Ghana holds rate, fiscal cuts to lower inflation risks

     Ghana's central bank left its policy rate unchanged at 14.50 percent, saying the "dynamics associated with the November 2021 policy rate hike are yet to be fully transmitted and expects the decisive implementations of the fiscal correction measures, especially the 20 percent cut in expenditure to help moderate the upside risks to the inflation outlook."
     Herewith an updated table with this week's policy decisions by central banks.
     The 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.

WEEK 5 JAN 31 - FEB 5, 2022 GHANA 31-Jan 14.50% 15:00 0 0 14.50%          FM BULGARIA 31-Jan 0.00% 0 0 0.00%          FM KYRGYZSTAN 31-Jan 8.00% 50 0 5.50% AUSTRALIA 1-Feb 0.10% 14:30 0 0 0.10%          DM ARMENIA 1-Feb 7.75% 50 0 5.50% LESOTHO 1-Feb 3.75% 25 0 3.50% GEORGIA 2-Feb 10.50% 14:00 50 0 8.00% ALBANIA 2-Feb 0.50% 0 0 0.50% BRAZIL 2-Feb 9.25% 18:30 150 0 2.00%          EM UNITED KINGDOM 3-Feb 0.25% 12:00 15 0 0.10%          DM EURO AREA 3-Feb 0.00% 13:45 0 0 0.00%          DM CZECH REPUBLIC 3-Feb 3.75% 14:30 100 0 0.25%          EM EGYPT 3-Feb 8.25% 0 0 8.25%          EM

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This week in monetary policy: Ghana, Bulgaria, Kyrgyzstan, Australia, Armenia, Lesotho, Georgia, Albania, Brazil, UK, ECB, Czech Rep. & Egypt

    This week - January 31 through February 5 - central banks from 13 countries or jurisdictions are scheduled to decide on monetary policy: Ghana, Bulgaria, Kyrgyz Republic, Australia, Armenia, Lesotho, Georgia, Albania, Brazil, United Kingdom, euro area, Czech Republic and Egypt.

    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 5
JAN 31 - FEB 5, 2022
GHANA	31-Jan	14.50%	15:00	100	0	14.50%	FM
BULGARIA	31-Jan	0.00%		0	0	0.00%	FM
KYRGYZSTAN	31-Jan	8.00%		50	0	5.50%
AUSTRALIA	1-Feb	0.10%	14:30	0	0	0.10%	DM
ARMENIA	1-Feb	7.75%		50	0	5.50%
LESOTHO	1-Feb	3.75%		25	0	3.50%
GEORGIA	2-Feb	10.50%	14:00	50	0	8.00%
ALBANIA	2-Feb	0.50%		0	0	0.50%
BRAZIL	2-Feb	9.25%	18:30	150	0	2.00%	EM
UNITED KINGDOM	3-Feb	0.25%	12:00	15	0	0.10%	DM
EURO AREA	3-Feb	0.00%	13:45	0	0	0.00%	DM
CZECH REPUBLIC	3-Feb	3.75%	14:30	100	0	0.25%	EM
EGYPT	3-Feb	8.25%		0	0	8.25%	EM

 
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Azerbaijan raises rate 4th time, rising inflation pressure

      Azerbaijan's central bank raised its benchmark interest rate for the fourth time, saying inflationary pressures have continued to rise and "the country's economy will face unprecedented inflationary pressures."
     The Central Bank of the Republic of Azerbaijan (CBA) raised its discount rate by 25 basis points to 7.50 percent and has now raised it 1.0 percentage points following earlier rate hikes in September, October, December and today.
     The lower limit of CBA's interest rate corridor is now 6.0 percent and the upper limit 9.0 percent.

     "According to the Central Bank's baseline forecast, inflation is expected to approach the upper limit of the target range by the end of 2022 and the center of the target range in 2023," CBA said.

     Azerbaijan's inflation rate rose to a 2021-high of 6.7 percent in December from 6.2 percent in November and 3.3 percent in January.

