This week in monetary policy: Australia, Poland, Malaysia, Sri Lanka, Ukraine and Moldova

    This week - August 10 through August 15 - central banks from 6 countries or jurisdictions are scheduled to decide on monetary policy: Australia, Poland, Malaysia, Sri Lanka, Ukraine and Moldova.

     Following table includes the name of the country, the date of the next policy decision, the current policy rate, the local time a policy decision is announced, 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 be accessed by clicking on This Week.

WEEK 9
MAR 1 - MAR 6, 2021:
AUSTRALIA	2-Mar	0.10%	14:30	0	0	0.25%	DM
POLAND	3-Mar	0.10%		0	0	1.00%	EM
MALAYSIA	4-Mar	1.75%		0	0	2.50%	EM
SRI LANKA	4-Mar	4.50%	7:30	0	0	6.25%	FM
UKRAINE	4-Mar	6.00%	14:00	0	0	10.00%	FM
MOLDOVA	5-Mar	2.65%		0	0	3.25%

 

    www.CentralBankNews.info

Botswana maintains rate as inflation rise seen transitory

     Botswana's central bank left its benchmark bank rate steady for the second time to maintain an accommodative monetary policy stance, saying it expects the  economy to operate below full capacity in the short and medium-term and thus not create any inflationary pressures and a forecast rise in inflation this year is partly due to transitory factors.
     The Bank of Botswana (BoB) kept its bank rate at 3.75 percent, unchanged since October last year when it was cut for the second time in 2020 in response to a contraction in economic activity and below-target inflation as the country's key mining and tourism sectors were hit 

by the COVID-19 pandemic.
     Botswana's central bank has been in a monetary easing cycle since December 2010 and has lowered the rate 12 times and by a total of 6.25 percentage points, including two cuts by a total of 100 points last year.

     Botswana's inflation rate ticked up to 2.3 percent in January from 2.2 percent in December, but is still below the bank's target range of 3.0 to 6.0 percent.

     "Nonetheless, inflation is forecast to revert to within the objective range in the second quarter of 2021 and subsequently move closer to the upper bound partly due to transitory factors," BoB said, pointing to value added tax, sugar tax and fuel levy.

    "Overall, risks to the inflation outlook are assessed to be balanced," said the bank, reiterating its view from its last policy meeting in December, 2020.

    The economy of land-locked Botswana contracted by 6.4 percent in the 12 months to the end of September last year from growth of 3.7 percent in the same 2019 period, as mining output fell 21.9 percent and non-mining shrank 4.7 percent.

     The central bank noted that Botswana's finance ministry estimates a 7.7 percent contraction for the full 2020 year, up from an earlier estimate of 8.9 percent, and then growth of 8.8 percent in 2021, with the economy performing better in the fourth quarter of last year as compared with the third quarter given easier COVID-19 movement restrictions.

Turkey tightens policy again by raising lira reserve ratio

     Turkey's central bank, which has already raised its key interest rates three times in the last six months, tightened its policy further by raising its reserve requirements for banks, saying the move aimed to improve the effectiveness of its transmission of monetary policy.

     The Central Bank of the Republic of Turkey (CBRT) raised the reserve requirement ratio for all Turkish lira deposits by 200 basis points and lowered the upper limit for how much foreign exchange banks can hold to 20 percent from 30 percent and the upper limit for gold to 15 percent from 20 percent.

     In addition, CRBT will raise its renumeration rate applied to bank's required reserves by 150 basis points to 13.50 percent.

     The changes are expected to increase lira-denominated reserves at the central bank by around 25 billion lira, while total required reserves in foreign exchange and gold are expected to decline by US$500 million if the reserve option utilization rate remains unchanged for remaining tranches, the bank said.

     Unlike most central banks, Turkey's central bank frequently uses reserve requirements as part of its box of monetary policy tools.

     The previous change came in November when CBRT not only raised its main interest rate but revised its reserve requirement regulation by scrapping a policy of linking the reserve requirement and renumeration with banks' loans so the same ratio was applied to all banks.

