This week in monetary policy: China, Japan, Malaysia, Canada, Norway, Indonesia, ECB, Paraguay & Nigeria

    This week - January 19 through January 25 - central banks from 9 countries or jurisdictions are scheduled to decide on monetary policy: China, Japan, Malaysia, Canada, Norway, Indonesia, the euro area, Paraguay and Nigeria.

    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 4
JAN 19- JAN 25, 2020:
CHINA	20-Jan	4.15%	0	0	4.35%	EM
JAPAN	21-Jan	-0.10%	0	0	-0.10%	DM
MALAYSIA	22-Jan	3.00%	0	0	3.25%	EM
CANADA	22-Jan	1.75%	0	0	1.75%	DM
NORWAY	23-Jan	1.50%	0	0	0.75%	DM
INDONESIA	23-Jan	5.00%	0	0	6.00%	EM
EURO AREA	23-Jan	0.00%	0	0	0.00%	DM
PARAGUAY	23-Jan	4.00%	0	0	5.25%
NIGERIA	24-Jan	13.50%	0	0	14.00%	FM

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South Korea keeps rate and easy monetary policy stance

    South Korea's central bank left its base rate steady at 1.25 percent and said it would maintain its accommodative monetary policy stance as economic growth is expected to be moderate, restraining any upward pressure on inflation.
     The Bank of Korea (BOK), which cut its rate twice last year, most recently in October,  also reiterated its guidance from November that it is still ready to "adjust the degree of monetary policy accommodation" while it carefully monitors global trade disputes, the economies of major countries, household debt and how geopolitical risks affect the domestic economy.
     BOK said the pace of global economic growth had continued to slow but "sluggishness in the domestic economy has eased somewhat" as investment in facilities had risen slightly and consumption growth had expanded while investment in construction continued to decline.
     BOK said South Korea's economy is forecast to grow at the "lower-2% level" this year, as it projected in November, as the sluggishness in exports and facilities investment gradually eases and consumption rises while construction investment remains depressed.
     In 2019 South Korea's economy is estimated to have expanded 2.0 percent and in November BOK forecast growth of 2.3 percent in 2020.
     Two of the monetary policy board's seven members dissented, and voted for a rate cut. The terms of four board members expire in April.

Uzbekistan holds rate but sees possible slight rate cut

    Uzbekistan's central bank left its refinancing rate steady at 16.0 percent but said a slight decrease in the rate was possible in the next monetary policy meetings.
     The Central Bank of the Republic of Uzbekistan (CBU), which has maintained its rate since raising it in September 2018 due to high inflation, said the decision to maintain the rate today was to strengthen its confidence that inflation would decelerate along with persistent uncertainties over changes to regulated prices.
     Uzbekistan's inflation rate at the end of 2019 was 15.2 percent, near the upper boundary of CBU's forecast corridor of 13.5 to 15.5 percent, with a rise in the second half of last year mainly caused by a liberalization of some regulated prices (an uptick fo 21.6 percent in prices) along with a fall in the exchange rate of the sum in August 2019, the bank said.
     But in the fourth quarter of last year, the quarterly inflation rate slowed to 5.0 percent from 5.7 percent in the same 2018 period and CBU is forecasting inflation of 12.0 to 13.5 percent in 2020.
    This forecast is based on the assumptions of a slower rise in food prices, an expansion of agricultural output, better supply of textiles and construction, moderate credit growth, the exhaustion of some of the inflationary impulses that arose last year along with a fiscal stance that should prevent excess demand, thus easing the upward pressure on inflation and pressure on the exchange rate.
     Last year the sum lost 12.3 percent of its value against the U.S. dollar but this year the depreciation has slowed with sum trading at 9,550 today, down 0.5 percent since January 1.
     Uzbekistan's economy expanded last year by an estimated 5.5 to 5.6 percent and the central bank said conditions for this year, especially in the first half, remain favorable due to stimulating fiscal and credit policies and the positive outlook for major export commodities.