      CBA, which targets inflation of 2.0-6.0 percent, forecast inflation in 2022 between 6.6 and 7.1 percent before decelerating into the bank's target range in the first quarter of 2023.

     CBA said the level of inflation is affecting inflation expectations, with households's expectations topping its forecast and inflation expectations by businesses are also rising.

     "As the pandemic continues and the effects of price liberalization imposed by government regulation continue, rising domestic producer prices are also fueling the costs factors in inflation," CBA said, estimating the impact of government-regulated prices on inflation exceeds 20 percent.

     Economic activity in Azerbaijan topped expectations in 2021, with gross domestic product estimated to have expanded 5.6 percent in real terms, including 7.2 percent in the non-oil sector.

     From the beginning of the third quarter, the country's output exceeded its level prior to the COVID-19 pandemic, employment continues to approach the level prior to the pandemic and the loan portfolio of commercial banks rose 17.7 percent in 2021.

      CBA also said the dollarization of the country's economy is continuing to decline, with deposits denominated in U.S. dollars down 9.8 percentage points to 41 percent and loans in dollars down 4 percentage points to 25.8 percent.

      The central bank also said it had maintained a balanced foreign exchange market, ensuring a stable exchange rate so external inflation is neutralized, and its interventions in the currency market amounted to US$245 million last year.

    www.CentralBankNews.info

    

Colombia raises rate 4th time, inflation forecast raised

      Colombia's central bank raised its key interest rate for the fourth time - the sixth central bank to raise rates this week and the 16th this year - citing higher-than-expected inflation and a "significant" increase in inflation expectations.
     The Central Bank of Colombia (CBC) raised its interest rate by 1 percentage point to 4.0 percent - the most aggressive rate hike since it began raising rates in September last year - and has now raised it by a total of 2.25 percentage points.
     In September last year CBC raised its rate by 25 basis points and then followed this up with 50 point hikes in both October and December before today's 100 point hike.
    "This decision is compatible with the dynamism of an economy that has recovered rapidly and does not require the same degree of monetary stimulus that the Bank duly provided throughout the crises caused by COVID-19," CBC said.

     Today's rate hike comes after Colombia's government raised minimum wages by 10 percent - the highest raise in 50 years - which analysts said added pressure on the central bank to raise rates faster.

     CBC has now almost fully unwound its 7 rate cuts in 2020 from February to September in response to the pandemic, with the cuts totaling 2.50 percentage points.
     The bank's board was split in its today's decision, with five voting for the 100-point rate hike while two board members voted for a 75-point increase.
     The board was also split in December, when four members voted for the 50-point rate hike while three members voted for a 75-point hike.

      Inflation in Colombia rose to a 2021-high of 5.62 percent in December, 30 basis points higher than the central bank's staff had forecast, while the measure of basic inflation, which excludes food and regulated items, ended the year at 2.49 percent.

     "The results of inflation in 2021 induced a significant increase in inflation expectations measured from various sources, including non-food inflation," said CBC, which targets inflation of 3.0 percent.

     The bank's staff raised its forecast for headline inflation in 2022 to 4.3 percent from an earlier 3.7 percent and forecast core inflation of 4.5 percent.

     In 2023 CBC expects headline inflation of 3.4 percent and core inflation of 3.6 percent.

     Colombia's economy has recovered swiftly from the pandemic and CBC said indicators for November show continued expansion, which confirms the bank's forecast for growth of close to 10 percent in 2021.

     Economic output last year thus exceeds that of 2019 and excess capacity is close to being eliminated, the central bank added, forecasting growth in 2022 of around 4.3 percent.

     CBC also said the current account deficit would end 2021 around 5.7 percent of gross domestic product, slightly up from the December estimate of 5.6 percent.

     This year, however, CBC expects the deficit to ease to 4.9 percent of GDP.

     Today's rate hike comes after Colombia's government raised minimum wages by 10 percent - the highest raise in 50 years - which analysts said added pressure on the central bank to raise rates faster.