     According to its website, the ratio on lira demand deposits is now 8 percent, 6 percent on deposits of up to 6 months, 4 percent on deposits up to 1 year and 3 percent on 1 year or longer.

     The reserve ratio on foreign currency deposits ranges from 19 percent on demand deposits to 13 percent on deposits 1 year and longer, and for precious metals the ratio ranges from 22 percent for deposits on demand to 18 percent for deposits 1 year or longer.

     Turkey's central bank raised its policy interest rate by a total of 825 basis points from September through December to 17.0 percent and has pledged to maintain a tight monetary policy stance, and tighten further if needed, until inflation falls permanently.

     At the bank's last meeting on monetary policy on Feb. 18, the bank confirmed its commitment to tight monetary policy, saying the lagged effects of a fall in the lira's exchange rate and high inflation expectations were still having an adverse impact on prices.

     However, the central bank also noted that credit growth was starting to slow amid tighter financial conditions and the decelerating impact of the monetary tightening on credit and domestic demand was expected to become more significant.

     Earlier this month the central bank's governor, Naci Agbal, told Reuters that interest rates were unlikely to be cut for a long time this year given the pressures on inflation and he also wanted to rebuild the bank's depleted foreign exchange reserves.

     Despite a rebound in the lira's exchange rate in the last four months, Turkey's inflation rate shot up to 15 percent in January from 14.6 percent in December - three times the central bank's medium-term target of 5.0 percent inflation - due to higher prices of housing, fuels and food.

     In its latest inflation report from January, CBRT forecast inflation of 9.4 percent by the end of 2021 and then 7.0 percent by the end of 2022 before stabilizing around the 5 percent target in 2023.

ear.

     The combination of rate hikes and new economic leadership, including the arrival of Agbal in November last year has bolstered the confidence of investors.

     Last year the lira lost 30 percent of its value from the start of the year until early November when Turkey's strong-willed president, Tayyip Erdogan, installed Agbal at the central bank, followed by the resignation of Berat Albayrak, Erdogan's son-in-law, as finance minister.

     Since Nov. 8, when the lira hit a record low around 8.52 to the U.S. dollar, the lira has soared almost 19 percent - making it the world's top performer - to a rate of 7.17 today and is up 2.4 percent this year.

     After shrinking in the second quarter, Turkey's economy bounced back in the third quarter and grew an annual 6.7 percent from a fall of 9.9 percent. 

      Analysts estimate economic growth of up to 8.0 percent in the fourth quarter of 2020 for an annual expansion of 2.5 percent.

Kyrgyzstan raises rate as food prices boost inflation

      Kyrgyzstan's central bank, one of only a handful of central banks to have raised interest rates in 2020, returned to the monetary tightening path by raising its key interest rate for the second time in exactly 12 months as higher food prices push up inflation at the same time economic activity is strengthening.

      The National Bank of the Kyrgyz Republic (NBKR) becomes the sixth central bank to raise interest rates this year as policy makers slowly, but steadily, unwind last year's unprecedented easing in response to the outbreak of the COVID-19 pandemic when benchmark interest rates were cut 256 times worldwide.

     NBKR raised its discount rate by 50 basis points to 5.50 percent, returning the rate to a level last seen in November 2016.

     Starting in March 2016, Kyrgyzstan's central bank shifted into a monetary easing cycle when it began cutting its rate from 10.0 percent. 

     But this easing cycle came to an end one year ago on Feb. 24, 2020 when the central bank, which is transitioning to a monetary framework based on inflation-targeting to ensure price stability, raised the rate to dampen inflationary pressures.

     "A gradual recovery of the economies of trading partners is expected, which will contribute to an increase in economic activity in the republic to meet external demand in the medium term," NBKR said,.

     It did not exclude the possibility of additional changes to its monetary policy.

     Inflation in the former Soviet republic - tucked between which China, Kazakhstan, Tajikistan and Uzbekistan - had trended lower since topping 20 percent in 2007 but in the last five months it has accelerated and rose to 10.1 percent in January, up from 5 percent in August last year.

