Mozambique's central bank lowered its monetary policy rate for the eight consecutive time as its outlook for inflation points to single digits with no signs that aggregate demand will create significant price pressures.
The Bank of Mozambique (BM) cut its MIMO rate (monetary policy rate) by 75 basis points to 15.00 percent and has now cut it by 675 points since April 2017 when MIMO became the new policy rate and set at 21.75 percent.
"The MPC considers that the current stance of monetary policy is appropriate in its contribution to the preservation of macroeconomic stability," BM said.
In addition to the rate cut, BM raised the reserve ratio for banks' liabilities in foreign currency by 500 basis points to 27.00 percent due to "volatility in the foreign exchange market."
The reserve ratio for liabilities in the metical was maintained at 14.0 percent.
Mozambique's inflation rate rose to 4.73 percent in July from 4.4 percent due to higher administered prices amid slower growth in food prices.
Taking into account the recent upward revision of regulated prices of goods and service, particularly electricity and water prices, BM said its forecast post to single digit inflation over the nexts eight quarters.
The economy expanded by an annual 3.3 percent in the second quarter, up form 3.2 percent in the first quarter, supported by agriculture, mining, social services and public administration.
Although BM said a decline in electricity and water services, construction, hotels and restaurants curbed economic activity, it added business expectations remain positive.
Earlier this month the International Monetary Fund (IMF) said the central bank still had room to lower its rates but added this should be done cautiously given the uncertainties in the global economy and the electoral cycle in Mozambique.
The IMF forecast growth this year of 3.5 to 4.0 percent, rising to 4.0 - 4.5 percent in 2019, supported by further cuts in interest rates given the benign outlook for inflation, which is forecast to average 6.5 percent this year and then 5.5 percent in 2019.
Mozambique's international reserves are forecast to remain at comfortable levels this year and next, IMF said.
Thursday, August 30, 2018
Argentina hikes rate 150 bps, pledges no cuts until Dec
Argentina's central bank continued to tighten its monetary policy stance after the peso tumbled to new record lows, raising its benchmark rate for the fifth time this year and for the second time this month.
The Central Bank of the Argentine Republic (BCRA) raised its monetary policy rate by another 150 basis points to a sky-high 60.0 percent and has now raised the rate by 31.25 percentage points since late April when it changed course and began raising rates to shore up the peso and curb soaring inflation.
In its second unscheduled meeting this month, the bank's monetary policy committee said it was raising the rate today in response to the current exchange rate situation and the risk this would have a greater impact on inflation.
The peso hit a record low of 41.3 to the dollar earlier today but then rose in response to the rate hike and was trading at 38.7 late today, down 52 percent this year.
To guarantee that monetary conditions maintain their contractionary bias, the newly-established committee, known as Copom, pledged not the lower the policy rate until at least December.
On Aug. 13, when the key rate was raised 500 basis points to 45.0 percent, Copom pledged not the cut the rate at least until October.
To help reduce liquidity in the money markets, the central bank also raised its reserve requirement for all peso deposits by financial institutions for the fourth time this year. The reserve requirement for both sight and term deposits was raised 500 basis points and is now 34 percent.
Argentina's inflation rate rose to 31.20 percent in July from 29.5 percent in June.
In June the International Monetary Fund and Argentina agreed on a 3-year, $50 billion support package that included new inflation targets for BCRA and a new central bank law that will strengthen its operational and financial autonomy.
The new targets are for inflation below 22 percent for the second quarter of 2019 and for inflation of 17 percent for 2019. For 2020 an inflation target of 13 percent has been set and for 2021 a target of 9 percent. By 2022 BCRA is targeting 5 percent inflation, its estimate of price stability.
www.CentralBankNews.info
The Central Bank of the Argentine Republic (BCRA) raised its monetary policy rate by another 150 basis points to a sky-high 60.0 percent and has now raised the rate by 31.25 percentage points since late April when it changed course and began raising rates to shore up the peso and curb soaring inflation.
In its second unscheduled meeting this month, the bank's monetary policy committee said it was raising the rate today in response to the current exchange rate situation and the risk this would have a greater impact on inflation.
The peso hit a record low of 41.3 to the dollar earlier today but then rose in response to the rate hike and was trading at 38.7 late today, down 52 percent this year.
To guarantee that monetary conditions maintain their contractionary bias, the newly-established committee, known as Copom, pledged not the lower the policy rate until at least December.
On Aug. 13, when the key rate was raised 500 basis points to 45.0 percent, Copom pledged not the cut the rate at least until October.
To help reduce liquidity in the money markets, the central bank also raised its reserve requirement for all peso deposits by financial institutions for the fourth time this year. The reserve requirement for both sight and term deposits was raised 500 basis points and is now 34 percent.
Argentina's inflation rate rose to 31.20 percent in July from 29.5 percent in June.
In June the International Monetary Fund and Argentina agreed on a 3-year, $50 billion support package that included new inflation targets for BCRA and a new central bank law that will strengthen its operational and financial autonomy.