South Africa is 15th central bank to raise rates in 2022

      South Africa became the fifth central bank to raise its main interest rate this week and the 15th central bank to raise rates so far in 2022 as monetary authorities worldwide continue last year's tightening of monetary conditions to dampen inflationary pressures as the global economy continues to heal from the COVID-19 pandemic.
      Central banks have raised their benchmark interest rates by a total of 11.25 percentage points so far, boosting the average interest rate by the 104 central banks tracked by Central Bank News to 5.58 percent this week from 5.51 percent at the end of 2021 and 4.18 percent at the end of 2020.

      Meanwhile, three central banks - Congo, South Sudan and China - have cut rates a total of 4.10 percentage points.

     As part of its coverage of global monetary policy, Central Bank News publishes a Global Interest Rate Monitor (GIRM) that tracks changes to central banks' interest rates. 

     GIRM is continuously updated and can always be accessed on the Central Bank News website under the section for Interest Rates.

     The first section of the table shows changes to policy rates in the current month, including the name of the country that changed its rate, the current policy rate, the latest change in the policy rate in basis points, the date of the change, the year-to-date net change and the change in basis points in the earlier years of 2021, 2020 and 2019.
    The second section of the table shows changes year-to-date, starting with the Global Monetary Policy Rate (GMPR), or the average nominal rate of the 104 central banks covered by Central Bank News.

     This is followed by the change in GMPR year-to-date, and the date for the latest change. It also shows the total change in GMPR in basis points in 2021, 2020 and 2019.

South Africa raises rate 2nd time, upside inflation risks

      South Africa's central bank raised its main interest rate for the second time and said a gradual rise in rates will be sufficient to keep inflation expectations well anchored and thus moderate the future path of rates given the expected trajectory in inflation and upside risks.
      The Reserve Bank of South Africa (SARB) raised its repurchase rate by another 25 basis points to 4.0 percent and has now raised it 50 points following a similar-sized rate hike in November, the bank's first rate hike in 3 years.

      Four members of the central bank's monetary policy committee voted for the rate hike while one member want to maintain the rate.

      Although SARB's quarterly projection model shows the repo rate ending this year at 4.91 percent, then 5.84 percent in 2023 and 6.55 percent in 2024, the path is lower than forecast in November and the central bank reiterated the projection is only a broad guide to policy and changes with new data and risks.

    "In this uncertain environment, policy decisions will continue to be data dependent and sensitive to the balance of risks to the outlook," SARB said, adding it would continue to look through temporary prices shocks and focus on potential second-round effects.

     "Current repurchase rate levels reflect and accommodative policy stance through the forecast period, keeping financial conditions supporting of credit demand as the economy continues to recover," SARB said, adding adjusted for inflation the repo rate is projected to rise to 0.0 percent this year from minus 1.4 percent last year, then 1.0 percent in 2023 and 1.8 percent in 2024.

     South Africa's economy rebounded strongly from the COVID-19 pandemic but SARB said damage to the economy from unrest in July 2021, cyber attacks and strikes had dented activity and it lowered its estimate of growth in 2021 to 4.8 percent from an earlier 5.2 percent.

     Mirroring the expected slowdown in global growth this year after the strong bounce-back in 2021, SARB expects South Africa's gross domestic product to slow to growth of 1.7 percent this year, then 1.8 percent in 2023 and 2.0 percent in 2024.

     "Global economic conditions are less supportive of emerging and developing economies now than they were for most of this past year," SARB said, saying higher global inflation is likely to accelerate the normalization of interest rates and balance sheet reductions by major central banks.

     It cautioned that economies that failed to take advance of better global conditions or to reduce large macroeconomic balances remain vulnerable.

     Like most countries, South Africa's inflation rate trended upwards in 2021 and hit a year-high of 5.9 percent in December from 5.5 percent in November, in the upper end of SARB's target range of 3.0 to 6.0 percent.

     "The risks to the inflation outlook are assessed to the upside," SARB said, pointing to global producer prices and food prices, which could surprise again, while oil prices are well above forecasts.