     As of Feb. 12, inflation rose further to 10.2 percent, mainly due to the higher cost of imported food.

     "The rise in prices on world food markets continues and, as a result, there is an increase in inflation in the country," NBKR said, adding the rise in commodity markets will determine how persistent inflation will rise in the near future.

     Food inflation rose to 18.5 percent in January from 9.4 percent in August and 17.6 percent in December and a planned increase in taxes on alcohol and tobacco this quarter will push up prices further.

     "It is expected that, after some acceleration, by the middle of the year inflation will gradually stabilize and be within single digits by the end of the year," the bank said.

     Kyrgyzstan's economy shrank 8.6 percent in 2020 after growth of 4.5 percent in 2019 and while domestic demand remains weak, NBKR said the economy was recovering at "a moderate pace," helped by remittances from workers abroad which rose 2.0 percent to US$1.9 billion by the end of last year.

     After tumbling in March last year Kyrgyzstan's som rebounded in the following months but since June it has steadily depreciated, with the central bank saying the foreign exchange market is relatively stable but it participates in the market to smooth out sharp fluctuations in the exchange rate.

     The som was trading at 84.63 to the U.S. dollar today, down 2.1 percent since the start of this year and down 17.6 percent since the start of 2020.

     www.CentralBankNews.info

Paraguay holds rate, looks toward policy normalization

     Paraguay's central bank left its policy rate steady for the 8th month in a row and while it affirmed the current easy monetary policy was still compatible with its inflation target, it said it will now evaluate the impact of the economy on prices "in order to start a gradual process of normalizing monetary policy in the near future."
     The Central Bank of Paraguay (BCP) kept its policy rate at 0.75 percent after cutting it five times in 2020 by a total of 325 basis points.

     BCP has been in monetary easing cycle since May 2016 and its last rate cut in June 2020 was the 13th cut since it began lowering the rate from 6.0 percent for a total reduction of 5.25 percentage points.

     As in January, the decision by the bank's monetary policy committee was unanimous but it is the first time the committee has made a reference to normalizing its policy.

     In January, for example, the committee only said it continued to carefully the impact of new developments, both international and local, on monetary policy.

      The bank said the prospects for global economic growth in 2021 had improved and data for the domestic economy and demand showed greater "dynamism" toward the end of last year.

     In recent months, the construction, livestock and manufacturing sectors have shown a good performance, adding to the gradual recovery of the services sector.

     This year the favorable outlook for the agricultural sector, together with a stronger impulse from the external sector, will determine the speed of how fast the economy recovers, especially from the second quarter onwards, BCP said.

     Nevertheless, there is still a risk from the COVID-19 virus, with the mitigation of this depending on the roll-out of vaccinations.

     Inflation in the land-locked South American country has remained low and inflation expectations over the monetary policy horizon are still aligned with the bank's target of 4.0 percent, the bank said.

     Paraguay's gross domestic product shrank an annual 1.2 percent in the third quarter, better than a 6.5 percent fall in the second quarter, while inflation has been rising since July last year and hit 2.6 percent in January, up from 2.2 percent in the previous two months.

     In December the central bank estimated the economy would contract 1.5 percent in 2020 and then expand 4 percent in 2021 while inflation would rise to 3.9 percent.

     After hitting a record low in late November last year, the exchange rate of Paraguay's guarani has been appreciating.

      Today the guarani was trading around 6,812 to the U.S. dollar, up 2.4 percent since the start of 2021 and up almost 4 percent since a record low around 7,082 on Nov 29, 2020.

     But since the start of 2020, the guarani is still down 5.3 percent.

     www.CentralBankNews.info

     

     

Rwanda keeps easy policy stance as inflation seen low

      Rwanda's central bank left its benchmark interest rate steady, saying it was maintaining an accommodative monetary policy stance as inflation is projected to evolve around the lower bound of its inflation target while there is a need to support the financing of the economic by banks.
     The National Bank of Rwanda (NBR) left its central bank rate (CBR) at 4.50 percent, unchanged since April last year when it was cut by 50 basis points.

