will continue to manifest in the future, she cautioned, expecting economic growth of between 2.8 and 4.8 percent in 2021 and then 1.5 to 3.5 percent in 2022.
Last year Russia's gross domestic product grew 1.3 percent after 2.5 percent in 2018.
The forecast is based on what it said was a "conservative" view of oil prices, especially this year, assuming they will slowly rise to average $25 per barrel in the fourth quarter from an average of $15 in the second quarter as the large stocks of oil will limit any price rise even if there are new OPEC+ agreements.
Next year oil prices are seen rising to an average of $35 per barrel from an average of $27 this year - sharply down from 2019's average of $64 - and then to $45 in 2022 as global demand picks up and oil stocks decline.
The collapse in domestic and global demand will have a significant disinflationary effect, with the central bank now expecting inflation to average 3.1 to 3.9 percent this year, down from 2019's 4.5 percent and the previous forecast of 3.5 to 4.0 percent.
Inflation in March and April will still reflect the temporary response of consumer prices to the weaker ruble and higher demand for certain products, and as of April 20, inflation was around 3.1 percent compared with 2.5 percent in March.
"Inflation expectations of households and businesses have increased, but in the face of falling demand their change will be of short-term nature," the central bank said.
In 2021 and 2022 inflation is then seen settling at the bank's 4.0 percent target.
After slowly rising from September 2018 to January, Russia's ruble tumbled from February to mid-March but has been rising in the last week.
Today the ruble was trading at 74.4 to the U.S. dollar, down 16.7 percent this year.
Thursday, April 23, 2020
Ukraine cuts rate 8th time with further easing in sight
Ukraine's central bank cut its policy rate for the eight time, saying inflationary pressures remain moderate and the economy requires "substantial support due to the adverse impact of quarantine measures on business activity, consumption and employment."
The National Bank of Ukraine (NBU) lowered its key policy rate by another 200 basis points to 8.0 percent - a much larger cut than expected by analysts - and has now cut it by 10 percentage points since it began an easing cycle in April 2019.
NBU reiterated that it still expects to reduce the rate further to 7.0 percent this year, with the pace of the easing dependent on how talks with the International Monetary Fund (IMF) progress, how the coronavirus pandemic develops and how quickly quarantine measures are lifted, and what anti-crises measures other governments and central banks adopt.
"The NBU leaves open the possibility of a greater easing in monetary policy if a fall in consumer demand due to quarantine measures and weaker business activity put stronger downward pressure on inflation than is currently expected," NBU said.
Ukraine's inflation rate decelerated for the 8th consecutive month to 2.3 percent in March, well below the central bank's target range of 5.0 percent, plus/minus 1 percentage points, due to lower energy prices, the residual effects of a rise in the hryvnia's exchange rate last year, and a larger supply of raw foods, NBU said.
These factors outweighed the upward pressure on prices from a fall in the hryvnia in March and the panic buying of some goods after the quarantine was imposed on March 17.
Inflation is expected to accelerate moderately in coming months to 6 percent by the end of this year, but still remain within the target range, as consumer demand remains subdued long after the quarantine ends although fiscal and monetary stimulus will help offset some of the decline.
Next year inflation is expected to temporarily exceed the target range due to the low comparison base before stabilizing around the medium-term target of 5.0 percent, NBU said.
After rising from September last year to the end of 2019, the hryvnia fell through March but has bounced back this month, both against the U.S. dollar and the euro.
Today the hryvnia was trading at 27.0 to the U.S. dollar, down 12.6 percent this year and at 29.2 against the euro, down 9.2 percent.
Ukraine's economy, which had been expected to expand 3.5 percent this year, up from 2019's 3.3 percent, is now expected to shrink by 5.0 percent in 2020 before resuming growth of around 4.0 percent in following years as the economy begins to recover in the second half of this year.
"The adverse impact of the pandemic on the Ukrainian economy is expected to be relatively shorty-term, but strong," NBU said, with the most pronounced impact from lower business activity, consumption, employment and exports in the second quarter of this year.
An updated economic forecast will be published on April 30.