     Additional upside risks stem from higher domestic import tariffs, stronger services inflation and higher wage demands, with a particular risk from a faster normalization of global policy rates and quantitative tightening, which could lead to a reversal of capital flows from riskier assets, such as emerging market debt.

      Inflation averaged 4.5 percent in 2021 and SARB raised its forecast for inflation this year to 4.9 percent from an earlier 4.3 percent, with inflation in the first quarter of this year peaking at 5.6 percent.

     For 2023 inflation is seen easing to 4.5 percent and remaining the same for 2024.

Costa Rica raises rate 2nd time and sees more hikes

      Costa Rica's central bank raised its main interest rate for the second month, saying the risks to inflation remain titled to the upside and it expects to continue to raise the rate gradually to reach a neutral monetary policy stance.
     The Central Bank of Costa Rica (BCCR) raised its policy rate by another 50 basis points to 1.75 percent and has now raised it 1 percentage point following the rate hike in December and today.
    "With these adjustments, the monetary policy stance of the Central Bank remains expansive, but is approaching a position of neutrality," the bank's board of directors said.
     The monetary tightening cycle in Costa Rica now under way follows 11 rate cuts totaling 4.50 percentage points from January 2019 through the COVID-19 pandemic until June 2020 after which then rate was maintained at 0.75 percent until December last year.
     Inflation in Costa Rica is relatively mild compared with many other countries and at 3.3 percent in December, it remains within the bank's target range of 3.0 percent, plus/minus 1 percentage point.
     "Although the projected inflation is within the tolerance range, given the upward risks in the inflation projections, the Board of Directors considers it opportune to continue with the normalization process of the TPM and to gradually and orderly move it to a neutral position" to maintain inflation within the tolerance range in a 24-month horizon," BCCR said.
     The central bank expects headline and core inflation to remain within its tolerance range in 2022 and 2023 but said it could top the range in the first half of this year and the risk to its forecast are tilted to the upside.
     BCCR pointed to four reasons for these upside risks, including producer prices, which rose 13.9 percent in December. With declining slack in production there is a greater probability higher prices being passed onto consumer prices.
     Secondly, although 12-month inflation expectations were only 1.1 percent in December, surveys of financial analysts and businesses showed expectations in the upper limit of the tolerance range of 3.8 percent. 
     Thirdly imported inflation has been growing and is persistent and if it continue to rise this could affect inflation expectations. Fourthly, wage pressures could rise as production improves.
     In line with the improvement in the international economy, Costa Rica's economy has recovered better than expected, BCCR said, pointing to the trend in the monthly index of economic activity - which rose 9.8 percent in November - and strong economic growth in the second half of 2021, which has resulted in the negative output gap being close to eliminated.
     Costa Rica's gross domestic product grew 10.29 percent year-on-year in the third quarter of last year, up from 9.81 percent in the second quarter.
     In addition to the hike in the monetary policy rate, BCCR said it would return to a symmetrical interest rate corridor in its liquidity operations and this puts the rate on its permanent credit facility at 75 basis points above the policy rate and the rate on its permanent deposit facility at minus 75 points.

     www.CentralBankNews.info

Chile raises rate 5th time, significant risks to inflation

     Chile's central bank raised its policy interest rate for the fifth time, saying there are still significant risks of higher inflation as the most recent data on economic activity and inflation are somewhat above the latest forecast in December at the same time inflationary pressures from abroad have increased.
     The Central Bank of Chile (CBC) raised its monetary policy interest rate by 1.50 percentage points to 5.50 percent and has now raised it 5 percentage points since it began raising rates in July 2021.

     It is the first time in the current monetary tightening cycle CBC has raised its rate so sharply but minutes from its December meeting showed a 150 basis point rate hike had been considered before the board decided on a 125 point rate hike, as in October and December last year.

     The bank's board was once again unanimous in its decision although the current governor, Mario Marcel, did not participate after being picked last week as finance minister by Chile's President-elect Gabriel Boric.

     The departure of Marcel from comes only three months after he was named for a second 5-year term as governor of the central bank.

