Colombia's central bank lowered its policy interest rate for the fourth time this year, as expected, as it continues the countercyclical momentum of monetary policy to boost the economy amid what it said was a persistent uncertainty about the outlook for the global economy.
The Central Bank of Colombia cut its main interest rate by another 25 basis points to 2.50 percent and has now cut it by 175 points this year following earlier cuts in March, April and May.
A majority of five of the bank's seven-member board voted for the rate cut, the bank said.
Today's 25-basis-point cut is smaller than the previous cuts this year that were all 50 points.
Colombia's inflation rate fell to 2.85 percent in May from 3.86 percent in April, and inflation expectations continued to decline to below 3.0 percent, reflecting weak demand, a deterioration of employment and excess productive capacity, the bank said.
Downward revisions to local and global growth suggest this excess productive capacity will expand and labour markets will deteriorate further, the bank said, adding its main trading partners will only expand slowly during the rest of the year.
Although conditions in financial markets have improved from the start of the Covid-19 pandemic, there is still great uncertainty about the global economy, the central bank said.
Colombia's gross domestic product slumped to annual growth of 1.1 percent in the first quarter of this year from 3.5 percent in the previous quarter and on a quarterly basis GDP contracted by 2.4 percent in the first quarter from the fourth quarter of last year.
Colombia's finance ministry expects the country's economy to contract 5.5 percent this year while the central bank in May forecast a contraction of between 2.0 and 7.0 percent this year, including a 10-15 percent annual contraction in the second quarter.
www.CentralBankNews.info
Tuesday, June 30, 2020
Jamaica holds rate steady to keep inflation on target
Jamaica's central bank kept its key interest steady, saying this is based on its continued view this rate is generally appropriate to support inflation remaining within its target of 4.0 to 6.0 percent over the next two years.
The Bank of Jamaica (BOJ) left its rate on overnight deposits at 0.50 percent, unchanged and at a historic low since August 2019, but added the outlook remains "highly uncertain" in the context of the ongoing Covid-19 pandemic and it "stands ready to implement other policy measures, if the need arises."
In a statement from June 29, BOJ said the risks to its forecast for gross domestic product were slightly skewed to the upside as the government's decision to re-open the country's ports to incoming passengers in June could improve growth prospects, along with the prospects of stronger economic activity in the United States.
However, material risks to the downside remain, BOJ added.
In its May outlook, BOJ forecast GDP would contract an average 5.1 percent in the current fiscal year, which began April 1, and then partially recover in fiscal 2021/22 with growth ranging from 2.5 to 5.5 percent.
Jamaica's economy stagnated in the fourth quarter of 2019, with GDP at zero percent growth year-on-year, down from growth of 0.6 percent in the third quarter, with output hit by measures to contain the pandemic.
On a quarterly basis, GDP shrank 0.5 percent from the third quarter following a quarterly contraction of 0.2 percent in the third quarter, with the decline mainly seen in hotels and restaurants, mining, wholesale and retail, transport, storage and communications, and other services.
Inflation declined to 4.8 percent in March from 6.0 percent in February.
Although BOJ left its rate steady at its last policy meeting on May 20, on May 15 it lowered the cash reserve requirement by 200 basis points to 5 percent to boost liquidity in the financial system by releasing some J$14 billion to deposit-taking institutions. It also cut the foreign currency cash reserve requirement by 200 points to 13 percent, which returned some US$70 million to institutions.
In May BOJ forecast inflation would average 4.4 percent over the next two years and today it said the current assessment is inflation is likely to be slightly higher due to higher agricultural, energy and transport prices, and upward pressures from higher-than-expected demand in connection with an earlier-than-expected re-opening of the economy and a more expansionary fiscal stance.
Jamaica's dollar has firmed slightly this month but remains down 5 percent since the start of this year at 140.0 to the U.S. dollar.
The Bank of Jamaica (BOJ) left its rate on overnight deposits at 0.50 percent, unchanged and at a historic low since August 2019, but added the outlook remains "highly uncertain" in the context of the ongoing Covid-19 pandemic and it "stands ready to implement other policy measures, if the need arises."
In a statement from June 29, BOJ said the risks to its forecast for gross domestic product were slightly skewed to the upside as the government's decision to re-open the country's ports to incoming passengers in June could improve growth prospects, along with the prospects of stronger economic activity in the United States.
However, material risks to the downside remain, BOJ added.
In its May outlook, BOJ forecast GDP would contract an average 5.1 percent in the current fiscal year, which began April 1, and then partially recover in fiscal 2021/22 with growth ranging from 2.5 to 5.5 percent.
Jamaica's economy stagnated in the fourth quarter of 2019, with GDP at zero percent growth year-on-year, down from growth of 0.6 percent in the third quarter, with output hit by measures to contain the pandemic.
On a quarterly basis, GDP shrank 0.5 percent from the third quarter following a quarterly contraction of 0.2 percent in the third quarter, with the decline mainly seen in hotels and restaurants, mining, wholesale and retail, transport, storage and communications, and other services.
Inflation declined to 4.8 percent in March from 6.0 percent in February.
Although BOJ left its rate steady at its last policy meeting on May 20, on May 15 it lowered the cash reserve requirement by 200 basis points to 5 percent to boost liquidity in the financial system by releasing some J$14 billion to deposit-taking institutions. It also cut the foreign currency cash reserve requirement by 200 points to 13 percent, which returned some US$70 million to institutions.
In May BOJ forecast inflation would average 4.4 percent over the next two years and today it said the current assessment is inflation is likely to be slightly higher due to higher agricultural, energy and transport prices, and upward pressures from higher-than-expected demand in connection with an earlier-than-expected re-opening of the economy and a more expansionary fiscal stance.
Jamaica's dollar has firmed slightly this month but remains down 5 percent since the start of this year at 140.0 to the U.S. dollar.
Kyrgyzstan holds rate again to maintain stimulus
Kyrgyzstan's central bank, one of only five central banks to have raised interest rates this year, left its key interest rate steady again to maintain stimulus to the economy, adding it would take "appropriate monetary policy measures" if there are any risks to inflation.
The National Bank of the Kyrgyz Republic (NBKR) kept its discount rate at 5.0 percent, unchanged since it raised it in February by 75 basis points to dampen inflationary pressures.
Inflation in Kyrgyzstan - sandwiched between China, Kazakhstan, Uzbekistan and Tajikistan - eased to 6.1 percent as of June 19 from 7.2 percent in May and 8.6 percent in April.
Weaker domestic demand is determining the downward dynamics of inflation, the central bank said, pointing to the downward trend in remittances and export earnings along with a decline in the output of almost all sectors of the economy.
The central bank maintained its forecast for inflation to average around its target of 5.0 to 7.0 percent by the end of the year based on the assumption of weaker domestic and foreign demand.
"The recession in the global economy is expected to be significant," NBKR said, adding its own economy remains susceptible to changes in global and regional economies and international financial organizations are revising forecasts lower despite some signs of recovery in some countries after quarantine measures have been lifted.
Expansion by the public sector and support of credit operations by the central bank have led to excess liquidity in the banking system and NBKR continues to carry out sterilization operations in the short end of the money market, the central bank said, adding the foreign exchange market has been relatively stable.
NBKR is in the process of transitioning to a monetary framework that is based on inflation targeting and from mid-March to early April, the Kyrgyzstani som tumbled 18 percent, hitting 84.9 to the U.S. dollar by April 4.
Since the the som has firmed though it has eased during the month of June and was trading at 75.99 today, down 8.3 percent this year.
www.CentralBankNews.info
The National Bank of the Kyrgyz Republic (NBKR) kept its discount rate at 5.0 percent, unchanged since it raised it in February by 75 basis points to dampen inflationary pressures.
Inflation in Kyrgyzstan - sandwiched between China, Kazakhstan, Uzbekistan and Tajikistan - eased to 6.1 percent as of June 19 from 7.2 percent in May and 8.6 percent in April.
Weaker domestic demand is determining the downward dynamics of inflation, the central bank said, pointing to the downward trend in remittances and export earnings along with a decline in the output of almost all sectors of the economy.
The central bank maintained its forecast for inflation to average around its target of 5.0 to 7.0 percent by the end of the year based on the assumption of weaker domestic and foreign demand.
"The recession in the global economy is expected to be significant," NBKR said, adding its own economy remains susceptible to changes in global and regional economies and international financial organizations are revising forecasts lower despite some signs of recovery in some countries after quarantine measures have been lifted.
Expansion by the public sector and support of credit operations by the central bank have led to excess liquidity in the banking system and NBKR continues to carry out sterilization operations in the short end of the money market, the central bank said, adding the foreign exchange market has been relatively stable.