The National Bank of Ukraine (NBU) lowered its key policy rate by another 200 basis points to 8.0 percent - a much larger cut than expected by analysts - and has now cut it by 10 percentage points since it began an easing cycle in April 2019.
NBU reiterated that it still expects to reduce the rate further to 7.0 percent this year, with the pace of the easing dependent on how talks with the International Monetary Fund (IMF) progress, how the coronavirus pandemic develops and how quickly quarantine measures are lifted, and what anti-crises measures other governments and central banks adopt.
"The NBU leaves open the possibility of a greater easing in monetary policy if a fall in consumer demand due to quarantine measures and weaker business activity put stronger downward pressure on inflation than is currently expected," NBU said.
Ukraine's inflation rate decelerated for the 8th consecutive month to 2.3 percent in March, well below the central bank's target range of 5.0 percent, plus/minus 1 percentage points, due to lower energy prices, the residual effects of a rise in the hryvnia's exchange rate last year, and a larger supply of raw foods, NBU said.
These factors outweighed the upward pressure on prices from a fall in the hryvnia in March and the panic buying of some goods after the quarantine was imposed on March 17.
Inflation is expected to accelerate moderately in coming months to 6 percent by the end of this year, but still remain within the target range, as consumer demand remains subdued long after the quarantine ends although fiscal and monetary stimulus will help offset some of the decline.
Next year inflation is expected to temporarily exceed the target range due to the low comparison base before stabilizing around the medium-term target of 5.0 percent, NBU said.
After rising from September last year to the end of 2019, the hryvnia fell through March but has bounced back this month, both against the U.S. dollar and the euro.
Today the hryvnia was trading at 27.0 to the U.S. dollar, down 12.6 percent this year and at 29.2 against the euro, down 9.2 percent.
Ukraine's economy, which had been expected to expand 3.5 percent this year, up from 2019's 3.3 percent, is now expected to shrink by 5.0 percent in 2020 before resuming growth of around 4.0 percent in following years as the economy begins to recover in the second half of this year.
"The adverse impact of the pandemic on the Ukrainian economy is expected to be relatively shorty-term, but strong," NBU said, with the most pronounced impact from lower business activity, consumption, employment and exports in the second quarter of this year.
An updated economic forecast will be published on April 30.
Wednesday, April 22, 2020
Paraguay cuts rate 4th time this year as inflation slows
Paraguay's central bank lowered its monetary policy rate for the fourth time this year as inflation continues to trend downward and there are no signs of inflationary pressures in coming months.
The Central Bank of Paraguay (BCP) cut its policy rate by another 100 basis points to 1.25 percent and has now cut the rate by a total of 275 basis points this year following three cuts in March.
The first of those three rate cuts last month followed a regularly scheduled meeting of BCP's monetary policy committee on March 13 but the following two cuts (March 16 and March 30) were taken after extraordinary policy meetings.
Paraguay's inflation rate rose slightly to 2.5 percent in March from 2.4 percent in February but BPC said global economic growth projections have been revised significantly down in the face of the Covid-19 pandemic, and uncertainty remains high about the duration of the pandemic.
Within South American, economic activity is deteriorating and this could be exacerbated by a worsening of international financial conditions as illustrated by rising risk premiums for emerging and developing economies, the central bank said.
Domestically, measures to contain the spread of the virus have had a significant impact on economic activity and domestic demand has fallen considerably as underlying data for inflation are showing a declining trend and there are no inflationary pressures forecast in coming months.
"In this context, CPM (monetary policy committee) considers it necessary to make monetary conditions easier in order to guarantee that inflation converges to the goal of 4.0 percent in the relevant monetary policy horizon," BCP said.
It added new data along with local and international information will determine the next policy steps.
On April 21 the executive board of the International Monetary Fund approved the disbursement of US$274 million for Paraguay under its Rapid Financing Instrument to help the country meet "urgent" balance of payment needs, preserve resources for health and social safety net spending and to catalyze multilateral donor support.
stemming from the outbreak of the COVID-19 pandemic."
In addition to its rate cuts and liquidity support, Paraguay has allowed banks to restructure loans to private sector companies that are facing difficulties and postponed collection of taxes and user fees for 2 months.