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Turkey cuts rate "measured" 75 bps, sees inflation easing

     Turkey's central bank lowered its policy rate by another 75 basis points to 11.25 percent and reiterated its monetary policy stance is consistent with the projected path of slowing inflation but it still needs to maintain a "cautious" policy stance to ensure inflation declines.
    It is the first rate cut by the Central Bank of the Republic of Turkey (CBRT) this year but continues the rapid pace of easing since July last year when the current governor, Murat Uysal, took over from Murat Cetinkay, who was fired for failing to follow President Recep Tayyip Erdogan's instructions to lower rates.
    Since July 2019 CBRT has cut its key rate by 12.75 percentage points but inflation has also come down sharply since topping 25 percent in October 2018 following a currency crises that sent import prices soaring.
    In 2019 Turkey's inflation rate decelerated from just over 20 percent in January to a low of 8.55 percent in October before rising in November and further in December to 11.84 percent, fueling expectations the central bank may trim the size of today's rate cut to around 50 basis points.
    CBRT has forecast inflation of 12 percent by the end of 2019 and expects it to decline further to 8.5 percent by the end of 2020, with a decision in December to scrap an automatic tax increase on alcohol and tobacco products in the first half of this year helping curb inflation further.
     "The course of inflation is considered to be broadly in line with the year-end inflation projection," CBRT said, adding the exchange rate, domestic demand and producer prices have contributed to a mild trend in core inflation.
     The central bank repeated its guidance that the monetary policy stance would be determined by considering the underlying trend in inflation to ensure it continues to decline.
     In December the International Monetary Fund (IMF) forecast inflation would remain largely stable at around 12 percent in both 2020 and 2021, adding "the recent monetary policy easing has gone too far," given the still-high inflation expectations and rapid credit growth in state-owned banks.
    Turkey's lira, which fell 33 percent in 2018 and another 11 percent in 2019, has bounced back in the last week and rose further today following the central bank's decision.
     The lira rose 0.5 percent to 5.85 per U.S. dollar today to be up 1.7 percent this year, helped by the recent rise in emerging market assets.

The Fed protects gamblers at the expense of the economy

     Following article is written by Ellen Brown, author, attorney, activist and founder of the Public Banking Institute, for Central Bank News.
     Central Bank News will occasionally carry articles by guest contributors if they are of interest to our readers.

"Although the repo market is little known to most people, it is a $1-trillion-a-day credit machine, in which not just banks but hedge funds and other “shadow banks” borrow to finance their trades. Under the Federal Reserve Act, the central bank’s lending window is open only to licensed depository banks; but the Fed is now pouring billions of dollars into the repo (repurchase agreements) market, in effect making risk-free loans to speculators at less than 2%.

This does not serve the real economy, in which products, services and jobs are created. However, the Fed is trapped into this speculative monetary expansion to avoid a cascade of defaults of the sort it was facing with the long-term capital management crisis in 1998 and the Lehman crisis in 2008. The repo market is a fragile house of cards waiting for a strong wind to blow it down, propped up by misguided monetary policies that have forced central banks to underwrite its highly risky ventures.

This week in monetary policy: Turkey, South Africa, Egypt, South Korea & Zimbabwe

    This week - January 12 through January 18 - central banks from 5 countries or jurisdictions are scheduled to decide on monetary policy: Turkey, South Africa, Egypt, South Korea and Zimbabwe.

    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 3
JAN 12- JAN 18, 2020:
TURKEY	16-Jan	12.00%	0	0	24.00%	EM
SOUTH AFRICA	16-Jan	6.50%	0	0	6.75%	EM
EGYPT	16-Jan	12.25%	-100	-450	16.75%	EM
SOUTH KOREA	17-Jan	1.25%	0	0	1.75%	EM
ZIMBABWE	17-Jan	35.00%	0	0	N/A

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UPDATE-2020 Global Central Bank Monetary Policy Calendar

     Herewith the latest update of the 2020 calendar for meetings by central bank committees that decide monetary policy, which adds the central banks of Iceland, Fiji, Malawi and Honduras.
     The following table includes the date for scheduled monetary policy meetings for more than 45 of the world's central banks. In the event policy meetings take place over several days, the date listed below is for the final day of the meetings when decisions are normally announced.
     During the year the calendar is regularly updated as some monetary policy committees only announce the date for the upcoming meeting a few weeks in advance.
     Readers are therefore encouraged to check the latest version of the calendar here.
     You may replicate the calendar in part of full only if you link to Central Bank News.