NBKR is in the process of transitioning to a monetary framework that is based on inflation targeting and from mid-March to early April, the Kyrgyzstani som tumbled 18 percent, hitting 84.9 to the U.S. dollar by April 4.
Since the the som has firmed though it has eased during the month of June and was trading at 75.99 today, down 8.3 percent this year.
www.CentralBankNews.info
Sunday, June 28, 2020
This week in monetary policy: Kyrgyzstan, Jamaica, Bulgaria, Colombia, Sweden and Albania
This week - June 28 through July 4 - central banks from 6 countries or jurisdictions are scheduled to decide on monetary policy: Kyrgyz Republic, Jamaica, Bulgaria, Colombia, Sweden and Albania.
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 27 | ||||||
| JUN 28 - JUL 4 2020: | ||||||
| KYRGYZSTAN | 29-Jun | 5.00% | 0 | 75 | 4.25% | |
| JAMAICA | 29-Jun | 0.50% | 0 | 0 | 0.75% | |
| BULGARIA | 30-Jun | 0.00% | 0 | 0 | 0.00% | |
| COLOMBIA | 30-Jun | 2.75% | -50 | -150 | 4.25% | EM |
| SWEDEN | 1-Jul | 0.00% | 0 | 0 | -0.25% | DM |
| ALBANIA | 1-Jul | 0.50% | 0 | -50 | 1.00% | |
Friday, June 26, 2020
Trinidad & Tobago holds rate, liquidity up after March cut
Trinidad and Tobago's central bank left its benchmark repo rate steady at 3.50 percent, saying its "unprecedented" rate cut in March had boosted liquidity in the domestic financial system substantially and it expects this will have a stronger effect on credit as the economy opens up.
The Central Bank of Trinidad and Tobago (CBTT) said its 150-basis-point rate cut in March, along with a 300 point cut in banks' reserve requirement, had led to an almost immediate reduction in banks' prime lending rates to 7.50 percent from 9.25 percent.
On March 17 the bank's monetary policy committee decided to slash the rate and lower the reserve requirement at a special meeting in light of the "unprecedented nature and magnitude of the pandemic, exacerbated by the energy price drop."
Since this monetary easing, liquidity in the financial system has surged, with excess reserves at CBTT reaching over TT$110 billion by mid-June but there still hasn't been a significant pickup in private sector credit as businesses are still waiting for a recovery in demand, the bank said.
But based on history, the central bank expects the impact of its rate cut to take several months to fully filter into interest rates and credit.
Meanwhile, it said economic activity in Trinidad and Tobago is gradually resuming following several months of lockdown to prevent the spread of the Covid-19 pandemic.
Noting the rise in liquidity, the central bank said it decided to maintain its repo rate today and was continuing to monitor developments and "will take further action as necessary."
Latest data show lending to businesses had declined 5.7 percent year-on-year in March, reflecting a pre-pandemic trend, but despite the gloomy environment, the country's international reserves remained steady at US$6.8 billion on June 19 - around 8 months of imports - and lower interest rates in the U.S. had improved the TT-US rate differential to 81 basis points on 3-month Treasuries.
But CBTT said the situation and outlook on the international front "warrant concern," and the macroeconomic environment can best be described as "intense and uncertain," constrained for the most part by the fiscal space available to governments.
Inflation in Trinidad and Tobago rose to 0.5 percent in February from 0.4 percent in January.
The Central Bank of Trinidad and Tobago (CBTT) said its 150-basis-point rate cut in March, along with a 300 point cut in banks' reserve requirement, had led to an almost immediate reduction in banks' prime lending rates to 7.50 percent from 9.25 percent.
On March 17 the bank's monetary policy committee decided to slash the rate and lower the reserve requirement at a special meeting in light of the "unprecedented nature and magnitude of the pandemic, exacerbated by the energy price drop."
Since this monetary easing, liquidity in the financial system has surged, with excess reserves at CBTT reaching over TT$110 billion by mid-June but there still hasn't been a significant pickup in private sector credit as businesses are still waiting for a recovery in demand, the bank said.
But based on history, the central bank expects the impact of its rate cut to take several months to fully filter into interest rates and credit.
Meanwhile, it said economic activity in Trinidad and Tobago is gradually resuming following several months of lockdown to prevent the spread of the Covid-19 pandemic.
Noting the rise in liquidity, the central bank said it decided to maintain its repo rate today and was continuing to monitor developments and "will take further action as necessary."
Latest data show lending to businesses had declined 5.7 percent year-on-year in March, reflecting a pre-pandemic trend, but despite the gloomy environment, the country's international reserves remained steady at US$6.8 billion on June 19 - around 8 months of imports - and lower interest rates in the U.S. had improved the TT-US rate differential to 81 basis points on 3-month Treasuries.
But CBTT said the situation and outlook on the international front "warrant concern," and the macroeconomic environment can best be described as "intense and uncertain," constrained for the most part by the fiscal space available to governments.
Inflation in Trinidad and Tobago rose to 0.5 percent in February from 0.4 percent in January.
Thursday, June 25, 2020
Mexico cuts rate 5th time as risks remain to downside
Mexico's central bank cut its benchmark interest rate for the fifth time this year, saying the risks to the economy remain to the downside and there is persistent uncertainty about the economic recovery after a considerable impact from the Covid-19 pandemic.
The Bank of Mexico, known as Banxico, cut its target for the overnight interbank interest rate by another 50 basis points to 7.0 percent and has now cut it 225 points this year following cuts in February, March, April and May.
It is also Banxico's 9th rate cut since August 2019 when it began to unwind some of rate hikes - a total of 500-basis-points - between December 2015 and December 2018. Since August last year the rate has been cut 325 points.
The bank's board said its decision today was unanimous and future actions will be based on the impact on economic activity from the Covid-19 pandemic and the evolution of the financial shock so the policy rate is consistent with inflation around Banxico's target.
Mexico's economy has contracted in the last four quarters, with gross domestic product in the first quarter down 1.2 percent from the previous quarter.
In late May Banxico forecast the economy would contract as much as 8.8 percent this year.
Banxico said the reopening of parts of the economy in May and June will lead to some recovery though the impact of the pandemic have been "considerable and uncertainty persists" and growth risks remain significantly biased to the downside.
Mexico's inflation rate rose to 2.84 percent in May and 3.17 percent in the first half of June from 2.15 percent in April and the central bank said expectations are for inflation to remain above its 3.0 percent goal.
www.CentralBankNews.info
The Bank of Mexico, known as Banxico, cut its target for the overnight interbank interest rate by another 50 basis points to 7.0 percent and has now cut it 225 points this year following cuts in February, March, April and May.
It is also Banxico's 9th rate cut since August 2019 when it began to unwind some of rate hikes - a total of 500-basis-points - between December 2015 and December 2018. Since August last year the rate has been cut 325 points.
The bank's board said its decision today was unanimous and future actions will be based on the impact on economic activity from the Covid-19 pandemic and the evolution of the financial shock so the policy rate is consistent with inflation around Banxico's target.
Mexico's economy has contracted in the last four quarters, with gross domestic product in the first quarter down 1.2 percent from the previous quarter.
In late May Banxico forecast the economy would contract as much as 8.8 percent this year.
Banxico said the reopening of parts of the economy in May and June will lead to some recovery though the impact of the pandemic have been "considerable and uncertainty persists" and growth risks remain significantly biased to the downside.
Mexico's inflation rate rose to 2.84 percent in May and 3.17 percent in the first half of June from 2.15 percent in April and the central bank said expectations are for inflation to remain above its 3.0 percent goal.
www.CentralBankNews.info
Guatemala cuts rate 3rd time in 2020 to boost growth
Guatemala's central bank lowered its monetary policy rate for the third time this year, saying this is aimed at lowering the cost of credit for companies and households and thus help promote a recovery of economic activity.
The Bank of Guatemala cut it policy rate by a further 25 basis points to 1.75 percent and has now cut it 100 points this year following two rate cuts in March.
This includes a 50-basis-point cut on March 19 at an extraordinary board meeting, the same week when 46 other central banks, including the U.S. Federal Reserves, lashed their rates in response to the global measures to prevent the spread of the Covid-19 pandemic.
The bank's monetary board said in a statement released on June 25 that its policy decision, which was taken at its June 24 meeting, was unanimous.
A significant slowdown in economic activity in Guatemala and imports has been partially moderated due to a better-than-expected performance of exports, family remittances and bank credit to the private sector, the central bank said, referring to the monthly index of economic activity (IMEA).
However, the central bank still lowered its forecast for the economy to contract between 3.5 and 1.5 percent this year from its previous forecast of a contraction of 0.5 percent.
In 2019 Guatemala's economy grew an estimated 3.8 percent.
The economy should recover next year and expand between 2.0 and 4.0 percent, the bank added.