Prior to the outbreak of the coronavirus, Paraguay was on track to recover from a weather-related recession in 2019 but its economy is now seen shrinking by around 1 percent this year and the fiscal deficit is seen rising to 4.5 percent of GDP.
A temporary widening of the deficit is considered appropriate by the IMF but once the crises abates, the budget deficit will have to be narrowed and the country should re-establish its fiscal rule, which has anchored macroeconomic stability in the past 5 years.
www.CentralBankNews.info
The Central Bank of Paraguay (BCP) cut its policy rate by another 100 basis points to 1.25 percent and has now cut the rate by a total of 275 basis points this year following three cuts in March.
The first of those three rate cuts last month followed a regularly scheduled meeting of BCP's monetary policy committee on March 13 but the following two cuts (March 16 and March 30) were taken after extraordinary policy meetings.
Paraguay's inflation rate rose slightly to 2.5 percent in March from 2.4 percent in February but BPC said global economic growth projections have been revised significantly down in the face of the Covid-19 pandemic, and uncertainty remains high about the duration of the pandemic.
Within South American, economic activity is deteriorating and this could be exacerbated by a worsening of international financial conditions as illustrated by rising risk premiums for emerging and developing economies, the central bank said.
Domestically, measures to contain the spread of the virus have had a significant impact on economic activity and domestic demand has fallen considerably as underlying data for inflation are showing a declining trend and there are no inflationary pressures forecast in coming months.
"In this context, CPM (monetary policy committee) considers it necessary to make monetary conditions easier in order to guarantee that inflation converges to the goal of 4.0 percent in the relevant monetary policy horizon," BCP said.
It added new data along with local and international information will determine the next policy steps.
On April 21 the executive board of the International Monetary Fund approved the disbursement of US$274 million for Paraguay under its Rapid Financing Instrument to help the country meet "urgent" balance of payment needs, preserve resources for health and social safety net spending and to catalyze multilateral donor support.
stemming from the outbreak of the COVID-19 pandemic."
In addition to its rate cuts and liquidity support, Paraguay has allowed banks to restructure loans to private sector companies that are facing difficulties and postponed collection of taxes and user fees for 2 months.
Prior to the outbreak of the coronavirus, Paraguay was on track to recover from a weather-related recession in 2019 but its economy is now seen shrinking by around 1 percent this year and the fiscal deficit is seen rising to 4.5 percent of GDP.
A temporary widening of the deficit is considered appropriate by the IMF but once the crises abates, the budget deficit will have to be narrowed and the country should re-establish its fiscal rule, which has anchored macroeconomic stability in the past 5 years.
www.CentralBankNews.info
Iceland cenbank to begin buying Treasury bonds in May
Iceland's central bank joined the growing number of central banks that are engaged in asset purchases, also known as quantitative easing, saying it will begin buying Treasury bonds in the secondary market starting in May to ensure its easy monetary policy stance is transmitted to households and businesses.
The Central Bank of Iceland (CBI), which has cut its key interest rates three times this year by a total of 125 basis points and eight times since May 2019 by a total of 2.75 percentage points, said it may purchase up to 150 billion krona of Treasury bonds, with the amount it intends to buy each quarter to be announced in advance.
The total amount to be purchased in the second quarter may range up to 20 billion krona with the purchases focused on all nominal benchmark Icelandic krona bonds maturing in 2021, 2022, 2025 and 2031, and any new benchmark bonds that will be issued.
Today's announcement follows a decision by CBI's monetary policy committee on March 23 - only a week after CBI last cut its rate at an unscheduled monetary policy meeting - that it would begin direct purchases of Treasury bonds in the secondary market and "will do what is needed" so its accommodative policy stance is transmitted to the economy.
At that time, it said details of its decision would be announced later.
Governments worldwide, including Iceland's are sharply boosting spending and thus the issuance of government debt, to cushion the economic damage from measures to contain the coronavirus.
This will tend to reduce liquidity and push Treasury yields higher, disrupting the normal transmission of easier monetary policy at a time when the central bank's actions are amid at easing the financial conditions faced by households and businesses, CBI said in March 23.
