Saturday, November 26, 2011

Monetary Policy Week in Review - 27 Nov 2011

The past week in monetary policy saw interest rate decisions announced by 6 central banks around the world.  Of those changing rates, Georgia dropped -25bps to 7.00%, Egypt increased +100bps to 9.25%, and Colombia increased +25bps to 4.75%.  Meanwhile those that held interest rates unchanged were Turkey at 5.75%, Nigeria at 12.00%, and Russia at 8.25%.  Croatia also announced a cut to its Lombard rate (-275bps to 6.25%).  Elsewhere, China made headlines when it was revealed that a number of rural cooperative banks were to have their required reserve ratios reversed by 50 basis points to 16.00%.  Also, the ECB noted it had purchased EUR 8 billion last week, up from EUR 4.5 billion the previous week.

Following are some of the key comments and quotes from central bankers that announced monetary policy decisions over the past week:

  • National Bank of Georgia (dropped rate 25bps to 7.00%): "Given that the total output is below the potential and the existing forecasts indicate that the inflation in the next year will remain below the target, the Monetary Policy Committee of the NBG considered it appropriate to continue easing the monetary policy and decided to decrease the policy rate by 25 basis points."
  • Central Bank of Turkey (held rate at 5.75%): "Recent data releases suggest that the rebalancing between the domestic and external demand is ongoing as envisaged. With the credit growth decelerating to more reasonable levels, the desired increase in private  savings has already started to take place. Accordingly, the improvement in the current  account balance is expected to become more significant in the final months of the year."
  • Central Bank of Russia (held rate at 8.25%): "Considering recent domestic and international macroeconomic developments the Bank of Russia judged that the current level of money market interest rates was appropriate to balance the inflationary risks and the risks of economic growth slowdown.  The increase in money market interest rates, resulting from the transition to the liquidity shortage in the banking sector together with the instability on the global financial markets, puts upward pressure on other interest rates in the economy.  Thereupon the Bank of Russia will continue to monitor the money market conditions and the external economic developments, and to assess the risks of further increase in the market interest rates and its consequences."
  • Central Bank of Colombia (increased rate 25bps to 4.75%): "Given the central forecast described above, and the risks of financial imbalances, the Board considers it prudent to increase 25 basis points interest rate intervention and believes that this movement is achieved monetary stance which helps to maximize the growth of output and employment consistent with the achievement of future targets for inflation. This decision also includes the possibility of early detection of a substantial change in external conditions of the economy and to react quickly to it."

Looking at the central bank calendar, there's a series of emerging market monetary policy decisions due to be announced; Brazil will be one of the key ones to watch as it previously cut its rate twice in a row at its past two meetings.  The other emerging market central banks will also be informative in terms of how the policy makers are thinking about their economies.  Elsewhere the US Federal Reserve will release its Beige Book economic survey on Wednesday.

  • HUF - Hungary (Magyar Nemzeti Bank) expected to hold at 6.00% on the 29th of Nov
  • THB - Thailand (Bank of Thailand) expected to cut from 3.50% on the 30th of Nov
  • BRL - Brazil (Banco Central do Brasil) expected to cut from 11.50% on the 30th of Nov
  • PHP - Philippines (Bangko Sentral ng Pilipinas) expected to hold at 4.50% on the 1st of Dec
  • MXN - Mexico (Banco de Mexico) expected to hold at 4.50% on the 2nd of Dec

1 comment:

  1. MNB will increase its rate by at least 50 basis points next week.