Guatemala's inflation rate has been relatively steady in recent months - it eased to 1.8 percent in May from 1.88 percent in April - and the central bank said its latest forecast show a moderation this year and in 2021, with inflationary expectations anchored to its target.
The Bank of Guatemala, which has targeted inflation since 2005, currently targets inflation of 4.0 percent, plus/minus 1 percentage point.
Guatemala's quetzal has been relatively stable since October 2018 and was trading at 7.7 to the U.S. dollar today, unchanged since the start of this year.
Earlier this month the executive board of the International Monetary Fund approved emergency financial assistance to Guatemala of US$594 million to help meet some of the cost of containing Covid-19 at a time of a hit to economic growth and a drop in remittances from abroad and lower exports.
www.CentralBankNews.info
The Bank of Guatemala cut it policy rate by a further 25 basis points to 1.75 percent and has now cut it 100 points this year following two rate cuts in March.
This includes a 50-basis-point cut on March 19 at an extraordinary board meeting, the same week when 46 other central banks, including the U.S. Federal Reserves, lashed their rates in response to the global measures to prevent the spread of the Covid-19 pandemic.
The bank's monetary board said in a statement released on June 25 that its policy decision, which was taken at its June 24 meeting, was unanimous.
A significant slowdown in economic activity in Guatemala and imports has been partially moderated due to a better-than-expected performance of exports, family remittances and bank credit to the private sector, the central bank said, referring to the monthly index of economic activity (IMEA).
However, the central bank still lowered its forecast for the economy to contract between 3.5 and 1.5 percent this year from its previous forecast of a contraction of 0.5 percent.
In 2019 Guatemala's economy grew an estimated 3.8 percent.
The economy should recover next year and expand between 2.0 and 4.0 percent, the bank added.
Guatemala's inflation rate has been relatively steady in recent months - it eased to 1.8 percent in May from 1.88 percent in April - and the central bank said its latest forecast show a moderation this year and in 2021, with inflationary expectations anchored to its target.
The Bank of Guatemala, which has targeted inflation since 2005, currently targets inflation of 4.0 percent, plus/minus 1 percentage point.
Guatemala's quetzal has been relatively stable since October 2018 and was trading at 7.7 to the U.S. dollar today, unchanged since the start of this year.
Earlier this month the executive board of the International Monetary Fund approved emergency financial assistance to Guatemala of US$594 million to help meet some of the cost of containing Covid-19 at a time of a hit to economic growth and a drop in remittances from abroad and lower exports.
www.CentralBankNews.info
Philippines cuts rate 4th time in 2020 on benign inflation
The Philippine central bank cut its key interest rate for the fourth time this year and for the seventh time in just over a year, saying "a further reduction in the policy rate amidst a benign inflation environment would help mitigate the downside risks to growth and boost market confidence."
Bangko Sentral Ng Pilipinas (BSP) cut the rate on its overnight reverse repurchase facility (RRP) by a further 50 basis points to 2.25 percent and has now cut it 175 points this year following cuts in February, March and April.
BSP has been lowering its interest rates since May 2019 and has now cut them by 250 basis points since then.
The Philippine peso has been on a rising trend since October 2018, with the seven rate cuts only slowing the general upward trend slightly.
Today the peso was trading at 50.0 to the U.S. dollar, up 1.5 percent since the start of this year and 8.6 percent higher than a low of 54.3 in early October 2018.
BSP said it remains committed to "deploying its full range of monetary instruments and regulatory relief measures as needed" to meet its mandate of promoting non-inflationary and sustainable economic growth.
Bangko Sentral Ng Pilipinas (BSP) cut the rate on its overnight reverse repurchase facility (RRP) by a further 50 basis points to 2.25 percent and has now cut it 175 points this year following cuts in February, March and April.
BSP has been lowering its interest rates since May 2019 and has now cut them by 250 basis points since then.
The Philippine peso has been on a rising trend since October 2018, with the seven rate cuts only slowing the general upward trend slightly.
Today the peso was trading at 50.0 to the U.S. dollar, up 1.5 percent since the start of this year and 8.6 percent higher than a low of 54.3 in early October 2018.
In addition to the cut in RRP, the bank's monetary board cut the rate on the overnight deposit facility to 1.75 percent and the rate on the overnight lending facility to 2.75 percent.
Inflation in the Philippines fell to 2.1 percent in May, the fourth consecutive month of deceleration, and BSP said the latests forecast show inflation could settle near the low end of its inflation target of 3.0 percent, plus/minus 1 percentage point in 2020 and up to 2022.
The decline in inflation had fueled expectation by some analysts that BSP would cut its rate today.
Although economies around the world are beginning to reopen from measures to prevent the spread of Covid-19 and the functioning of financial markets has improved, BSP said the global recovery is likely to be "protected and uneven" and domestic economic activity has slowed.
"Hence, there remains a critical need for continuing measures to bolster economic activity and support financial conditions," BSP said, pointing to measures to protect human health, boost agricultural productive and build infrastructure.BSP said it remains committed to "deploying its full range of monetary instruments and regulatory relief measures as needed" to meet its mandate of promoting non-inflationary and sustainable economic growth.
Pakistan cuts rate 5th time on improving inflation outlook
Pakistan's central bank cut its key interest rate for the fifth time this year and for the third month in a row, saying this decision reflects a further improvement in the outlook for inflation while the slowdown of the country's economy continues and downside risks to growth have risen.
The State Bank of Pakistan (SBP) cut its policy rate by another 100 basis points to 7.0 percent and has now cut it by 625 points this year following previous cuts in March, April and May.
Noting its mandate to support households and businesses through the Covid-19 pandemic and to minimize the damage to the economy, SBP's monetary policy committee said after a surprise meeting that from a risk management point of view "a prompt response to downside risks to growth was called for given the improved inflation outlook."
The central bank added that some 3.3 trillion rupees of loans were due to be repriced by early July, making this an opportune moment to take action as the benefits of interest rate reductions would be passed on to households and businesses in a timely manner.
Pakistan's inflation rate eased to 8.22 percent in May from 8.5 percent in April and 14.6 percent in January due to the government's cut in diesel and petrol prices and SBP said data shows this moderation was continuing in June despite a rise in some food prices, such as wheat.
While supply shocks could trigger some volatility in inflation, SBP said this was likely to be transitory given the weak demand and given the absence of any demand-side pressures, average inflation could fall below the previously expected range of 7-9 percent in fiscal 2020/21, which begins July 1.
In May SBP also forecast inflation for the current fiscal year to be close to the low end of its expected range of 11-12 percent.
"With the current reduction in the policy rate to 7 percent, the MPC felt that real rates on a forward-looking basis (defined as the policy rate less expected inflation) would be kept close to zero, which is appropriate under the current circumstances," SBP said.
High-frequency data, such as cement dispatches, automobile sales, food and textile exports, and petroleum sales were continuing to contract in April though the rate was lower than in the previous two months and looking ahead SBP expects a gradual recovery in the fiscal 2021 although risks are still skewed to the downside and dependent on the evolution of the pandemic.
Pakistan's rupee, which had stabilized in June last year after an agreement with the International Monetary Fund (IMF), fell sharply in March but then recovered in April. But since late May the rupee has again been falling and was trading at 167.4 to the U.S. dollar today, down 7.5 percent this year.
SPB said the flexible exchange rate had played "its valuable shock absorber role," helping cushion the economy from any tightening of financial conditions from capital outflows and deteriorating global sentiment, adding the rupee's depreciation had been lower than in many other emerging markets, reflecting the increased reserve buffers accumulated over the last year.
The State Bank of Pakistan (SBP) cut its policy rate by another 100 basis points to 7.0 percent and has now cut it by 625 points this year following previous cuts in March, April and May.
Noting its mandate to support households and businesses through the Covid-19 pandemic and to minimize the damage to the economy, SBP's monetary policy committee said after a surprise meeting that from a risk management point of view "a prompt response to downside risks to growth was called for given the improved inflation outlook."
The central bank added that some 3.3 trillion rupees of loans were due to be repriced by early July, making this an opportune moment to take action as the benefits of interest rate reductions would be passed on to households and businesses in a timely manner.
Pakistan's inflation rate eased to 8.22 percent in May from 8.5 percent in April and 14.6 percent in January due to the government's cut in diesel and petrol prices and SBP said data shows this moderation was continuing in June despite a rise in some food prices, such as wheat.
While supply shocks could trigger some volatility in inflation, SBP said this was likely to be transitory given the weak demand and given the absence of any demand-side pressures, average inflation could fall below the previously expected range of 7-9 percent in fiscal 2020/21, which begins July 1.
In May SBP also forecast inflation for the current fiscal year to be close to the low end of its expected range of 11-12 percent.