The Central Bank of Iceland (CBI), which has cut its key interest rates three times this year by a total of 125 basis points and eight times since May 2019 by a total of 2.75 percentage points, said it may purchase up to 150 billion krona of Treasury bonds, with the amount it intends to buy each quarter to be announced in advance.
The total amount to be purchased in the second quarter may range up to 20 billion krona with the purchases focused on all nominal benchmark Icelandic krona bonds maturing in 2021, 2022, 2025 and 2031, and any new benchmark bonds that will be issued.
Today's announcement follows a decision by CBI's monetary policy committee on March 23 - only a week after CBI last cut its rate at an unscheduled monetary policy meeting - that it would begin direct purchases of Treasury bonds in the secondary market and "will do what is needed" so its accommodative policy stance is transmitted to the economy.
At that time, it said details of its decision would be announced later.
Governments worldwide, including Iceland's are sharply boosting spending and thus the issuance of government debt, to cushion the economic damage from measures to contain the coronavirus.
This will tend to reduce liquidity and push Treasury yields higher, disrupting the normal transmission of easier monetary policy at a time when the central bank's actions are amid at easing the financial conditions faced by households and businesses, CBI said in March 23.
Turkey cuts rate 8th time on downside inflation outlook
Turkey's central bank cut its policy rate for the fourth time this year and for the 8th time since July 2019, saying the outlook for inflation is to the downside from weak domestic demand, inflationary expectations and producer prices stemming from the efforts to contain the spread of the coronavirus.
The Central Bank of the Republic of Turkey (CBRT) cut its one-week deposit rate by another 100 basis points to 8.75 percent and has now cut it by 325 basis points this year and by 15.25 percentage points since July last year when it began its easing cycle after a new governor was installed.
As other central banks worldwide, CBRT has been using a wide range of its monetary tools to ease its policy stance and has injected liquidity into financial markets to ensure they continue to function smoothly so they can supply credit to businesses and the economy.
CBRT has also been purchasing government debt, including from the country's unemployment insurance fund, and on April 17 it doubled its limit on its asset purchases to 10 percent of its total assets from 5 percent.
Turkey's headline inflation rate eased to 11.86 percent in March from 12.37 percent in February and while core inflation rose to 11.65 percent, CBRT said inflation expectations, demand conditions and producer prices were contributing to a "mild trend" in core inflation indicators.
Despite a depreciation of the Turkish lira due to global developments, a continued sharp fall in commodity prices, especially crude oil and metals prices, were having a favorable effect on the outlook for inflation.
"Keeping the disinflation process in track with the targeted path requires the continuation of a cautious monetary stance," CBRT said, adding maintaining a sustained disinflation process remains key to lowering the sovereign risk, lowering long-term interest rates and a stronger economic recovery.
Turkey's lira, which has been falling for the last decade, has depreciated sharply this year and fell further in response to today's rate cut to trade at 6.99 to the U.S. dollar, down almost 15 percent this year.
The Central Bank of the Republic of Turkey (CBRT) cut its one-week deposit rate by another 100 basis points to 8.75 percent and has now cut it by 325 basis points this year and by 15.25 percentage points since July last year when it began its easing cycle after a new governor was installed.
As other central banks worldwide, CBRT has been using a wide range of its monetary tools to ease its policy stance and has injected liquidity into financial markets to ensure they continue to function smoothly so they can supply credit to businesses and the economy.
CBRT has also been purchasing government debt, including from the country's unemployment insurance fund, and on April 17 it doubled its limit on its asset purchases to 10 percent of its total assets from 5 percent.
Turkey's headline inflation rate eased to 11.86 percent in March from 12.37 percent in February and while core inflation rose to 11.65 percent, CBRT said inflation expectations, demand conditions and producer prices were contributing to a "mild trend" in core inflation indicators.
Despite a depreciation of the Turkish lira due to global developments, a continued sharp fall in commodity prices, especially crude oil and metals prices, were having a favorable effect on the outlook for inflation.
"Keeping the disinflation process in track with the targeted path requires the continuation of a cautious monetary stance," CBRT said, adding maintaining a sustained disinflation process remains key to lowering the sovereign risk, lowering long-term interest rates and a stronger economic recovery.