      Last year's rate cut extended the bank's monetary easing cycle that has been in place since June 2013. Since then CBR has been lowered by 300 points.

      Rwanda's inflation rate has been decelerating the last three months and fell to 3.5 percent in January from 3.9 percent in December and the central bank projects inflation in 2021 will remain around the lower bound of 2.0 percent due to subdued inflationary pressures.

     In January 2019 NBR switched to using prices instead of money supply to ensure price stability and targets an inflation midpoint of 5.0 percent within a lower bound of 2.0 percent and an upper limit of 8.0 percent.

    Rwanda's economy shrank 4.1 percent in the first three quarters of 2020 compared with growth of 8.3 percent in the same 2019 period but began gradually recovering in the second half of last year, evidenced by a rising trend of the composite index of economic activities (CIEA).

     CIEA rose 9.4 percent in the second half of 2020 after contracting 2.1 percent in the first half.

     "This domestic economic recovery is expected to continue in 2021, supported by policy interventions to revive business activity, despite the uncertainty around COVID-19 and its containment measures," the central bank said, adding the roll-out vaccines globally will enhance optimism and stimulate recovery.

     In December last year the International Monetary Fund (IMF) said Rwanda's response to the pandemic was generally well-designed and forecast the economy would shrink 0.2 percent in 2020 and then expand by 5.7 percent in 2021.

     The IMF also forecast Rwanda's inflation rate would average 2.5 percent this year, then rise to 4.1 percent in 2022 and 5.0 percent in following years.

     Rwanda's franc has been steadily deprecating in the last decade and NBR said it had declined 5.4 percent year-on-year against the U.S. dollar as of December compared with a fall of 4.9 percent in December 2019 as pressure came in the second half of last year as a resumption of economic activity led to higher demand for foreign currencies amid lower inflows.

     NBR expects the foreign exchange market to remain stable with adequate foreign exchange reserves to cover 5.9 months of imports.

     www.CentralBankNews.info

This week in monetary policy: Israel, Paraguay, Kyrgyzstan, Hungary, New Zealand, South Korea, Botswana, Gambia & Bulgaria

     This week - February 22 through February 27 - central banks from 9 countries or jurisdictions are scheduled to decide on monetary policy: Israel, Paraguay, Kyrgyz Republic, Hungary, New Zealand, South Korea, Botswana, Gambia and Bulgaria.

     Following table includes the name of the country, the date of the next policy decision, the current policy rate, the local time a policy decision is announced, 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 be accessed by clicking on This Week.
 

WEEK 8
FEB 22 - FEB 27, 2021:
ISRAEL	22-Feb	0.10%	12:00	0	0	9.00%	DM
PARAGUAY	22-Feb	0.75%		0	0	4.00%
KYRGYZSTAN	22-Feb	5.00%		0	0	5.00%
HUNGARY	23-Feb	0.60%		0	0	0.90%	EM
NEW ZEALAND	24-Feb	0.25%	14:00	0	0	1.00%	DM
SOUTH KOREA	25-Feb	0.50%		0	0	1.25%	EM
BOTSWANA	25-Feb	3.75%		0	0	4.75%
GAMBIA	25-Feb	10.00%		0	0	12.00%
BULGARIA	26-Feb	0.00%		0	0	0.00%	FM

 
    www.CentralBankNews.info

Zimbabwe hikes rate 500 bps, sees inflation below 10%

     Zimbabwe became the third central bank in Southern Africa to tighten its monetary policy stance this year, saying the move takes into account the current liquidity conditions in the market and the need to control speculative borrowing as its maintains a conservative monetary targeting framework in 2021.

      The Reserve Bank of Zimbabwe (RBZ) raised its policy rate for overnight accommodation by 500 basis points to 40.0 percent, the medium-lending rate for the productive sector to 30 percent from 25 percent and the statutory reserves to 5.0 percent from 2.5 percent for demand and/or call deposits.

     "The decision on interest rates takes into account the current liquidity conditions in the market and the need to continue controlling speculative borrowing," the bank said in its monetary policy statement that evaluates the progress since August 2020 and policy measures to be pursued for the next six months.