"With the current reduction in the policy rate to 7 percent, the MPC felt that real rates on a forward-looking basis (defined as the policy rate less expected inflation) would be kept close to zero, which is appropriate under the current circumstances," SBP said.
High-frequency data, such as cement dispatches, automobile sales, food and textile exports, and petroleum sales were continuing to contract in April though the rate was lower than in the previous two months and looking ahead SBP expects a gradual recovery in the fiscal 2021 although risks are still skewed to the downside and dependent on the evolution of the pandemic.
Pakistan's rupee, which had stabilized in June last year after an agreement with the International Monetary Fund (IMF), fell sharply in March but then recovered in April. But since late May the rupee has again been falling and was trading at 167.4 to the U.S. dollar today, down 7.5 percent this year.
SPB said the flexible exchange rate had played "its valuable shock absorber role," helping cushion the economy from any tightening of financial conditions from capital outflows and deteriorating global sentiment, adding the rupee's depreciation had been lower than in many other emerging markets, reflecting the increased reserve buffers accumulated over the last year.
Wednesday, June 24, 2020
Georgia cuts rate 2nd time as inflation outlook lowered
Georgia's central bank lowered its benchmark policy rate for the second time this year as it continues to gradually exit from a tight monetary policy stance as the significant weakening of external and domestic demand is leading to a lower inflation forecast.
The National Bank of Georgia (NBG) cut its refinancing rate by another 25 basis points to 8.25 percent and has now cut it 75 points this year following a 50-point cut in April.
Despite today's rate cut, NBG said its monetary policy remains tight to ensure inflation returns to its target, adding "the pace of further policy normalization will depend on how quick inflation expectations recede."
The central bank began tightening its policy stance in September last year to curb inflation from a decline in the lari's exchange rate, hiking its rate four times by a total of 200 basis points.
These rate hikes helped the lari rebound but on March 19, the day after it kept its rate steady amid a massive spree of rate cuts worldwide in response to the hit to economic activity from measures to contain the Covid-19 pandemic, the lari plunged.
By March 27 the lari had lost some 21 percent of its value, forcing the central bank to intervene in the foreign exchange market. NBG has intervened 6 times in the market totaling $180 million.
This intervention helped calm the market and on April 8 NBG announced a series of emergency measures in response to the pandemic, including the provision of $400 million through swaps to commercial banks and microfinance institutions, allowing banks to use foreign currency buffers to manage lari liquidity and an easing of banks' capital requirements.
Today the lari was trading at 3.05 to the U.S. dollar, up almost 15 percent since the low of 3.50 on March 27 but still down 6.2 percent since the start of this year.
Georgia's inflation rate eased to 6.5 percent in May from 6.9 percent in April, but is still above NGB's target of 3.0 percent.
The central bank confirmed its view from April that it expects inflation to gradually decline over the rest of this year and reach its target level in the first half of 2021 as the impact of higher costs of some goods and services in connection with measures to prevent the spread of Covid-19 only affects inflation in the short term.
The impact of weaker external and domestic demand, however, will have a longer lasting impact on inflation though it cautioned that above-target inflation has the risk of stoking inflation expectations.
"Taking these factors into account, the Monetary Policy Committee deemed it appropriate to continue the gradual exit from the tightened monetary policy stance and reduced the rate by 0.25 percentage points," NBG said.
Preliminary data show mixed signals regarding the expected drop in demand, the central bank said, adding significant fiscal stimulus is also expected to boost demand.
Current estimates show a 16.6 percent year-on-year fall in economic activity in April while payment card transactions in May rose 21 percent from the previous month, though it was still negative in annual term.
And high growth of cash in circulation points to increased economic activity and there has been an improvement in credit activity in the wake of a gradual lifting of restrictions.
The National Bank of Georgia (NBG) cut its refinancing rate by another 25 basis points to 8.25 percent and has now cut it 75 points this year following a 50-point cut in April.
Despite today's rate cut, NBG said its monetary policy remains tight to ensure inflation returns to its target, adding "the pace of further policy normalization will depend on how quick inflation expectations recede."
The central bank began tightening its policy stance in September last year to curb inflation from a decline in the lari's exchange rate, hiking its rate four times by a total of 200 basis points.
These rate hikes helped the lari rebound but on March 19, the day after it kept its rate steady amid a massive spree of rate cuts worldwide in response to the hit to economic activity from measures to contain the Covid-19 pandemic, the lari plunged.
By March 27 the lari had lost some 21 percent of its value, forcing the central bank to intervene in the foreign exchange market. NBG has intervened 6 times in the market totaling $180 million.
This intervention helped calm the market and on April 8 NBG announced a series of emergency measures in response to the pandemic, including the provision of $400 million through swaps to commercial banks and microfinance institutions, allowing banks to use foreign currency buffers to manage lari liquidity and an easing of banks' capital requirements.
Today the lari was trading at 3.05 to the U.S. dollar, up almost 15 percent since the low of 3.50 on March 27 but still down 6.2 percent since the start of this year.
Georgia's inflation rate eased to 6.5 percent in May from 6.9 percent in April, but is still above NGB's target of 3.0 percent.
The central bank confirmed its view from April that it expects inflation to gradually decline over the rest of this year and reach its target level in the first half of 2021 as the impact of higher costs of some goods and services in connection with measures to prevent the spread of Covid-19 only affects inflation in the short term.
The impact of weaker external and domestic demand, however, will have a longer lasting impact on inflation though it cautioned that above-target inflation has the risk of stoking inflation expectations.
"Taking these factors into account, the Monetary Policy Committee deemed it appropriate to continue the gradual exit from the tightened monetary policy stance and reduced the rate by 0.25 percentage points," NBG said.
Preliminary data show mixed signals regarding the expected drop in demand, the central bank said, adding significant fiscal stimulus is also expected to boost demand.
Current estimates show a 16.6 percent year-on-year fall in economic activity in April while payment card transactions in May rose 21 percent from the previous month, though it was still negative in annual term.
And high growth of cash in circulation points to increased economic activity and there has been an improvement in credit activity in the wake of a gradual lifting of restrictions.
On May 1 the International Monetary Fund's executive board raised Georgia's access to its extended fund facility (EFF) to 230 percent of its quota, releasing some US$200 million to help the country meet urgent balance of payments and fiscal needs, including higher spending on health. This brought the IMF's total disbursements under the 3-year EFF to some US$448 million.
"The COVID-19 pandemic has hit the Georgian economy hard," IMF said, noting a fall in external demand and tourism has widened the current account and fiscal deficits, depreciated the exchange rate and led to a substantial decline in economic activity.
The IMF also supported NBG's "moderately tight monetary policy," while allowing the exchange rate to remain flexible, adding monetary policy decisions should be based on monitoring inflation expectations.
The IMF forecast Georgia's economy would contract 4.0 percent this year, down from 5.1 percent growth last year, and then expand 4.0 percent in 2021.
Inflation is seen averaging 4.7 percent this year, slightly up from 4.5 percent in 2019, and then easing to 3.9 percent in 2021.
Measured in lari, Georgia's current account deficit is seen widening to 11.3 percent of GDP, up from a 4.9 percent in 2019, and then narrowing to 7.5 percent in 2021. In U.S. dollar terms, the deficit this year is seen widening to 1.7 percent of GDP and then 1.3 percent in 2021.
Tuesday, June 23, 2020
New Zealand holds rate but omits reference to lower rates
New Zealand's central bank left its benchmark interest rate steady at essentially zero and said it would continue purchasing government bonds to keep interest rates low "for the foreseeable future," but dropped last month's reference to its readiness to lower its interest rate further.
The Reserve Bank of New Zealand (RBNZ), which slashed its Official Cash Rate (OCR) by 75 basis points to the current level of 0.25 percent in March, said it was "prepared to provide additional stimulus as necessary," including expanding its Large Scale Asset Purchase (LSAP) programme and was continuing to prepare for the use of additional monetary policy tools if needed.
In May the central bank said it was prepared to use additional monetary policy tools "if and when needed, including reducing the OCR further."
However, the record of the meeting of the bank's monetary policy committee said bank staff was working to ensure that a broader range of monetary policy tools would be deployable in coming months, including a term lending facility, reductions in OCR and foreign asset purchases, as well as reassessing the appropriate quantum of LSAP.
In May RBNZ expanded its asset purchase program to $60 billion from $33 billion due to a deterioration of the economy and today it confirmed this amount.
Under LSAP the central bank can purchase New Zealand government bonds, local government funding agency bonds, and government inflation-indexed bonds.
As in its May statement, RBNZ said the balance of economic risks remain to the downside and although New Zealand has contained the spread of Covid-19 for now, the severe global economic disruption is persisting, leading to "lower economic activity, employment, and inflation abroad and in New Zealand."
The negative economic impact on New Zealand is exacerbated by international border restrictions and the appreciation of New Zealand's dollar has "place further pressure on export earnings."