Turkey's lira, which has been falling for the last decade, has depreciated sharply this year and fell further in response to today's rate cut to trade at 6.99 to the U.S. dollar, down almost 15 percent this year.
Monday, April 20, 2020
China cuts LPR 20 bps to 3.85% in 2nd cut this year
China's central bank lowered its benchmark interest rate for the second time this year, cutting the one-year Loan Prime Rate (LPR) by 20 basis points to 3.85 percent and the five-year LPR, used to price mortgages, by 10 basis points to 4.65 percent, as widely expected.
On Feb. 20 the People's Bank of China (PBOC) cut LPR by 10 basis points, brining this year's total cut in LPR to 30 basis points.
It is PBOC's fourth cut in LPR since it was introduced in August 2019 as its new benchmark lending rate and since then China's main lending rate has been cut an effective 50 basis points.
Today's cut in LPR follows a 20 basis point cut in the 1-year medium-term-lending (MLF) rate to 2.95 percent on April 15, the lowest level since it was introduced in September 2014.
In August last year PBOC restructured its method for calculating LPR and set it as a spread to MLF. It also designated LPR as its new benchmark lending rate.
A few days later PBOC set LPR at 4.25 percent, 10 basis points below the previous benchmark lending rate of 4.35 percent.
LPR was then cut 5 basis points in September 2019 and then another 5 points in November 2019, a few weeks after the MLF rate also was cut 5 points.
On Feb. 17 this year MLF was lowered 10 basis points and then a few days later on Feb. 20 PBOC cut LPR by the same 10 basis points.
PBOC announces LPR on the 20th of each month and in March it was left unchanged.
www.CentralBankNews.info
On Feb. 20 the People's Bank of China (PBOC) cut LPR by 10 basis points, brining this year's total cut in LPR to 30 basis points.
It is PBOC's fourth cut in LPR since it was introduced in August 2019 as its new benchmark lending rate and since then China's main lending rate has been cut an effective 50 basis points.
Today's cut in LPR follows a 20 basis point cut in the 1-year medium-term-lending (MLF) rate to 2.95 percent on April 15, the lowest level since it was introduced in September 2014.
In August last year PBOC restructured its method for calculating LPR and set it as a spread to MLF. It also designated LPR as its new benchmark lending rate.
A few days later PBOC set LPR at 4.25 percent, 10 basis points below the previous benchmark lending rate of 4.35 percent.
LPR was then cut 5 basis points in September 2019 and then another 5 points in November 2019, a few weeks after the MLF rate also was cut 5 points.
On Feb. 17 this year MLF was lowered 10 basis points and then a few days later on Feb. 20 PBOC cut LPR by the same 10 basis points.
PBOC announces LPR on the 20th of each month and in March it was left unchanged.
www.CentralBankNews.info
Sunday, April 19, 2020
This week in monetary policy: China, Turkey, Paraguay, Ukraine and Russia
This week - April 19 through April 25 - central banks from 5 countries or jurisdictions are scheduled to decide on monetary policy: China, Turkey, Paraguay, Ukraine and Russia.
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 17 | ||||||
| APR 19 - APR 25, 2020: | ||||||
| CHINA | 20-Apr | 4.05% | 0 | -10 | 4.35% | EM |
| TURKEY | 22-Apr | 9.75% | -100 | -225 | 24.00% | EM |
| PARAGUAY | 22-Apr | 3.25% | -50 | -75 | 4.75% | |
| UKRAINE | 23-Apr | 10.00% | -100 | -350 | 17.50% | FM |
| RUSSIA | 24-Apr | 6.00% | 0 | -25 | 7.75% | EM |
Mozambique cuts rate 12th time as inflation outlook falls
Mozambique's central bank lowered its monetary policy rate for the first time this year but for the 12th time in three years, saying this comes amid a significant downward revision in the inflation outlook for the medium term "in a context of a greater decline in aggregate demand as a result of the impact of COVID-19 on the domestic and international economy."
The Bank of Mozambique's (BOM) cut its monetary policy rate, or MIMO, by 150 basis points to 11.25 percent and has now cut it by 12 percentage points since it began easing its policy stance in April 2017 after inflation began a steady decline from a peak of over 26 percent in November 2016.