     "The risks for the evolution of inflation continue to be significant and its eventual materialization becomes especially relevant in a context in which both the annual variation of the CPI and its prospects are already high," CBC said, adding the decision was consistent with a rate trajectory that would be around the upper edge of the rate corridor outlined in the December policy report.

      In December the central bank raised its inflation forecast for 2021 to 6.9 percent from an earlier 5.7 percent and the 2022 forecast to 3.7 percent from 3.5 percent, and has said the policy interest rate would need to reach as much as 6 percent to curb inflation.

     Chile's inflation rate rose to a 2021-high of 7.2 percent in December, the highest since 2008 and more than twice the central bank's 3.0 percent target.

     Chile's economy has recovered swiftly from the COVID-19 pandemic and CBC said activity and demand was consistent with the upper range of its forecast for 2021.

      In December CBC raised its estimate of 2021 economic growth to between 11.5 and 12.0 percent with growth then seen slowing to 1.5 to 2.5 percent in 2022.

Fed maintains rate but to end QE and raise rate 'soon'

      The U.S. Federal Reserve left its key interest rate unchanged but said "with inflation well above 2 percent and a strong labor market, the Committee (the Fed's policy-making body) expects it will soon be appropriate to raise the target range for the federal funds rate," a message financial markets expected.
      The Federal Open Market Committee (FOMC) also said it had decided to "reduce the monthly pace of its net asset purchases, bringing them an an end in early March," with a reduction in the size of its balance sheet to begin after the benchmark federal funds rate has been raised.
      The Fed kept its target for the federal funds at 0.0 to 0.25 percent, unchanged since March 2020 when the rate was lowered twice in a single month by a total of 1.50 percentage points.

      Today's statement continues the Fed's pivot toward monetary tightening after the policy stance was kept ultra easy for five quarters while economic activity gradually recovered from the devastating hit from the COVID-19 pandemic and inflation rose.

       In November 2021 the Fed finally joined the global trend toward monetary tightening - central banks raised rates 124 times last year to combat rising inflation - and trimmed its monthly purchases of Treasury securities and mortgage-backed securities.

      In December last year the Fed then sped up the pace of monetary tightening further by trimming asset purchases even more and dropped its description of inflation as "transitory" as it raised its forecast for inflation and projected three rate hikes of 25 basis points each in 2022 and another three in 2023.

      With inflation continuing to rise - headline inflation hit 7 percent in December, the highest since June 1982 from 6.8 percent - Fed Chairman Jerome Powell this month kept up his hawkish message, describing inflation as a "severe threat" to a Senate hearing on Jan. 11, boosting market expectations the Fed may even raise rates four times this year.

      Today marks another critical step forward in the normalization of global monetary policy and follows on the heels of the Bank of Canada's message earlier today that interest rates need to be raised.

      As in December, the Fed said economic activity and employment have continued to improve though there are still risks to the outlook from new variants of the virus, such as the Omicron variant.

     However, the Fed also acknowledged inflation is "well above" its 2 percent target and the labor market was strong, the two conditions it had laid out in order to tighten monetary policy.

      To wrap up its asset purchases - known as Quantitative Easing (QE) and used as an addition tool to ease policy -  the Fed said it would purchase at least $20 billion of Treasury securities at least $10 billion of agency mortgage-backed securities in February to continue to smooth market functioning and support the flow of credit.

     However, next month will be the final month of asset purchases that will end in early March.

     The Fed said a reduction of its balance sheet - which contains some $8.8 trillion of bonds and securities - "will commence after the process of increasing the target range for the federal funds rate has begun."

Canada maintains rate but says rates need to rise

      Canada's central bank left its key interest rates steady but took another major step forward toward normalizing its monetary policy and raising interest rates rate by dropping its previous guidance that the economy still needs considerable monetary policy support and policy rates would be kept unchanged.