As most other currencies, New Zealand's dollar, known as the kiwi, fell against the U.S. dollar in February and March but has bounced back 15 percent since hitting 1.77 to the U.S. dollar on March 23.
Today the kiwi was trading at 1.54 to the U.S. dollar, down 3.9 percent this year.
The Reserve Bank of New Zealand (RBNZ), which slashed its Official Cash Rate (OCR) by 75 basis points to the current level of 0.25 percent in March, said it was "prepared to provide additional stimulus as necessary," including expanding its Large Scale Asset Purchase (LSAP) programme and was continuing to prepare for the use of additional monetary policy tools if needed.
In May the central bank said it was prepared to use additional monetary policy tools "if and when needed, including reducing the OCR further."
However, the record of the meeting of the bank's monetary policy committee said bank staff was working to ensure that a broader range of monetary policy tools would be deployable in coming months, including a term lending facility, reductions in OCR and foreign asset purchases, as well as reassessing the appropriate quantum of LSAP.
In May RBNZ expanded its asset purchase program to $60 billion from $33 billion due to a deterioration of the economy and today it confirmed this amount.
Under LSAP the central bank can purchase New Zealand government bonds, local government funding agency bonds, and government inflation-indexed bonds.
As in its May statement, RBNZ said the balance of economic risks remain to the downside and although New Zealand has contained the spread of Covid-19 for now, the severe global economic disruption is persisting, leading to "lower economic activity, employment, and inflation abroad and in New Zealand."
The negative economic impact on New Zealand is exacerbated by international border restrictions and the appreciation of New Zealand's dollar has "place further pressure on export earnings."
As most other currencies, New Zealand's dollar, known as the kiwi, fell against the U.S. dollar in February and March but has bounced back 15 percent since hitting 1.77 to the U.S. dollar on March 23.
Today the kiwi was trading at 1.54 to the U.S. dollar, down 3.9 percent this year.
UPDATED-Hungary cuts base rate first time in 4 years
(Following item has been updated with details from the press release)
Hungary's central bank cut its benchmark interest rate for the first time in four years, describing the move as a "fine-tuning" to help counter the decline in inflation and support economic growth, which is now looking more subdued than earlier expected.
The National Bank of Hungary (NBH) cut its central bank base rate by 15 basis points to 0.75 percent as of June 24, the central bank said, surprising analysts who had expected the rate to be kept steady.
The last time the central bank cut its base rate was in May 2016 when it was also cut by 15 basis points.
"Based on incoming data, Hungarian economic performance in 2020 is likely to be more subdued than earlier expected, while the outlook for inflation has shifted downwards," NBH said.
NBH left its other main rates unchanged, including the overnight deposit rate at minus 0.05 percent, and the overnight and one-week collateralised loan rates at 1.85 percent, respectively.
Today's rate cut comes after NBH in early April modified its operational framework to provide liquidity to submarkets in a targeted manner and made its interest rate corridor symmetrical.
Interest rates would be allowed to deviate upward and downward within this corridor and the overnight and one-week collateralized lending rates were raised by 95 basis points.
The overnight collateralized loan rates would be set 110 basis above the base rate while the overnight deposit rate would be 80 points below the base rate.
"In the Council's view, the current set of instruments provides appropriate room for maneuver to respond to emerging challenges in a targeted and flexible manner," the central bank said today.
The impact of the Covid-19 pandemic on Hungary's economy is likely to be the strongest in the second quarter of this year but recovery is expected from the third quarter, with a pick-up in public investment and an expansion in corporate lending required for a V-shape recovery in the second half of the year, NBH said.
In line with the expected slower global recovery, output from the country's export-oriented sectors may pick up towards the end of this year but overall Hungary's gross domestic product may show a "restrained pace" this year, the central bank added.
Growth this year is forecast to slow to between 0.3 and 2.0 percent, down from 2019's 4.9 percent and the March forecast of 2.0 to 3.0 percent.
In the first quarter of this year GDP contracted 0.4 percent from the previous quarter for annual growth of 2.2 percent, down from 4.5 percent in the fourth quarter of 2019.
Next year Hungary's economy is seen bouncing back to expand 3.8 to 5.1 percent and then by 3.5 to 3.7 percent in 2022.
As in other countries, the impact of the pandemic has slowed Hungary's inflation rate and the central bank expects volatility to persist before inflation slowly stabilizes around its 3.0 percent target though more muted domestic demand is likely to restrain underlying inflation.
Hungary's consumer price inflation rate fell to 2.2 percent in May from 2.4 percent in April and NBH forecast inflation this year of 3.2 to 3.3 percent, down from 3.4 percent in 2019. In 2021 inflation is seen at 3.2 to 3.3 percent and then 3.0 percent in 2022.
The exchange rate of the forint, which has been weakening against the euro since March 2019, fell further in response to the rate cut. The forint fell 0.8 percent to 349.9 per euro to be down 5.4 percent since the start of this year.
Hungary's central bank cut its benchmark interest rate for the first time in four years, describing the move as a "fine-tuning" to help counter the decline in inflation and support economic growth, which is now looking more subdued than earlier expected.
The National Bank of Hungary (NBH) cut its central bank base rate by 15 basis points to 0.75 percent as of June 24, the central bank said, surprising analysts who had expected the rate to be kept steady.
The last time the central bank cut its base rate was in May 2016 when it was also cut by 15 basis points.
"Based on incoming data, Hungarian economic performance in 2020 is likely to be more subdued than earlier expected, while the outlook for inflation has shifted downwards," NBH said.
NBH left its other main rates unchanged, including the overnight deposit rate at minus 0.05 percent, and the overnight and one-week collateralised loan rates at 1.85 percent, respectively.
Today's rate cut comes after NBH in early April modified its operational framework to provide liquidity to submarkets in a targeted manner and made its interest rate corridor symmetrical.
Interest rates would be allowed to deviate upward and downward within this corridor and the overnight and one-week collateralized lending rates were raised by 95 basis points.
The overnight collateralized loan rates would be set 110 basis above the base rate while the overnight deposit rate would be 80 points below the base rate.
"In the Council's view, the current set of instruments provides appropriate room for maneuver to respond to emerging challenges in a targeted and flexible manner," the central bank said today.
The impact of the Covid-19 pandemic on Hungary's economy is likely to be the strongest in the second quarter of this year but recovery is expected from the third quarter, with a pick-up in public investment and an expansion in corporate lending required for a V-shape recovery in the second half of the year, NBH said.
In line with the expected slower global recovery, output from the country's export-oriented sectors may pick up towards the end of this year but overall Hungary's gross domestic product may show a "restrained pace" this year, the central bank added.
Growth this year is forecast to slow to between 0.3 and 2.0 percent, down from 2019's 4.9 percent and the March forecast of 2.0 to 3.0 percent.
In the first quarter of this year GDP contracted 0.4 percent from the previous quarter for annual growth of 2.2 percent, down from 4.5 percent in the fourth quarter of 2019.
Next year Hungary's economy is seen bouncing back to expand 3.8 to 5.1 percent and then by 3.5 to 3.7 percent in 2022.
As in other countries, the impact of the pandemic has slowed Hungary's inflation rate and the central bank expects volatility to persist before inflation slowly stabilizes around its 3.0 percent target though more muted domestic demand is likely to restrain underlying inflation.
Hungary's consumer price inflation rate fell to 2.2 percent in May from 2.4 percent in April and NBH forecast inflation this year of 3.2 to 3.3 percent, down from 3.4 percent in 2019. In 2021 inflation is seen at 3.2 to 3.3 percent and then 3.0 percent in 2022.
The exchange rate of the forint, which has been weakening against the euro since March 2019, fell further in response to the rate cut. The forint fell 0.8 percent to 349.9 per euro to be down 5.4 percent since the start of this year.
Monday, June 22, 2020
Paraguay cuts rate 5th time as inflation heading lower
Paraguay's central bank lowered its monetary policy rate for the fifth time this year, saying it considers a more accommodative policy appropriate to support a gradual recovery of domestic demand and ensure inflation converges to its target of 4.0 percent.
The Central Bank of Paraguay (BCP) cut its policy rate by another 50 basis points to 0.75 percent and has now cut it by 325 points this year following three cuts in March and one in April.
BCP added the decision by its monetary policy committee was unanimous.
Internationally, data show a greater than expected negative impact on activity from the quarantine imposed to curb the spread of the Covid-19 virus and the forecast for the regional economy is also showing reduced growth, BCP said.
The domestic economy showed a "significant drop" in April and a smaller contraction in May while inflation, both headline and underlying measures, remain on a downward trajectory, the central bank said.
Weaker domestic demand and the prospect of further economic deterioration of the economy of Paraguay's trading partners indicate limited inflationary pressures in coming months, it added.