The last rate cut prior to today's was in August 2019 and the rate cut four years ago was carried out as BOM adopted MIMO as its new policy rate.
At a meeting on April 16, BOM's monetary policy committee also lowered the rate on its deposit and lending facilities by 150 basis points to 8.25 percent and 14.25 percent, respectively. The Compulsory Reserve Ratio on liabilities in national and foreign currency was unchanged at 11.50 percent and 34.50 percent, respectively.
Mozambique's economy has been battered for decades by a series of major events, including a 15-year civil war, the withdrawal of funding by foreign donors in 2016 after it was discovered the government had hidden almost $1.4 billion of debt, and intense tropical cyclones that have killed thousands and destroyed crops, most recently cyclones Idai and Kenneth 12 months ago.
In August last year Mozambique's president and the leader of the main opposition group finally signed a peace agreement that paved the way for peaceful elections in October, ending violence that has persisted since a full-scale civil war ended in 1992 that cost the lives of an estimated 1 million.
In March Mozambique's inflation rate eased further to 3.09 percent from 3.55 percent in February and 3.48 percent in January while the exchange rate of the metical has depreciated this year after remaining relatively stable since May 2017.
Today the metical was trading at 67.1 to the U.S. dollar, down 7.3 percent this year after only falling 0.9 percent in 2019.
But Mozambique's inflation prospects are continuing to improve, BOM said, adding international reserves were at a comfortable level of around US$3.9 billion, enough to cover more than 6 months of imports, and steady from $3.9 billion in February.
Last week's decision by the International Monetary Fund (IMF) to provide immediate debt relief for six months to 25 of its poorest and most vulnerable members will allow Mozambique to use some US$15 million to help combat the effects of the coronavirus
However, BOM's policy committee added the pressure on public spending along with lower revenue has already risen, with internal public debt rising to 166.76 billion meticais from the issuance of treasury bonds from 155.25 billion since February.
Last month the Confederation of Mozambican Business Associations (CTA) called for a sharp reduction in interest rates due to the impact of COVID-19, especially on tourism, transport and agriculture.
CTA, which said MIMO should be cut to 6.55 percent, as the income of these three sectors has already fallen 95 percent, 70 percent and 47 percent, respectively, for a combined loss of US$355 million.
Prior to the hit to Mozambique's economy from the spread of the virus, BOM had expected economic growth to pick up this year due to reconstruction after last year's cyclones.
In the fourth quarter of 2019, Mozambique's gross domestic product expanded by an unchanged 2.0 percent year-on-year.
But BOM said the outlook for economic growth this year has deteriorated at a time when the economy was still weak from the effects of the cyclones and military instability.
However, the central bank had room to continue to support policies to mitigate the effects of the virus as the inflationary outlook continues to improve.
www.CentralBankNews.info
The Bank of Mozambique's (BOM) cut its monetary policy rate, or MIMO, by 150 basis points to 11.25 percent and has now cut it by 12 percentage points since it began easing its policy stance in April 2017 after inflation began a steady decline from a peak of over 26 percent in November 2016.
The last rate cut prior to today's was in August 2019 and the rate cut four years ago was carried out as BOM adopted MIMO as its new policy rate.
At a meeting on April 16, BOM's monetary policy committee also lowered the rate on its deposit and lending facilities by 150 basis points to 8.25 percent and 14.25 percent, respectively. The Compulsory Reserve Ratio on liabilities in national and foreign currency was unchanged at 11.50 percent and 34.50 percent, respectively.
Mozambique's economy has been battered for decades by a series of major events, including a 15-year civil war, the withdrawal of funding by foreign donors in 2016 after it was discovered the government had hidden almost $1.4 billion of debt, and intense tropical cyclones that have killed thousands and destroyed crops, most recently cyclones Idai and Kenneth 12 months ago.
In August last year Mozambique's president and the leader of the main opposition group finally signed a peace agreement that paved the way for peaceful elections in October, ending violence that has persisted since a full-scale civil war ended in 1992 that cost the lives of an estimated 1 million.
In March Mozambique's inflation rate eased further to 3.09 percent from 3.55 percent in February and 3.48 percent in January while the exchange rate of the metical has depreciated this year after remaining relatively stable since May 2017.