     The Bank of Canada (BOC) left its benchmark target for the overnight rate at the effective lower bound of 0.25 percent, unchanged since it was cut three times in March 2020 at the height of the COVID-19 pandemic.
     BOC also left its bank rate at 0.50 percent and the deposit rate at 0.25 percent.
     "With overall economic slack now absorbed, the Bank has removed its exceptional forward guidance on its policy interest rate," BOC said, paving the way for interest rate hikes as soon as its next meeting in March.

     At the press conference, BOC Governor Tiff Macklem added the emergency monetary measures that helped support the economy during the pandemic were no longer needed and interest rates will need to rise to control inflation.

    "Second, we want to clearly signal that we expect interest rates will need to increase," Macklem said, adding inflation will come down as the pandemic fades and conditions normalize.

     BOC said it was still in a phase of reinvesting in government bonds by keeping its overall holdings roughly constant, at least until it begins to raise the policy interest rate.

      At that point BOC - which in April last year began reducing its weekly bond purchases and then ended them in October - said it will consider "reducing the size of its balance sheet by allowing roll-off of maturing Government of Canada bonds."
      In recent years central banks have adopted forward guidance as a monetary tool to affect expectations and prices in financial markets, and BOC at its last policy meeting in December reiterated the economy still required considerable support and interest rates would be held at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is achieved.

     Since then it has become clear Canada's economy performed better than expected in the second half of last year and inflation is now at highs not seen for 30 years.

     "While COVID-19 continues to affect economic activity unevenly across sectors, the Governing Council judges that overall slack in the economy is absorbed, thus satisfying the conditions outlined in the Bank's forward guidance on its policy interest rate," BOC said, adding:

     "The Governing Council therefore decided to end its extraordinary commitment to hold its policy rate at the effective lower bound."

     The timing and pace of future rate increases will now be guided by the bank's commitment to achieving the 2.0 percent inflation target, within a range of 1-3 percent.

     BOC's step-by-step tightening of its monetary policy stance since April last year takes place against a backdrop of estimated growth of 4.5 percent in 2021 and the economy entered 2022 with considerable momentum, such as strong employment growth and a tightening labour market, that shows economic slack is absorbed.

     Although the Omicron variant of COVID-19 is weighing on economic activity, BOC said its impact is expected to be less severe and economic growth is expected to bounce back and remain robust, helped by consumer spending on services, exports and investment.

     BOC forecast economic growth in 2022 of 4.0 percent in its latest monetary policy report, down from 4.3 percent previously forecast, and about 3.5 percent in 2023, down from an earlier 3.7 percent.

     Inflation has remained above the upper limit of BOC's target range since April last year and rose to 4.8 percent in December, the highest since September 1991, and BOC expects inflation to remain close to 5 percent in the first half of this year due to persistent supply constraints and higher food and energy prices.

     But as these supply shortages ease, inflation is expected to decline to about 3 percent by the end of this year and gradually ease toward the target.

    "The Bank will use its monetary policy tools to ensure that higher near-term inflation expectations do not become embedded in ongoing inflation," BOC said.

     BOC raised its forecast for 2022 headline inflation to 4.2 percent from an earlier 3.4 percent while the 2023 forecast was unchanged at 2.3 percent.

Hungary raises rate 8th time, will continue with hikes

     Hungary's central bank raised its benchmark interest rates for the 8th month in row and said it "will continue the cycle of interest rate hikes until the outlook for inflation stabilizes around the central bank target and inflation risks become evenly balanced on the horizon of monetary policy."
     The National Bank of Hungary, or Magyar Nemzeti Bank (MNB) in Hungarian, raised its base rate by a further 50 basis points to 2.90 percent and has now raised it 2.30 percentage points since it began a monetary tightening cycle in June last year.
     MNB also raised its other key rates by 50 basis points, putting the overnight deposit rate at 2.90 percent, the overnight and one-week collateralized lending rates at 4.90 percent.
     "Inflation risks warrant a further tightening of monetary conditions," the central bank's monetary council said, adding mitigating second-round inflation risks and driving expectations have necessitated continuing the rate hike cycle and in greater increments than in December, when it was raised 30 basis points.
      In addition to its base rate, which is decided monthly, MNB uses the weekly tender for its one-week deposit facility to respond quickly to short-term changes in financial market conditions and has raised this rate seven times since mid-November in response to the rise in inflation.
     At the last tender on Thursday, Jan. 20, the one-week deposit rate was maintained at 4.0 percent for the third week in a row.
     Although MNB said risks in financial markets had eased since December, it added the sharp increase in core inflation signaled an increase in "persistent inflationary pressures" and the base rate should catch up to the level of the one-week deposit rate in coming months.
     "Accordingly, the council will continue the cycle of base rate hikes at a monthly frequency and in larger increments than in December," with MNB adding it will also raise the one-week deposit rate.