     Earlier today Zambia's central bank raised its key interest rate by 50 basis points to contain rising inflation, following on the heels of Mozambique's central bank that raised its key rate 300 points in late January due to rising inflation from continued depreciation of its currency.

     Last year Zimbabwe's central bank cut its key interest rate in March and April by a total of 20 percentage points to 15.0 percent, continuing an easing cycle that began in November 2019 when the rate was cut to 35.0 percent from 70 percent.

     But as part of an overhaul of its foreign exchange system, the central bank in June 2020 reversed course and raised the policy rate back up to 35.0 percent to help stabilize the exchange rate. 

     Today RBZ maintained its rate on time deposits at 2.5 percent, saying the differentiation by maturity was expected to incentives banks to hold long-term liabilities or time deposits and thus facilitate long-term lending in the medium term.

     Last year Zimbabwe abandoned its policy of strictly controlling foreign exchange in favor of a 3-pronged strategy that includes foreign exchange auctions to discover a market exchange rate along with a more conservative monetary targeting framework to keep inflation and the exchange rate in check.

     Zimbabwe has for years suffered with a depreciation of its dollar, which was reintroduced in 2019, but the central bank said the introduction of the foreign exchange auction system in June last year had minimized distortions in prices by curtailing speculative prices and parallel market exchange rate indexation of prices by businesses.

     The premium on the parallel exchange rate has narrowed to what RBZ said was a "tolerable band of up to 20%, consistent with experiences in other countries," and helped dampen inflation pressures.

     The bank has also implemented a conservative monetary targeting framework to contain money supply growth, reduce pressure on the exchange rate and inflationary pressures, noting reserve money grew 18.6 percent in 2020 against a target of 25 percent per quarter.

     For 2021 the target for quarterly reserve money growth will be lowered to 22.5 percent, which RBZ said was consistent with targeted end of year inflation of below 10 percent and the projected 7.4 percent economic growth.

     "The measured optimism is based on the expected significant growth of the agricultural output in 2021, as a result of the good rainy seasons, fiscal sustainability and the Bank's focus on price and financial system stability," RBZ said.

     Helped by keeping reserve money growth in check and a more efficient allocation of foreign currency, RBZ said inflation has been on a downward trajectory since the second half of last year and monthly headline inflation ended 2020 below 5 percent, as it desired, resulting in annual inflation of 348.6 percent, slightly above its forecast of 300 percent.

     In January, however, the annual inflation rate rose to 362.6 percent from 348.6 percent in December due to higher administrative levies and other charges that traditionally take effect at the start of the year.

     "Overall, both headline and blended inflation are expected to progressively decline in 2021," RBZ said.

     www.CentralBankNews.info

     

Indonesia cuts rate 10th time and lowers GDP forecast

      Indonesia's central bank cut it's key interest rates for the 10th time in the current easing cycle, as widely expected, and trimmed its forecast for economic growth in 2021 following a slower-than-expected rebound in the fourth quarter of last year.

     Bank Indonesia (BI) lowered its benchmark 7-day reverse repo rate by another 25 basis points to 3.50 percent and has now cut it by a total of 2.50 percentage points since it began easing its monetary policy stance in July 2019 in response to a slowdown in global economic growth.

     BI also lowered its other main interest rates by the same amount, lowering the deposit rate to 2.75 percent and the lending rate to 4.25 percent.

     "The decision is consistent with projected low inflation and maintained exchange rate stability as well as follow-up efforts to support national economic recovery momentum," BI said, adding:

     "Moving forward, Bank Indonesia will continue to direct all policy instruments toward supporting the national economic recovery, while controlling inflation and maintaining rupiah exchange rate stability and financial system stability."

     At the beginning of the COVID-19 pandemic, BI was among the first wave of central banks in February 2020 to quickly loosen monetary policy along with the central banks of China, Thailand, Philippines, Mexico, Brazil and Turkey.