Paraguay's headline inflation rate fell to 0.7 percent in May from 2.0 percent in April.
www.CentralBankNews.info
The Central Bank of Paraguay (BCP) cut its policy rate by another 50 basis points to 0.75 percent and has now cut it by 325 points this year following three cuts in March and one in April.
BCP added the decision by its monetary policy committee was unanimous.
Internationally, data show a greater than expected negative impact on activity from the quarantine imposed to curb the spread of the Covid-19 virus and the forecast for the regional economy is also showing reduced growth, BCP said.
The domestic economy showed a "significant drop" in April and a smaller contraction in May while inflation, both headline and underlying measures, remain on a downward trajectory, the central bank said.
Weaker domestic demand and the prospect of further economic deterioration of the economy of Paraguay's trading partners indicate limited inflationary pressures in coming months, it added.
Paraguay's headline inflation rate fell to 0.7 percent in May from 2.0 percent in April.
www.CentralBankNews.info
Belarus cuts rate 3rd time in '20 after Lukashenko request
The central bank of Belarus cut its benchmark interest rate for the third time, saying domestic inflation was slowing faster than expected while inflation in trading partners was also slowing down more rapidly, leading other central banks to actively lower their interest rates.
The National Bank of the Republic of Belarus (NBRB) cut its refinancing rate by another 25 basis points to 7.75 percent and has now cut it 125 points this year following cuts in February and May.
Since April 2016 NBRB has been easing its monetary policy and cut the rate 19 times by a total of 17.25 percentage points.
The rate cut was decided at an extraordinary meeting of NBB's board today, ahead of the scheduled meeting on Aug. 12, with the rate cut taking effect on July 1.
In addition to cutting the refinancing rate, the overnight loan rate was also cut 25 basis points to 8.75 percent and the overnight deposit rate to 6.75 percent.
The board meeting comes after Belarus President Alexander Lukashenko on Friday asked the central bank to look into lowering the refinancing rate at a meeting to discuss economic support measures, according to local press reports.
According to BelTA, the state-owned national news agency, Lukashenko said all countries are lowering their interest rates to revive economic activity, inflation is within forecasts, and the central bank should carry out this rate cut before the end of June.
Belarus, formerly known as White Russia or Belorussia, became independent of the Soviet Union in 1991 and Lukashenko has been president since 1994.
Headline inflation in Belarus eased to 4.9 percent in May from 5.4 percent in April, just below NBRB's target of 5.0 percent, while core inflation slowed to 3.9 percent from 4.5 percent in April.
Under these conditions, the central bank said continued easing its monetary policy, with moderately soft monetary conditions would allow it to maintain an acceptable level of price and financial stability.
After depreciating sharply in February and March, the Belarus ruble has risen since April though it remains well below its level at the start of the year.
In January Belarus' government and the central bank adopted a major strategy to improve trust in the Belarusian ruble by pushing a coordinated policy to reduce reliance of foreign currency in the country and ensure the domestic currency had a leading role in transactions.
The government's debt is around 97 percent denominated in foreign currency. A new Belarusian ruble was introduced in July 2016.
This strategy includes full transition to inflation targeting by 2021, a reduced footprint by NBRB in the foreign exchange market, reduced monopolies in the economy, lower state debt, regular issues of debt in Belarusian rubles, and ensuring that all taxes, rents, tariffs and prices by state-run organizations are set in Belarusian rubles.
The Belarusian ruble was trading at 2.37 to the U.S. dollar today, up 10.5 percent from a record low of 2.62 on March 24 and down 11.4 percent this year.
www.CentralBankNews.info
The National Bank of the Republic of Belarus (NBRB) cut its refinancing rate by another 25 basis points to 7.75 percent and has now cut it 125 points this year following cuts in February and May.
Since April 2016 NBRB has been easing its monetary policy and cut the rate 19 times by a total of 17.25 percentage points.
The rate cut was decided at an extraordinary meeting of NBB's board today, ahead of the scheduled meeting on Aug. 12, with the rate cut taking effect on July 1.
In addition to cutting the refinancing rate, the overnight loan rate was also cut 25 basis points to 8.75 percent and the overnight deposit rate to 6.75 percent.
The board meeting comes after Belarus President Alexander Lukashenko on Friday asked the central bank to look into lowering the refinancing rate at a meeting to discuss economic support measures, according to local press reports.
According to BelTA, the state-owned national news agency, Lukashenko said all countries are lowering their interest rates to revive economic activity, inflation is within forecasts, and the central bank should carry out this rate cut before the end of June.
Belarus, formerly known as White Russia or Belorussia, became independent of the Soviet Union in 1991 and Lukashenko has been president since 1994.
Headline inflation in Belarus eased to 4.9 percent in May from 5.4 percent in April, just below NBRB's target of 5.0 percent, while core inflation slowed to 3.9 percent from 4.5 percent in April.
Under these conditions, the central bank said continued easing its monetary policy, with moderately soft monetary conditions would allow it to maintain an acceptable level of price and financial stability.
After depreciating sharply in February and March, the Belarus ruble has risen since April though it remains well below its level at the start of the year.
In January Belarus' government and the central bank adopted a major strategy to improve trust in the Belarusian ruble by pushing a coordinated policy to reduce reliance of foreign currency in the country and ensure the domestic currency had a leading role in transactions.
The government's debt is around 97 percent denominated in foreign currency. A new Belarusian ruble was introduced in July 2016.
This strategy includes full transition to inflation targeting by 2021, a reduced footprint by NBRB in the foreign exchange market, reduced monopolies in the economy, lower state debt, regular issues of debt in Belarusian rubles, and ensuring that all taxes, rents, tariffs and prices by state-run organizations are set in Belarusian rubles.
The Belarusian ruble was trading at 2.37 to the U.S. dollar today, up 10.5 percent from a record low of 2.62 on March 24 and down 11.4 percent this year.
www.CentralBankNews.info
Sunday, June 21, 2020
This week in monetary policy: China, Paraguay, Hungary, New Zealand, Thailand, Georgia, Czech Rep., Guatemala, Fiji, Philippines, Turkey, Kenya, Egypt, Mexico, Colombia & Trinidad and Tobago
This week - June 21 through June 27 - central banks from 16 countries or jurisdictions are scheduled to decide on monetary policy: China, Paraguay, Hungary, New Zealand, Thailand, Georgia, Czech Republic, Guatemala, Fiji, Philippines, Turkey, Kenya, Egypt, Mexico, Colombia and Trinidad & Tobago.
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 26 | ||||||
| JUN 21 - JUN 27, 2020: | ||||||
| CHINA | 22-Jun | 3.85% | 0 | -30 | 4.35% | EM |
| PARAGUAY | 22-Jun | 1.25% | 0 | -275 | 4.75% | |
| HUNGARY | 23-Jun | 0.90% | 0 | 0 | 0.90% | EM |
| NEW ZEALAND | 24-Jun | 0.25% | 0 | -75 | 1.50% | DM |
| THAILAND | 24-Jun | 0.50% | -25 | -75 | 1.75% | EM |
| GEORGIA | 24-Jun | 8.50% | -50 | -50 | 6.50% | |
| CZECH REP. | 24-Jun | 0.25% | -75 | -175 | 2.00% | EM |
| GUATEMALA | 24-Jun | 2.00% | 0 | -75 | 2.75% | |
| FIJI | 25-Jun | 0.25% | 0 | -25 | 0.50% | |
| PHILIPPINES | 25-Jun | 2.75% | -50 | -125 | 4.50% | EM |
| TURKEY | 25-Jun | 8.25% | -50 | -375 | 24.00% | EM |
| KENYA | 25-Jun | 7.00% | 0 | -150 | 9.00% | FM |
| EGYPT | 25-Jun | 9.25% | 0 | -300 | 15.75% | EM |
| MEXICO | 25-Jun | 5.50% | -50 | -175 | 8.25% | EM |
| COLOMBIA | 26-Jun | 2.75% | -50 | -150 | 4.25% | EM |
| TRINIDAD & TOBAGO | 26-Jun | 3.50% | -150 | -150 | 5.00% | |
Friday, June 19, 2020
Azerbaijan cuts rate 14th time, inflation seen in range
Azerbaijan's central bank cut its policy rate for the second time this year and for the 14th time since February 2018 and said future policy decisions will be aimed at keeping inflation within its target range, maintaining financial stability and supporting economic activity.
The Central Bank of the Republic of Azerbaijan (CBA) cut its discount rate by 25 basis points to 7.0 percent and has now cut it by 50 points this year following a cut in January.
Since February 2018, when CBA began easing its monetary policy stance, the rate has been cut 14 times and by a total of 800 basis points.