     Hungary's headline inflation rate was steady at 7.4 percent in December from November - but the highest since 2007 - while the core inflation rate rose to 6.4 percent from 5.3 percent.

     The central bank targets inflation of 2.0 to 4.0 percent around a 3.0 percent midpoint.

     While headline inflation may have peaked in December, the central bank said it may begin to decline later than it had expected and core inflation is expected to pick up in coming months as companies reprice their goods amid strong demand to reflect higher commodity prices and wages.

     Hungary's economy grew throughout last year and MNB said 2021 growth may have exceeded the 6.3-6.5 percent level it projected in December as data suggest activity in the fourth quarter was strong.

     For 2022 the central bank forecast growth of 4.0-5.0 percent as domestic demand offsets the negative impact of disruptions in International production chains and rising commodity, crop and energy prices.

     An increase in the minimum wage during a tight labor market will also maintain rapid wage growth and in the second half of this year exports are expected to rebound as external markets and supply chains recover.

    

Singapore tightens policy 2nd time, inflation seen higher

     Singapore's central bank tightened its monetary policy stance for the second time in four months in an unscheduled decision, saying it considered it "appropriate to make another pre-emptive adjustment" at this juncture as the inflation outlook had shifted further upward amid the confluence of recovering global demand and persistent supply-side frictions.
     The Monetary Authority of Singapore (MAS), which targets the value of the Singapore dollar against a basket of currencies to control inflation, said it would "therefore raise slightly the rate of appreciation of the S$NEER policy band," while leaving the width of the band and level at which it is centered unchanged.
     "This move builds on the pre-emotive shift to an appreciating stance in October 2021 and is appropriate for ensuring medium-term price stability," said MAS, adding SN$NEER (the Nominal Effect Exchange Rate) had broadly appreciated within the upper half of the policy band in the last three months.

      MAS normally decides monetary policy twice a year,  in April and October, but on occasions it will take an off-cycle decision.

      The tightening in October also took most analysts by surprise but since then inflation has continued to accelerate and an expected increase in Goods and Services Taxes (GST) this year, which would pass-through to core inflation, raised expectations MAS would tighten policy in April.

      Singapore's all-items inflation rate rose to a 2021-high of 4.0 percent in December from 0.2 percent in January while MAS core inflation rose to 2.1 percent from 1.6 percent, driven by an increase in services inflation from higher airfares.

      For the full year, headline inflation rose to 2.3 percent from minus 0.2 percent while core inflation rose to 0.9 percent from minus 0.2 percent in 2020, MAS and the Ministry of Trade and Industry said Jan. 24.

     "There remain upside risks to inflation arising from the impact of pandemic-related and geopolitical shocks on global supply chains," said MAS, adding the domestic labour market has tightened and wage growth is above its historical average, which has boosted prices more than forecast.

     MAS said it expects core inflation to pick up further in the near term and could reach 3 percent by the middle of this year and raised its forecast for this year to 2.0-3.0 percent from 1.0-2.0 percent expected in October last year.

     It also raised the forecast for all-time inflation, or headline inflation, to 2.5-3.5 percent from an earlier forecast of 1.5-2.5 percent.

     In 2021 the economy of the city-state expanded at its fastest pace since 2010 as gross domestic product grew 7.2 percent after contracting 5.4 percent in 2020.

    For this year MAS said Singapore's economy remains on track to grow 3.0-5.0 percent, with the output gap turning slightly positive. 