DATE	FX CODE	COUNTRY	CENTRAL BANK
JANUARY
8-Jan	RON	Romania	National Bank of Romania
8-Jan	PLN	Poland	National Bank of Poland
9-Jan	ILS	Israel	Bank of Israel
9-Jan	RSD	Serbia	National Bank of Serbia
9-Jan	PEN	Peru	Central Reserve Bank of Peru
16-Jan	TRY	Turkey	Central Bank of Republic of Turkey
16-Jan	ZAR	South Africa	South African Reserve Bank
16-Jan	EGP	Egypt	Central Bank of Egypt
17-Jan	KRW	South Korea	Bank of Korea
17-Jan	ZWD	Zimbabwe	Reserve Bank of Zimbabwe
21-Jan	JPY	Japan	Bank of Japan
22-Jan	CAD	Canada	Bank of Canada
22-Jan	MYR	Malaysia	Central Bank of Malaysia
23-Jan	NOK	Norway	Norges Bank
23-Jan	IDR	Indonesia	Bank Indonesia
23-Jan	EUR	Euro area	European Central Bank
27-Jan	AMD	Armenia	Central Bank of the Republic of Armenia
27-Jan	KGS	Kyrgyzstan	National Bank of the Kyrgyz Republic
28-Jan	HUF	Hungary	Central Bank of Hungary
29-Jan	GEL	Georgia	National Bank of Georgia
29-Jan	MDL	Moldova	National Bank of Moldova
29-Jan	USD	United States	Federal Reserve
29-Jan	CLP	Chile	Central Bank of Chile
30-Jan	LKR	Sri Lanka	Central Bank of Sri Lanka
30-Jan	FJD	Fiji	Reserve Bank of Fiji
30-Jan	UAH	Ukraine	National Bank of Ukraine
30-Jan	MWK	Malawi	Reserve Bank of Malawi
31-Jan	AZN	Azerbaijan	Central Bank of Azerbaijan Republic
31-Jan	BGN	Bulgaria	Bulgarian National Bank
31-Jan	COP	Colombia	Central Bank of Colombia

Peru maintains rate amid uncertain outlook for energy

     Peru's central bank kept its monetary policy rate steady at 2.25 percent, noting the risks to global growth have eased but the impact of recent geopolitical events on international energy prices is still uncertain.
     The Central Reserve Bank of Peru (BCRP), which cut its rate twice in 2019, most recently in November, also said the rate had been maintained as inflation is expected to be around 2.0 percent over the forecast horizon but with a moderate downward bias due to the possibility of lower-than-expected increase in domestic demand.
     Last month the central bank lowered its estimate of 2019 economic growth to 2.3 percent from a previous 2.7 percent but maintained its outlook for this year of 3.8 percent.
     Today BCRP said expectations of business expectations had remained stable in December from November while indicators of economic activity point to a gradual closing of the output gap.
      Last year Peru's economy was hit by a combination of slower global demand for its mining output, political uncertainty and a decline in public investment, with the fiscal deficit shrinking to an estimated 1.7 percent of gross domestic product.
     This year the fiscal deficit is seen narrowing further to 1.6 percent.
      Peru's mining sector accounts for around 15 percent of GDP and 60 percent of exports and Julio Velarde, BCRP governor, said on Dec. 20 higher mining output this year will boost growth.
     Peru's inflation rate rose slightly to 1.9 percent in December from 1.87 percent in November and the central bank has forecast 2.0 percent inflation for 2020, in line with its target of 2.0 percent, plus/minus 1 percentage point.
     Peru's sol has been relatively stable in the last four years and was trading at 3.32 to the U.S.dollar today, slightly down from 3.31 at the start of this year but up 1.8 percent since the start of 2019.
     Last month the International Monetary Fund (IMF) called on BCRP to greater exchange rate flexibility to help absorb external shocks and promote financial development as the level of dollarization in the country is declining.
     BCRP on occasions intervenes in the foreign exchange market, reflecting concern over liability dollarization, but loan dollarization is now at 39 percent for firms and 10 percent for households so greater exchange rate flexibility carries lower risks.
    "Limiting central bank intervention to cases of disorderly market conditions could help reduce dollarization further, encourage the use of hedging instruments, and strengthen the interest rate channel of monetary policy," IMF said on Dec. 3.