Azerbaijan's inflation rate eased to 2.9 percent in May from 3.0 percent in April and CBA said its updated forecasts point to inflation of 3.0 to 3.5 percent by the end of this year, within its target range of 4.0 percent, plus/minus 2 percentage points.
It added the situation on the foreign exchange market remained stable in May, with supply exceeding demand at its auctions, while the monetary base had risen 8.0 percent since the end of April but was still down 10.6 percent since the start of the year.
CBA said the negative impact from the Covid-19 pandemic on Azerbaijan's economy was continuing in May and June, with a drop in all parts of aggregate demand though official data showed growth in the non-oil, gas and agricultural sectors in the first five months.
Retail turnover in the first five months was down 1.7 percent from the same period last year while investments in the non-oil sector had fallen 16.7 percent, CBA said.
www.CentralBankNews.info
The Central Bank of the Republic of Azerbaijan (CBA) cut its discount rate by 25 basis points to 7.0 percent and has now cut it by 50 points this year following a cut in January.
Since February 2018, when CBA began easing its monetary policy stance, the rate has been cut 14 times and by a total of 800 basis points.
Azerbaijan's inflation rate eased to 2.9 percent in May from 3.0 percent in April and CBA said its updated forecasts point to inflation of 3.0 to 3.5 percent by the end of this year, within its target range of 4.0 percent, plus/minus 2 percentage points.
It added the situation on the foreign exchange market remained stable in May, with supply exceeding demand at its auctions, while the monetary base had risen 8.0 percent since the end of April but was still down 10.6 percent since the start of the year.
CBA said the negative impact from the Covid-19 pandemic on Azerbaijan's economy was continuing in May and June, with a drop in all parts of aggregate demand though official data showed growth in the non-oil, gas and agricultural sectors in the first five months.
Retail turnover in the first five months was down 1.7 percent from the same period last year while investments in the non-oil sector had fallen 16.7 percent, CBA said.
www.CentralBankNews.info
Russia cuts rate 8th time and will consider further easing
Russia's central bank cut its policy rate for the third time this year and for the 8th time in the last 12 months, saying the downward pressures on inflation are higher than expected and further rate cuts will be considered in coming policy meetings.
The Bank of Russia cut its key rate by another 100 basis points to 4.50 percent and has now cut it by 175 basis points this year following cuts in February and April.
Since June 2019, when the central bank began to reverse two rate hikes in the second half of 2018, the rate has been cut eight times by 325 points.
Today's decision was well-telegraphed by Governor Elvira Nabiullina who said on June 5 that a 100 basis-point rate cut was among the options that would be considered as there was significant room for monetary policy easing due to fading inflationary pressure from the measures taken by governments worldwide to curb the spread of the Covid-19 pandemic.
"Disinflationary factors have been more profound that expected due to a longer duration of restrictive measures in Russia and across the world," the central bank said, adding the effect of short-term pro-inflationary factors have largely been exhausted, inflation expectations have eased and financial stability risks in global markets have declined.
"In these circumstances, there's a risk that in 2021 inflation might significantly deviate downwards from the 4.0% target," the bank said, adding its rate cut was aimed at limiting this risk.
Russia's inflation rate eased to 3.0 percent in May from 3.1 percent in April as the upward pressure on prices from a lower ruble and higher demand for certain goods ahead of quarantines and a disruption to supply chains, begin to fade.
As of June 15, inflation rose back to 3.1 percent, the central bank said, adding inflation in coming months will be contained by the rise in the ruble in May and early June on the back of more stable global financial markets and rising oil prices.
But at the same time, inflation will also rise this year due to the low base effect of 2019.
In April the central bank forecast inflation would average 3.1 to 3.9 percent this year, down from 2019's 4.5 percent.
The current risks of disinflation are mainly due to the uncertainty over the virus and the scale of measures to fight it, and the impact of these measures on economic activity and how fast the global and Russian economy recover.
"If the situation develops in line with the baseline forecast, the Bank of Russia will consider the necessity of further key rate reduction at its upcoming meetings," the bank said.
Russia's ruble tumbled 25 percent from Jan. 12 to March 19 but since then it has rebounded 17 percent and was trading at 69.3 to the U.S. dollar today, down only 10.5 percent this year.
Some of Russia's measures to contain the spread of Covid-19 remain in place and together with the considerable drop in external demand this is putting longer-than-expected pressure on economic activity and recent surveys of business reflect cautious sentiment.
"The contraction of GDP in the second quarter could prove more sizable than expected," the central banks said, confirming its forecast for Russia's economy to contract 4-6 percent this year as compared with growth of 1.3 percent in 2019.
In the first quarter of this year Russia's GDP grew an annual 1.6 percent, down from 2.1 percent in the previous quarter.
Thursday, June 18, 2020
Costa Rica cuts rate 3rd time in 2020 as inflation falls
Costa Rica's central bank cut its policy rate for the third time this year, and for the 10th time since the start of last year, saying today's easing of monetary policy will not compromise its objective of maintaining low and stable inflation given the current trend of disinflation.
The Central Bank of Costa Rica (BCCR) cut its policy rate by another 50 basis points to 0.75 percent and has now cut it 200 points this year following cuts in January and March.
Since the start of 2019 the rate has been cut 10 times by a total of 450 basis points.
Inflation in Costa Rica fell to 0.61 percent in May from 0.89 percent in April and the central bank forecast inflation would be below the lower limit of its target range for the next 18 months, pointing to slack in production capacity, high unemployment, and low imported inflation and inflation expectations.
BCCR, which targets inflation of 3.0 percent, plus/minus 1 percentage points, added the rate cut was aimed at lowering the cost of credit to mitigate the short-term impact of the Covid-19 pandemic, facilitate an economic recovery and allow a return of inflation to the target.
In April, when BCCR kept its rate steady, the central bank forecast a 3.6 percent economic contraction this year following growth of 3.5 percent in 2019, with the county's hotel and restaurant sector shrinking almost 28 percent and exports down 5.3 percent.
Next year Costa Rica's economy is seen recovering to growth of 2.3 percent
www.CentralBankNews.info
The Central Bank of Costa Rica (BCCR) cut its policy rate by another 50 basis points to 0.75 percent and has now cut it 200 points this year following cuts in January and March.
Since the start of 2019 the rate has been cut 10 times by a total of 450 basis points.
Inflation in Costa Rica fell to 0.61 percent in May from 0.89 percent in April and the central bank forecast inflation would be below the lower limit of its target range for the next 18 months, pointing to slack in production capacity, high unemployment, and low imported inflation and inflation expectations.
BCCR, which targets inflation of 3.0 percent, plus/minus 1 percentage points, added the rate cut was aimed at lowering the cost of credit to mitigate the short-term impact of the Covid-19 pandemic, facilitate an economic recovery and allow a return of inflation to the target.
In April, when BCCR kept its rate steady, the central bank forecast a 3.6 percent economic contraction this year following growth of 3.5 percent in 2019, with the county's hotel and restaurant sector shrinking almost 28 percent and exports down 5.3 percent.
Next year Costa Rica's economy is seen recovering to growth of 2.3 percent
www.CentralBankNews.info
Indonesia cuts rate 3rd time in 2020, sees easing room
Indonesia's central bank returned to the easing path after a two-month pause and said there was still "space to lower interest rates in line with mild inflationary pressures, maintained external stability and the need to stimulate economic growth."
Bank Indonesia (BI) cut its 7-day reverse repo rate by another 25 basis points to 4.25 percent, its third rate cut this year following cuts in February and March.
The rate cut was expected by analysts in light of the economic pain being inflicted on Indonesia from the global measures to curb the spread of the Covid-19 virus.
This year BI has cut its rate by a total of 75 points and since July 2019, when it began easing in response to slowing global growth, the rate has been cut 7 times by a total of 175 points.
Today, BI also lowered its deposit rate by 25 basis points to 3.50 percent and the lending facility rate to 5.0 percent.
"The decision is consistent with efforts to maintain economic stability and nurture economic recovery momentum in the COVID-19 era," BI said, adding it would continue to stabilize the exchange rate of the rupiah and continue with its asset purchases, or quantitative easing.
In addition to the rate cuts, BI said it would begin remunerating banks that meet daily and average rupiah reserve requirements of 1.5 percent annually based on 3 percent of deposits as of Aug. 1.
Last month BI kept its rates steady to ensure stability of its rupiah but a rise in its exchange rate this month gave the central bank room to ease its policy further.
"The rupiah is gaining strength as foreign capital continues to flow into domestic financial markets," BI said.
BI noted a 5.69 percent rise in the rupiah as of June 17 from the average level in May, saying this reflects an easing of uncertainty in global financial markets, maintained investor confidence in the country's economic outlook and attractive financial investments.
Today the rupiah was trading 14,143.3 to the U.S. dollar, up 17 percent since a low of 16,564.8 on March 24 but still down 1.5 percent this year.