Today the metical was trading at 67.1 to the U.S. dollar, down 7.3 percent this year after only falling 0.9 percent in 2019.
But Mozambique's inflation prospects are continuing to improve, BOM said, adding international reserves were at a comfortable level of around US$3.9 billion, enough to cover more than 6 months of imports, and steady from $3.9 billion in February.
Last week's decision by the International Monetary Fund (IMF) to provide immediate debt relief for six months to 25 of its poorest and most vulnerable members will allow Mozambique to use some US$15 million to help combat the effects of the coronavirus
However, BOM's policy committee added the pressure on public spending along with lower revenue has already risen, with internal public debt rising to 166.76 billion meticais from the issuance of treasury bonds from 155.25 billion since February.
Last month the Confederation of Mozambican Business Associations (CTA) called for a sharp reduction in interest rates due to the impact of COVID-19, especially on tourism, transport and agriculture.
CTA, which said MIMO should be cut to 6.55 percent, as the income of these three sectors has already fallen 95 percent, 70 percent and 47 percent, respectively, for a combined loss of US$355 million.
Prior to the hit to Mozambique's economy from the spread of the virus, BOM had expected economic growth to pick up this year due to reconstruction after last year's cyclones.
In the fourth quarter of 2019, Mozambique's gross domestic product expanded by an unchanged 2.0 percent year-on-year.
But BOM said the outlook for economic growth this year has deteriorated at a time when the economy was still weak from the effects of the cyclones and military instability.
However, the central bank had room to continue to support policies to mitigate the effects of the virus as the inflationary outlook continues to improve.
www.CentralBankNews.info
Friday, April 17, 2020
India cuts reverse repo 2nd time, new long-term loans
India's central bank kept its benchmark repo rate steady at 4.40 percent but lowered its reverse repo rate by another 25 basis points to 3.75 percent to encourage banks to deploy a surplus of liquidity in the banking system to businesses following large injections of funds by itself and the government.
"Today, humanity faces perhaps the trial of its time as COVID-19 grips the world in its deadly embrace," RBI Governor Shaktikanta Das said in a video written statements, adding:
"Everywhere, as also in India, the mission is to do whatever it takes to prevent epidemiological curve from steepening any further."
Das said there had been few data releases since March 27, when the policy rate was cut, so a comprehensive assessment of the economy was not possible.
However, he said the contraction of exports in March of 34.6 percent was "much more severe than during the global financial crises," and inflation is likely to recede even further and could settle well below RBI's 4.0 percent target by the second half of the 2020-21 year.
"Such an outlook would make policy space available to address the intensification of risks to growth and financial stability brought on by COVID-19," Das said. "This space needs to be used effectively and in time."
Last month the Reserve Bank of India (RBI) cut its repo rate by 75 basis points and the reverse repo rate by 90 points, and with today's cut, it has now lowered the reverse repo rate by a total of 115 points this year.
RBI also last month decided to carry out targeted long term repo operations (TLTRO) of up to to 3 years for a total of 1 trillion rupees at the policy rate.
Today RBI launched another round of stimulus measures, including a second round of long term repos, known as TLTRO 2.0 worth another 500 billion rupees, with the funds being deployed in investment grade bonds, commercial paper and non-convertible debentures of non-banking financial companies. At least half of the funds will be invested in micro finance institutions and non-banking financial firms.
To improve the cash flow of financial institutions, RBI lowered the liquidity coverage ratio to 80 percent from an earlier 100 percent. However, the ratio will then be raised back up to 90 percent by October 1 and then fully restored by April 1, 2021.
Das also said 500 billion rupees would be made available through a special refinancing facility to regional rural banks, the national housing banks and small industries development bank.
www.CentralBankNews.info
"Today, humanity faces perhaps the trial of its time as COVID-19 grips the world in its deadly embrace," RBI Governor Shaktikanta Das said in a video written statements, adding:
"Everywhere, as also in India, the mission is to do whatever it takes to prevent epidemiological curve from steepening any further."
Das said there had been few data releases since March 27, when the policy rate was cut, so a comprehensive assessment of the economy was not possible.