      In addition to cuts to its interest rates and reserve requirements, BI has also injected some 750 trillion rupiah of liquidity into financial markets - the equivalent of 4.86 percent of gross domestic product - via outright purchases of Indonesian government bonds, illustrating how emerging market central banks have embraced the tool of quantitative easing.
     From February through November last year BI cut its rate five times by a total of 125 basis points to stimulate economic activity that was hit by measures to contain the spread of the virus.
     In December last year and January this year BI then paused in its easing campaign amid signs of an economic rebound, inflationary pressure and growing talk about an unwinding of monetary stimulus.
     But early this month it became clear Indonesia's economy was not rebounding as fast as expected as measures to prevent the spread of the pandemic had hit private consumption and investment.

     BI Governor Perry Warjiyo on Feb. 9 told the country's parliament there was still room to cut interest rates further to support the economy, foreshadowing today's move. 

     Indonesia's economy shrank 2.07 percent year-on-year in the fourth quarter of last year, the third consecutive quarter of contraction, for a decline in gross domestic product of 2.07 percent in 2020, the first time the economy shrunk since 1998.

     BI lowered its forecast for the economy to expand 4.3 to 5.3 percent this year, down from its earlier forecast of 4.8 to 5.8 percent.

     After ticking up in November and December, inflation decelerated in January to 1.55 percent from 1.68 percent and BI expects inflation this year to remain within its target range of 3.0 percent, plus/minus 1 percentage point.

     Reflecting improving global growth prospects and lower uncertainty in financial markets, Indonesia's rupiah has trended firmer since November and was trading at 14,038 to the U.S. dollar today, up 0.22 percent from its level in January, BI said.

     "Looking ahead, Bank Indonesia still expects the rupiah to regain lost value as the currency is fundamentally undervalued, supported by a narrow current account deficit, low and stable inflation, attractive domestic financial assets for investment, a lower risk premium in Indonesia as well as abundant global liquidity," BI said.

Zambia hikes rate, ready to tighten again if CPI rises

    Zambia's central bank raised its key interest rate for the first time since November 2019 to contain rising inflation and anchor inflation expectations, and said it was "ready to adjust the policy rate upwards further should inflationary pressures persist."
    The Bank of Zambia (BOZ) raised its Monetary Policy Rate by 50 basis points to 8.50 percent, partly reversing last year's aggressive monetary easing cycle when the rate was cut twice (May and August) by a total of 350 points to a historic low of 8.0 percent in response to the COVID-19 pandemic.

     But since last year's rate cuts, Zambia became Africa's first sovereign pandemic-era default in November, the exchange rate of the kwacha has continued to weaken despite BOZ's scaled-up interventions, and inflation has accelerated sharply in the last three months.

     In January Zambia's inflation rate hit 21.5 percent, up from 19.2 percent in December, the highest since April 2016, and BOZ said it expected inflation to deviate away from the upper bound of its target range of 6.0-8.0 percent due to the lagged pass-though from the kwacha's deprecation and sustained high fiscal deficits.

    "This risks to the inflation outlook are assessed to be tilted to the upside," the bank said, adding inflation was bound to rise even further if the rise in crude oil prices persists, fiscal deficits turn out to be higher than projected and the exchange rate depreciates further.

    The kwacha fell sharply in March last year in response to the outbreak of the pandemic but only bounced back marginally from April until August when pressure on the currency returned.

     Today the kwacha was trading at 21.65 to the U.S. dollar, down 2.3 percent this year and down 35 percent since the start of 2020.

     "Rising excess demand continued to characterize the foreign exchange market due to higher import requirements for petroleum products and agricultural inputs under FISP (Farmer Input Support Programme)," BOZ said, adding it had sold US$339.8 million in the fourth quarter of last year, up from US$148.5 million in the third quarter.

      Due to foreign exchange intervention and debt service, Zambia's gross international reserves declined by $117.7 million to $1.2 billion at the end of December from end-September, enough for 2.4 months of import cover. 

      The economy of Zambia, Africa's second largest copper miner, shrank less than expected in the second half of 2020 as COVID-19 restrictions were partly relaxed, and this year BOZ expects gross domestic product to recovery, helped by growth in mining, electricity, gas and water, along with information and communication services.