The new targets are for inflation below 22 percent for the second quarter of 2019 and for inflation of 17 percent for 2019. For 2020 an inflation target of 13 percent has been set and for 2021 a target of 9 percent. By 2022 BCRA is targeting 5 percent inflation, its estimate of price stability.
www.CentralBankNews.info
Gambia maintains rate as inflation seen heading to target
Gambia's central bank left its policy rate steady at 13.50 percent, saying it expects inflation to decelerate further towards its target of 5.0 percent as inflation expectations are well anchored and the exchange rate of the dalasi is expected to remain stable, supported by prudent fiscal and monetary policies.
The Central Bank of The Gambia (CBG), which cut its rate by 150 basis points in May, added economic growth had gained momentum on the back of sound macroeconomic policies, structural reform, strong external support and improved business confidence.
The central bank's rate cut in May was its first rate cut since June 2017. Since May 2017, when the CBG began an easing cycle, the rate has been cut by a total of 950 basis points.
The CBG also said its monetary policy committee had decided to introduce an interest rate corridor as of Sept.3, with the rate on overnight deposits set at 2 percent and the lending rate set 1 percent above the monetary policy rate.
Gambia's inflation rate declined to 6.46 percent in June from 6.53 percent in May and the CBG said it expects the continued decline in global food prices to dampen the effects of higher oil prices on domestic inflation.
Gambia's statistics office rebased the Gross Domestic Product to 2013 from 2004, estimating growth of 4.6 percent in 2017 compared with 0.4 percent in 2016.
Higher growth was largely due to a rebound in tourism and trade, financial services along with growth in construction, transport and communications while agricultural production shrank by 8.1 percent due to erratic rainfall, CBG said.
Economic growth this year is expected to strengthen further with GDP growth projected at 5.4 percent on the back of continued sound macroeconomic policies, structural reforms, and strong performance of the services sector and construction.
CBG also said the stock of domestic debt remained stable at 29.0 billion dalasi from the same period last year.
Supported by the International Monetary Fund (IMF), Gambia embarked on economic reforms in 2017, with the IMF in June this year saying implementation of the reform program was largely satisfactory, but public debt of nearly 130 percent of GDP was unsustainable.
After falling in 2017, the exchange rate of the dalasi has been stable this year, depreciating by 1.1 percent against the U.S. dollar from December 2017 to August and 0.1 percent against the euro, the central bank said.
Transactions in the domestic foreign exchange market totaled US$19 billion in the year to end-July, up from $1.2 billion in the same period last year, "reflecting improved market conditions and confidence," CBG said.
The Central Bank of The Gambia (CBG), which cut its rate by 150 basis points in May, added economic growth had gained momentum on the back of sound macroeconomic policies, structural reform, strong external support and improved business confidence.
The central bank's rate cut in May was its first rate cut since June 2017. Since May 2017, when the CBG began an easing cycle, the rate has been cut by a total of 950 basis points.
The CBG also said its monetary policy committee had decided to introduce an interest rate corridor as of Sept.3, with the rate on overnight deposits set at 2 percent and the lending rate set 1 percent above the monetary policy rate.
Gambia's inflation rate declined to 6.46 percent in June from 6.53 percent in May and the CBG said it expects the continued decline in global food prices to dampen the effects of higher oil prices on domestic inflation.
Gambia's statistics office rebased the Gross Domestic Product to 2013 from 2004, estimating growth of 4.6 percent in 2017 compared with 0.4 percent in 2016.
Higher growth was largely due to a rebound in tourism and trade, financial services along with growth in construction, transport and communications while agricultural production shrank by 8.1 percent due to erratic rainfall, CBG said.
Economic growth this year is expected to strengthen further with GDP growth projected at 5.4 percent on the back of continued sound macroeconomic policies, structural reforms, and strong performance of the services sector and construction.
CBG also said the stock of domestic debt remained stable at 29.0 billion dalasi from the same period last year.
Supported by the International Monetary Fund (IMF), Gambia embarked on economic reforms in 2017, with the IMF in June this year saying implementation of the reform program was largely satisfactory, but public debt of nearly 130 percent of GDP was unsustainable.
After falling in 2017, the exchange rate of the dalasi has been stable this year, depreciating by 1.1 percent against the U.S. dollar from December 2017 to August and 0.1 percent against the euro, the central bank said.
Transactions in the domestic foreign exchange market totaled US$19 billion in the year to end-July, up from $1.2 billion in the same period last year, "reflecting improved market conditions and confidence," CBG said.
Tunisia maintains rate as inflationary pressures persist
Tunisia's central bank left its key interest rate steady at 6.75 percent, noting the persistence of inflationary pressures despite a slight decline in July and underscoring the need to closely monitor financial and monetary data.
The Central Bank of Tunisia (BCT), which has raised its rate twice this year by a total of 175 basis points, also noted a continued widening of the trade deficit as higher energy imports outpaced the increase in tourism receipts and revenue from workers abroad.