Indonesia's economy has contracted for two quarters in a row and BI said it expects another decline in the second quarter as exports are shrinking and household and investments are falling due to the restrictions from measures to curb the virus.
Indonesia's gross domestic product contracted by 2.41 percent in the first quarter from the fourth quarter, which shrank 1.74 percent from the third quarter. Year-on-year, the economy expanded 2.97 percent in the second quarter.
Developments in May point to incipient signs of less pressure on the domestic economy, BI said, adding it expects a recovery to begin in the third quarter.
Growth this year is expected to average 0.9 to 1.9 percent and then 5.0 to 6.0 percent in 2021.
Earlier this week Indonesia's finance minister forecast an economic contraction of 3.1 percent in the second quarter.
Bank Indonesia (BI) cut its 7-day reverse repo rate by another 25 basis points to 4.25 percent, its third rate cut this year following cuts in February and March.
The rate cut was expected by analysts in light of the economic pain being inflicted on Indonesia from the global measures to curb the spread of the Covid-19 virus.
This year BI has cut its rate by a total of 75 points and since July 2019, when it began easing in response to slowing global growth, the rate has been cut 7 times by a total of 175 points.
Today, BI also lowered its deposit rate by 25 basis points to 3.50 percent and the lending facility rate to 5.0 percent.
"The decision is consistent with efforts to maintain economic stability and nurture economic recovery momentum in the COVID-19 era," BI said, adding it would continue to stabilize the exchange rate of the rupiah and continue with its asset purchases, or quantitative easing.
In addition to the rate cuts, BI said it would begin remunerating banks that meet daily and average rupiah reserve requirements of 1.5 percent annually based on 3 percent of deposits as of Aug. 1.
Last month BI kept its rates steady to ensure stability of its rupiah but a rise in its exchange rate this month gave the central bank room to ease its policy further.
"The rupiah is gaining strength as foreign capital continues to flow into domestic financial markets," BI said.
BI noted a 5.69 percent rise in the rupiah as of June 17 from the average level in May, saying this reflects an easing of uncertainty in global financial markets, maintained investor confidence in the country's economic outlook and attractive financial investments.
Today the rupiah was trading 14,143.3 to the U.S. dollar, up 17 percent since a low of 16,564.8 on March 24 but still down 1.5 percent this year.
Indonesia's economy has contracted for two quarters in a row and BI said it expects another decline in the second quarter as exports are shrinking and household and investments are falling due to the restrictions from measures to curb the virus.
Indonesia's gross domestic product contracted by 2.41 percent in the first quarter from the fourth quarter, which shrank 1.74 percent from the third quarter. Year-on-year, the economy expanded 2.97 percent in the second quarter.
Developments in May point to incipient signs of less pressure on the domestic economy, BI said, adding it expects a recovery to begin in the third quarter.
Growth this year is expected to average 0.9 to 1.9 percent and then 5.0 to 6.0 percent in 2021.
Earlier this week Indonesia's finance minister forecast an economic contraction of 3.1 percent in the second quarter.
UK holds rate, boosts asset purchases 100 bln. pounds
The central bank of the United Kingdom left its benchmark interest rate at essentially zero but raised its target for buying government bonds by another 100 billion pounds, saying further easing of monetary policy is warranted despite signs the contraction in the global and UK economy in the second quarter of this year will be less severe than it had expected in May.
Despite this sliver of optimism, the Bank of England (BOE) said the outlook was "unusually uncertain" as it depends on the evolution of the pandemic and downside risks to the global outlook remain, including the spread of Covid-19 virus within emerging markets and advanced economies.
The U.K. economy shrank by an annual 1.6 percent in the first quarter of this year, the largest decline since the end of 2009, and this drop in activity and rising spare capacity is putting downward pressure on inflation to well below the BOE's target of 2.0 percent.
Consumer price inflation dropped to 0.5 percent in May from 0.8 percent in April and BOE said "a further easing of monetary policy is warranted to meet its statutory objectives."
The Bank of England (BOE)'s monetary policy committee (MPC) unanimously agreed to keep the Bank Rate steady at 0.1 percent for the second time following two cuts in March, but voted 8-1 to raise the target for purchasing UK government bonds, financed by the issuance of reserves, by another 100 billion, taking the stock of total asset purchases to 745 billion pounds.
"The MPC will continue to monitor the situation closely and, consistent with its remit, stands ready to take further action as necessary to support the economy and ensure a sustained return of inflation to the 2% target," it said, adding it would also continue to review its asset purchase program.
The BOE initially launched its asset purchase program, also known as quantitative easing, in March 2009 during the global financial crises. On March 19 this year, when it cut its bank rate to the current level, it also increased the purchase target by 200 billion pounds.
In its May monetary policy report, BOE published what it said were "plausible illustrative economic scenario," given the uncertainties surrounding any forecasts. This included a very sharp fall in UK gross domestic product in the first half of this year and a sharp rise in unemployment that will push inflation significantly below its target given lower energy prices and weak demand.
BOE forecast the UK economic output would be some 30 percent lower in the second quarter of this year that at the end of 2019 as output would fall by around 3 percent in the first quarter and a further 25 percent in the second quarter.
Economic output would then pick up in the second half of the year but it will still take until the end of 2021 or early 2022 to return to its previous growth path.
Under the "illustrative scenario," UK GDP would contract by 14 percent this year from 1.0 percent growth in 2019, but then bounce back to expand 15 percent in 2021 and 3.0 percent in 2022.
Consumer price inflation would drop to an average of 0.6 percent this year from 1.8 percent last year and the remain low at 0.5 percent in 2021 before rising to 2.0 percent in 2022 while the unemployment rate would average 8 percent this year and then 7 percent in 2021.
In April UK GDP shrank by around 20 percent following a 6 percent fall in March, but BOE said recent data suggest economic output has begun to recover as consumer spending and services output are picking up, supported by easier monetary and fiscal policy.
Payments data are also consistent with a recovery in consumer spending in May and June though payrolls data suggest the labour market has weakened materially and households are worried about their job security.
Despite this sliver of optimism, the Bank of England (BOE) said the outlook was "unusually uncertain" as it depends on the evolution of the pandemic and downside risks to the global outlook remain, including the spread of Covid-19 virus within emerging markets and advanced economies.
The U.K. economy shrank by an annual 1.6 percent in the first quarter of this year, the largest decline since the end of 2009, and this drop in activity and rising spare capacity is putting downward pressure on inflation to well below the BOE's target of 2.0 percent.
Consumer price inflation dropped to 0.5 percent in May from 0.8 percent in April and BOE said "a further easing of monetary policy is warranted to meet its statutory objectives."
The Bank of England (BOE)'s monetary policy committee (MPC) unanimously agreed to keep the Bank Rate steady at 0.1 percent for the second time following two cuts in March, but voted 8-1 to raise the target for purchasing UK government bonds, financed by the issuance of reserves, by another 100 billion, taking the stock of total asset purchases to 745 billion pounds.
"The MPC will continue to monitor the situation closely and, consistent with its remit, stands ready to take further action as necessary to support the economy and ensure a sustained return of inflation to the 2% target," it said, adding it would also continue to review its asset purchase program.
The BOE initially launched its asset purchase program, also known as quantitative easing, in March 2009 during the global financial crises. On March 19 this year, when it cut its bank rate to the current level, it also increased the purchase target by 200 billion pounds.
In its May monetary policy report, BOE published what it said were "plausible illustrative economic scenario," given the uncertainties surrounding any forecasts. This included a very sharp fall in UK gross domestic product in the first half of this year and a sharp rise in unemployment that will push inflation significantly below its target given lower energy prices and weak demand.
BOE forecast the UK economic output would be some 30 percent lower in the second quarter of this year that at the end of 2019 as output would fall by around 3 percent in the first quarter and a further 25 percent in the second quarter.
Economic output would then pick up in the second half of the year but it will still take until the end of 2021 or early 2022 to return to its previous growth path.
Under the "illustrative scenario," UK GDP would contract by 14 percent this year from 1.0 percent growth in 2019, but then bounce back to expand 15 percent in 2021 and 3.0 percent in 2022.
Consumer price inflation would drop to an average of 0.6 percent this year from 1.8 percent last year and the remain low at 0.5 percent in 2021 before rising to 2.0 percent in 2022 while the unemployment rate would average 8 percent this year and then 7 percent in 2021.
In April UK GDP shrank by around 20 percent following a 6 percent fall in March, but BOE said recent data suggest economic output has begun to recover as consumer spending and services output are picking up, supported by easier monetary and fiscal policy.
Payments data are also consistent with a recovery in consumer spending in May and June though payrolls data suggest the labour market has weakened materially and households are worried about their job security.
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