     However, BOZ said aggregate demand still remains subdued and growth will be weak given uncertainty surrounding the resurgence of COVID-19 infections and the narrow fiscal space.

     In the third quarter of 2020 Zambia's GDP shrank an annual 2.6 percent, up from a 2.1 percent fall in the second quarter.

     www.CentralBankNews.info

Belarus postpones policy decision to analyze inflation

      Belarus' central bank has delayed today's scheduled decision on monetary policy until March, with the board saying it needs to conduct further analysis on the "dynamics of consumer pries and assess the duration of the impact of the key factors that led to the acceleration of consumer price growth."
     The board of the National Bank of the Republic of Belarus (NBRB) said on its website it would now consider monetary policy on March 12.
     The central bank of Belarus has maintained its benchmark refinancing rate at 7.75 percent since June when it was cut following a request by the country's president, Alexander Lukashenko, who has ruled the former-Soviet republic since 1994.

      Last year the central bank cut its refi rate three times by a total of 125 basis points and since April 2016 the bank has cut the rate 19 times and by a total of 17.25 percentage points.

     Inflation in Belarus has been accelerating in the last six months and rose to 7.7 percent in January from 7.4 percent in December.

     At its last policy meeting in November 2020 NBRB attributed the rise in consumer prices, especially imported non-food items, to the depreciation of the Belarus ruble.

     The bank's chairman, Pavel Kallaur, said in a statement in November the rise in inflation was temporary and by the end of 2020 inflation would be around 6 percent and then approach the bank's target of 5.0 percent by the end of this year.

     The Belarus ruble suffered twin shocks in 2020, first in March as COVID-19 spread worldwide and then in August after Lukashenko said he won the presidential election with 80 percent of the vote.

     But opponents say they won the election and more than 30,000 people have been detained by police since then following mass protests. 

    Last year the European Union imposed sanctions on Belarusian officials, including travel bans and a freeze of assets, for repression against peaceful demonstrators and for misconduct of the electoral process.

     On Feb. 16 Reuters reported Belarusian security forces had searched the homes of journalists and human rights activists across the country

     The Belarus ruble has been largely stable this year and was trading at 2.596 to the U.S. dollar today, down 19 percent since the start of 2020.

     www.CentralBankNews.info

   

Dominican Central Bank Reports Double-Digit Percentage Increase in Remittances - guest column

     The following article was written by Gerelyn Terzo, who is a writer for Sharemoney. She is a Wall Street veteran turned financial journalist, having written for InvestorPlace, Motley Fool, and GlobalAg Investing. She also previously served as Sr. Editorial Researcher at MandateWire, MoneyMedia and Financial Times.
    

     Central Bank News occasionally publishes articles by guest contributors if they are of interest to our readers.

By: Gerelyn Terzo for Sharemoney
 
The Dominican Republic’s economy has been taken on a roller coaster ride since the onset of the COVID-19 pandemic. For more than two decades, the country’s economy has been on the tear, with an annual GDP growth rate of 6.1% between 2015 and 2019. Much of that momentum has been fueled by remittances, with the percentage of economic expansion driven by personal remittances hovering at 8.3% as of 2019, which is similar to the dynamic in Pakistan, Zimbabwe and Sri Lanka, for example. 
 
Nonetheless, the country could not escape the wrath of the slowdown caused by coronavirus. For 2020, the Dominican is bracing for an economic contraction of 4.3%, with the fallout continuing to reverberate throughout the country for the next two years,according to the World Bank. As of mid-December 2020, the Dominican Republic experienced approximately 2,400 deaths from COVID-19. 
If a turnaround in the pace of remittances in the second half of 2020 is any indication, however, the Dominican Republic’s economy could be well on its way to recovery. The funds received from family members abroad are depended upon for consumption, savings and investing, all of which helps to fuel the economic recovery. After a tough first half of the year, remittances have been looking up since July, when the amount of money transfers surpassed USD 827 million, up 29.3% vs. July 2019. 