Israel maintains rate but still sees steady or lower rate

    Israel's central bank left its key interest rate steady at 0.25 percent, as expected, and confirmed its guidance that it "will be necessary to leave the interest rate at its current level for a prolonged period or to reduce it" to ensure inflation stabilizes around its the midpoint of its target range.
    The Bank of Israel (BOI), which has maintained its rate since raising it in November 2018 for the first time since 2011, added its monetary policy committee "is taking additional steps as necessary to make monetary policy more accommodative," a reference to its intervention in foreign exchange markets to weaken the strong shekel.
     Israel's shekel rose in 2019, prompting expectations last year the central bank would cut rates to stem further gains.
     Instead, BOI in November opted to intervene in the foreign exchange markets to weaken the shekel and boost inflation and has bought more than $3.5 billion of foreign currency since Nov. 25, 2019.
     In response to today's policy decision, the shekel weakened 0.3 percent to 3.47 to the U.S. dollar after rising 8.3 percent in terms of an effective exchange rate in 2019, "a development that continues to make it difficult to return inflation to the target range," BOI said.
     Underlining the BOI's dovish policy stance, its research staff lowered its forecasts for economic growth and inflation in 2020, and forecast the key interest rate would be between 0.25 percent and 0.1 percent in the coming year before gradually rising toward the end of 2021.
     Israel's inflation rate dropped to a lower-than-expected 0.3 percent in November from 0.4 percent in October and BOI lowered its forecast for inflation to be 1.0 percent in 2020, down from its previous forecast of 1.2 percent but up from 0.4 percent in 2019.
     BOI targets inflation of 1.0 to 3.0 percent.
     Economic activity in Israel last year was better than BOI had expected, with gross domestic product up an estimated 3.3 percent, on strong public and private consumption.
     BOI lowered its forecast for 2020 growth to 2.9 percent from October's forecast of 3.0 percent, and forecast 3.2 percent growth in 2021.
     BOI said the government's interim budget is expected to have a "markedly contractionary effect" in the first half of this year and there is continuing uncertainty about budgets after that.
     "Global economic activity continues to slow, but its seems that the risks of a significant deterioration have declined in view of progress in the trade negotiations between the US and China and the results of the UK elections," BOI said, adding additional monetary easing by major central banks "has reached its limits at this stage."

This week in monetary policy: Romania, Poland, Serbia, Israel and Peru

    This week - January 5 through January 11 - central banks from 5 countries or jurisdictions are scheduled to decide on monetary policy: Romania, Poland, Serbia, Israel and Peru.
    Following table includes the name of the country, the date of the next policy decision, the current policy rate, the result of the last policy decision, the change in the policy rate year to date, and the rate one year ago.

    The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.

WEEK 2
JAN 5 - JAN 11, 2020:
ROMANIA	8-Jan	2.50%	0	0	2.50%	FM
POLAND	8-Jan	0.00%	0	0	0.00%	EM
SERBIA	9-Jan	2.25%	0	0	3.00%	FM
ISRAEL	9-Jan	0.25%	0	0	0.25%	DM
PERU	9-Jan	2.25%	0	0	2.75%	EM

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China frees up 800 billion yuan by cutting RRR 50 bps

    China's central bank lived up to expectations and lowered its reserve requirement ratio for large banks by another 50 basis points, freeing up 800 billion yuan in funds in a move the bank described as "a countercyclical adjustment" that increases the source of funds for financial institutions to directly support the real economy.
     The People's Bank of China (PBOC) cut the ratio for large financial institutions to 12.50 percent, it's seventh cut in that ratio since April 2018 when it lowered it for the first time since 2016 from 17.0 percent.
      Today's cut in the reserve requirement, which takes effect Jan. 6, comes after Premier Li Keqiang on Dec. 23 said the government was studying further cuts in reserve requirements, among other measures, to lower borrowing costs for small businesses, cementing expectations that PBOC will continue its easing cycle in 2020.
      PBOC said on its website the cut in the ratio would lower banks' overall cost of funds by around 15 billion yuan annually, and small and medium-sized banks along with rural institutions would receive over 120 billion yuan of long-term funds to help local businesses.
      PBOC added the cut "is by no means an indiscriminate stimulus measure" but helps offset changes in the run-up to the Spring Festival, or Long Lunar holidays, later this month when demand for cash typically rises.
      It added such countercyclical adjustments of monetary policy are "appropriate and sound," and the monetary policy stance remains unchanged.
      The cut in the reserve requirement comes days after the PBOC told financial institutions to use the Loan Prime Rate (LPR), which is already used to price 90 percent of new loans, to price all new loans beginning this month and convert existing loans to LPR from March to August.
       Last August PBOC reformed its system for setting LPR and designated it as the new benchmark rate for all loans. Initially LPR was set at 4.25 percent, 10 percent below the old benchmark lending rate at 4.35 percent, and 6 points below the LPR that had been unchanged since October 2013.
      Under the new mechanism, which is based on the rate that 18 institutions offer their best customers, LPR is published on the 20th of ever month and the 1-year LPR was then lowered by 5 basis points in September and then another 5 points in November to its current rate of 4.15 percent.

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