    "Global economic prospects remain largely intact," MAS said, adding the Omicron variant may temporarily dampen some clusters of activity but was unlikely to derail the broader economic recovery.

Kazakhstan raises rate 4th time to lower inflation

     Kazakhstan's central bank raised its benchmark interest rate for the fourth time, saying it was continuing to tighten its monetary policy stance to reduce inflation expectations and bring inflation back into its target range of 4.0 to 6.0 percent by the end of 2022.
     The National Bank of the Republic of Kazakhstan (NBK) raised its base rate by a further 50 basis points to 10.25 percent and has now raised it 1.25 percentage points following rate hikes in July, September, October and today.

     After raising its rate sharply in March 2020 to curb inflation, NBK had to change course the following month due to the COVID-19 pandemic and cut its rate in April and July by a total of 3 percentage points.
     At its previous meeting in early December 2021, the bank's monetary policy committee maintained the rate due to a slowdown in inflation and uncertainty about the impact of the Omicron variant of COVID-19.

      However, NBK also said it would continue to tighten its policy stance "more decisively" if the decline in inflation and inflation expectations did not stabilize.
     "The internal situation, despite the presences of disinflationary precesses in recent months, is characterized by the presence of significant pro-inflationary risks both on the demand and supply side," NBK said, adding inflation continues to be elevated in most countries around the world.
     Kazakhstan's inflation rate eased for the second month to 8.4 percent in December from a 2021-high of 8.9 percent in September and October, helped by the government's anti-inflationary measures, which helped food inflation decelerate.
     However, the cost of other non-food items rose, with gasoline prices up 19.6 percent and diesel fuel up 46.5 percent.
     "The trajectory of core inflation points to the instability of the slowdown in inflationary processes," NBK said, adding most respondents in its survey still expect the current rise in prices to continue or accelerate in the next 12 months.
     To help lower inflation, the central bank said it had already withdrawn from programs that support the economy and confirmed it still expects inflation to decelerate to around 6.0 to 6.5 percent by end-2022.
     However, the central bank there may be an increase in inflationary pressures in the first quarter of this year due to the comparison with a relatively low base in the first half of 2021 and "in connection with the tragic events in Kazakhstan in early January this year."
      Protests and rioting broke out in the capital of Almaty in early January over fuel prices that only ended after the president declared a nationwide state of emergency and ordered security forces to shoot to kill without warning. The official death toll hit 225.

     www.CentralBankNews.info

     

This week in monetary policy: Kazakhstan, Pakistan, Hungary, Nigeria, Kenya, Canada, Mozambique, USA, Chile, South Africa, Malawi, Angola & Colombia

     This week - January 24 through January 29 - central banks from 13 countries or jurisdictions are scheduled to decide on monetary policy: Kazakhstan, Pakistan, Hungary, Nigeria, Kenya, Canada, Mozambique, United States, Chile, South Africa, Malawi, Angola and Colombia.

     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 4
JAN 24 - JAN 29, 2022
KAZAKHSTAN	24-Jan	9.75%	15:00	0	0	9.00%	FM
PAKISTAN	24-Jan	9.75%		100	0	7.00%	EM
HUNGARY	25-Jan	2.40%		30	0	0.60%	EM
NIGERIA	25-Jan	11.50%		0	0	11.50%	FM
KENYA	26-Jan	7.00%		0	0	7.00%	FM
CANADA	26-Jan	0.25%	10:00	0	0	0.25%	DM
MOZAMBIQUE	26-Jan	13.25%	16:00	0	0	13.25%
UNITED STATES	26-Jan	0.25%	14:00	0	0	0.25%	DM
CHILE	26-Jan	4.00%	18:00	125	0	0.50%	EM
SOUTH AFRICA	27-Jan	3.75%		25	0	3.50%	EM
MALAWI	28-Jan	12.00%		0	0	12.00%
ANGOLA	28-Jan	20.00%		0	0	15.50%
COLOMBIA	28-Jan	3.00%		50	0	1.75%	EM

  

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