Uganda holds rate, extends credit, liquidity measures

     Uganda's central bank left its key interest rate unchanged for the fourth time but extended credit relief measures and liquidity assistance to financial institutions as the economic recovery has lost momentum since mid-December due to a surge in COVID-19 infection rates.
    The Bank of Uganda (BOU) kept its Central Bank Rate (CBR) at 7.0 percent, unchanged since June 2020 when it cut it for the second time in 2020 to cushion the hit to the economy from the pandemic.
     Since October 2019, when BOU began easing its monetary policy stance, CBR has been cut 300 basis points, including 200 points last year.

     "Given the inflation outlook and the heightened uncertainties surrounding the economic growth path, the MPC (monetary policy committee) decided to maintain the current policy stance until the economy normalizes sustainably," the central bank said.

     BOU's high frequency indicators of economic activity indicate growth of about 2.6 percent in the quarter to December, down from growth of 9.2 percent in the quarter to September.

     "Nonetheless, economic indicators still suggest some recovery from the sharp contractions of 6 percent and 2.2 percent in the quarters to June 2020 and September 2020, respectively," BOU said.

     BOU maintained its forecast for growth in the current 2020/21 financial year, which ends June 30, of 3.0-3.5 percent, and forecast growth would accelerate to 4.0-4.5 percent in 2021/22 and 6.0-7.0 percent in following years.

     "The medium-term economic outlook continues to be highly conditional on the timeline of the world-wide vaccines rollout and the course of the virus and its new variants," BOU said, noting most of its exports go to Eastern and Southern Africa (COMESA) where the vaccine rollout is likely to be sluggish.

    "Thus, whereas advanced economies are expecting a rapid vaccine-fueled recovery, the damaging effects of the pandemic could persist in the region, which could be detrimental to domestic economic growth prospects in the medium to long-term," the bank said.

     While BOU still expects the output gap to close in FY2023/24, it said the adverse impact of the pandemic on potential growth could be more profound if it turns out to be longer or harsher than assumed.

      On the upside, economic activity could be stronger than projected if the COVID-19 scarring effects become more limited in scope, adding a faster rollout of mass vaccines globally could allow for a quicker unwinding of social distancing measures and result in a more robust increase in economic activity.

     Inflation in Uganda remains benign - it rose to 3.7 percent in January from 3.6 percent in December - and BOU expects inflation to return to its 5.0 percent target as excess capacity is absorbed.

     BOU said it would extend for six months from April 1 the Credit Relief Measures (CRM) and the Covid-19 Liquidity Assistance Program (CLAP) to supervised financial institutions and review CLAP as the pandemic evolves to ensure financial institutions that come under liquidity stress remain solvent so they can support credit extension.

     www.CentralBankNews.info

     

This week in monetary policy: Uganda, Jamaica, Zambia, Belarus, Namibia, Guatemala, Indonesia, Turkey & Rwanda

    This week - February 15 through February 20 - central banks from 9 countries or jurisdictions are scheduled to decide on monetary policy: Uganda, Jamaica, Zambia, Belarus, Namibia, Guatemala, Indonesia, Turkey and Rwanda.

     Following table includes the name of the country, the date of the next policy decision, the current policy rate, the local time a policy decision is announced, 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 be accessed by clicking on This Week.

WEEK 7
FEB 15 - FEB 20, 2021:
UGANDA	15-Feb	7.00%	12:00	0	0	9.00%
JAMAICA	16-Feb	0.50%		0	0	0.50%
ZAMBIA	17-Feb	8.00%	9:30	0	0	11.50%
BELARUS	17-Feb	7.75%	12:00	0	0	8.75%
NAMIBIA	17-Feb	3.75%		0	0	6.25%
GUATEMALA	17-Feb	1.75%		0	0	2.00%
INDONESIA	18-Feb	3.75%		0	0	4.75%	EM
TURKEY	18-Feb	17.00%	14:00	0	0	10.75%	EM
RWANDA	18-Feb	4.50%		0	0	5.00%

 
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