However, he said the contraction of exports in March of 34.6 percent was "much more severe than during the global financial crises," and inflation is likely to recede even further and could settle well below RBI's 4.0 percent target by the second half of the 2020-21 year.
"Such an outlook would make policy space available to address the intensification of risks to growth and financial stability brought on by COVID-19," Das said. "This space needs to be used effectively and in time."
Last month the Reserve Bank of India (RBI) cut its repo rate by 75 basis points and the reverse repo rate by 90 points, and with today's cut, it has now lowered the reverse repo rate by a total of 115 points this year.
RBI also last month decided to carry out targeted long term repo operations (TLTRO) of up to to 3 years for a total of 1 trillion rupees at the policy rate.
Today RBI launched another round of stimulus measures, including a second round of long term repos, known as TLTRO 2.0 worth another 500 billion rupees, with the funds being deployed in investment grade bonds, commercial paper and non-convertible debentures of non-banking financial companies. At least half of the funds will be invested in micro finance institutions and non-banking financial firms.
To improve the cash flow of financial institutions, RBI lowered the liquidity coverage ratio to 80 percent from an earlier 100 percent. However, the ratio will then be raised back up to 90 percent by October 1 and then fully restored by April 1, 2021.
Das also said 500 billion rupees would be made available through a special refinancing facility to regional rural banks, the national housing banks and small industries development bank.
www.CentralBankNews.info
Mauritius cuts rate another 100 bps in 2nd cut this year
The central bank of the Indian Ocean island of Mauritius cut its benchmark interest rate for the second time in as many months following a review of what it described as "the disruptive effects of COVID-19 on the Mauritian economy and its ensuing implications."
The Bank of Mauritius (BOM) cut is key repo rate (KRR) by a further 100 basis points to 1.85 percent and has now cut it by 150 basis points this year following a cut on March 10.
It is the second rate cut since a new governor of BOM took over in late February when the government appointed Harvesh Kumar Seegolam.
It is also the second unanimous policy decision by the new monetary policy committee.
Guiding its decision to cut the rate, BOM it had considered the latest economic forecast for Mauritius by the International Monetary Fund as well as projections by the bank.
In addition to cutting the KRR, BOM also lowered the rate on its Special Relief Amount by 100 basis points, with the interest rate cap on advances to businesses affected by the virus now at a fixed rate of 1.50 percent.
Following the rate cut in March BOM took a series of initiatives to help businesses on the island, including a 5 billion rupee Special Relief Amount through commercial banks to help firms meet cash flow and workig capital requirements. The program is available from March 23 to July 31.
On March 13 BOM also lowered its cash reserve ratio by 100 basis points to 8.0 percent, let commercial banks grant a moratorium of 6 months on repayments on existing loans for firms impacted by the virus, eased its credit impairment guidelines, and issued 5 billion rupees of a 2-year savings bond at 2.5 percent to residents of Mauritius.
www.CentralBankNews.info
The Bank of Mauritius (BOM) cut is key repo rate (KRR) by a further 100 basis points to 1.85 percent and has now cut it by 150 basis points this year following a cut on March 10.
It is the second rate cut since a new governor of BOM took over in late February when the government appointed Harvesh Kumar Seegolam.
It is also the second unanimous policy decision by the new monetary policy committee.
Guiding its decision to cut the rate, BOM it had considered the latest economic forecast for Mauritius by the International Monetary Fund as well as projections by the bank.
In addition to cutting the KRR, BOM also lowered the rate on its Special Relief Amount by 100 basis points, with the interest rate cap on advances to businesses affected by the virus now at a fixed rate of 1.50 percent.
Following the rate cut in March BOM took a series of initiatives to help businesses on the island, including a 5 billion rupee Special Relief Amount through commercial banks to help firms meet cash flow and workig capital requirements. The program is available from March 23 to July 31.
On March 13 BOM also lowered its cash reserve ratio by 100 basis points to 8.0 percent, let commercial banks grant a moratorium of 6 months on repayments on existing loans for firms impacted by the virus, eased its credit impairment guidelines, and issued 5 billion rupees of a 2-year savings bond at 2.5 percent to residents of Mauritius.
www.CentralBankNews.info
Subscribe to:
Posts (Atom)