The central bank's board stressed the need for further coordination with affected parties to help counteract these developments that are having a negative impact on the exchange rate of the dinar.
Tunisia's inflation rate has been rising steadily since October last year though it eased in July to 7.5 percent from 7.8 percent in June, when the BCT raised its rate by 100 basis points.
In its statement following the board meeting on Aug. 29, the central bank repeated its warning from June that persistent inflation would have a negative effect on the country's economic growth.
Tunisia's economy grew by an annual 2.8 percent in the second quarter of this year, up from 2.5 percent in the first quarter for first half growth of around. 2.6 percent, up from 1.9 percent a year earlier.
Tunisia's dinar has depreciated against both the euro and U.S. dollar this year although it has bounced back against the dollar in the last two weeks as the greenback has retreated.
The dinar was trading at 2.76 to the dollar today, down almost 11 percent this year.
www.CentralBankNews.info
The Central Bank of Tunisia (BCT), which has raised its rate twice this year by a total of 175 basis points, also noted a continued widening of the trade deficit as higher energy imports outpaced the increase in tourism receipts and revenue from workers abroad.
The central bank's board stressed the need for further coordination with affected parties to help counteract these developments that are having a negative impact on the exchange rate of the dinar.
Tunisia's inflation rate has been rising steadily since October last year though it eased in July to 7.5 percent from 7.8 percent in June, when the BCT raised its rate by 100 basis points.
In its statement following the board meeting on Aug. 29, the central bank repeated its warning from June that persistent inflation would have a negative effect on the country's economic growth.
Tunisia's economy grew by an annual 2.8 percent in the second quarter of this year, up from 2.5 percent in the first quarter for first half growth of around. 2.6 percent, up from 1.9 percent a year earlier.
Tunisia's dinar has depreciated against both the euro and U.S. dollar this year although it has bounced back against the dollar in the last two weeks as the greenback has retreated.
The dinar was trading at 2.76 to the dollar today, down almost 11 percent this year.
www.CentralBankNews.info
Wednesday, August 29, 2018
Israel maintains rate but moves step closer to hike
Israel's central bank kept its key interest rate steady at 0.10 percent, as expected, but took another small step toward raising its rate for the first time in seven years by saying inflation now appeared to becoming entrenched within its target range, meeting its requirement for tightening monetary policy.
While the Bank of Israel (BOI) reiterated its guidance that would keep its accommodative policy "as long as necessary in order to entrench the inflation environment within the target range," it added that inflation was now "moving toward entrenchment within the price stability target range."
Today's statement about inflation is more confident than in July when it said inflation was "approaching" its target range, and supports last month's forecast by BOI staff that the key rate will rise to 0.25 percent this year and then 0.50 percent in 2019.
The BOI has maintained its rate at 0.10 percent since wrapping up an easing cycle in March 2015 and last raised the rate in June 2011.
Israel's inflation rate rose to 1.4 percent in July from 1.3 percent in June, within BOI's target range of 1.0 - 3.0 percent, and up from 0.5 percent in May.
BOI acknowledged inflation was in the lower part of its target range and the main risk to inflation becoming entrenched within the range was a rise in the shekel's exchange rate.
The shekel has weakened this year against the U.S. dollar although it has firmed in the last few weeks. Today the shekel was trading at 3.61 to the dollar, down 3.6 percent this year.
In July BOI staff forecast that inflation would average 1.2 percent this year, up from 0.3 percent in 2017 and up from 1.1 percent previously forecast, and then rise further to 1.5 percent in 2019, up from 1.4 percent previously forecast.
While the Bank of Israel (BOI) reiterated its guidance that would keep its accommodative policy "as long as necessary in order to entrench the inflation environment within the target range," it added that inflation was now "moving toward entrenchment within the price stability target range."
Today's statement about inflation is more confident than in July when it said inflation was "approaching" its target range, and supports last month's forecast by BOI staff that the key rate will rise to 0.25 percent this year and then 0.50 percent in 2019.
The BOI has maintained its rate at 0.10 percent since wrapping up an easing cycle in March 2015 and last raised the rate in June 2011.
Israel's inflation rate rose to 1.4 percent in July from 1.3 percent in June, within BOI's target range of 1.0 - 3.0 percent, and up from 0.5 percent in May.
BOI acknowledged inflation was in the lower part of its target range and the main risk to inflation becoming entrenched within the range was a rise in the shekel's exchange rate.
The shekel has weakened this year against the U.S. dollar although it has firmed in the last few weeks. Today the shekel was trading at 3.61 to the dollar, down 3.6 percent this year.
In July BOI staff forecast that inflation would average 1.2 percent this year, up from 0.3 percent in 2017 and up from 1.1 percent previously forecast, and then rise further to 1.5 percent in 2019, up from 1.4 percent previously forecast.
Iceland holds rate, to hike if inflation expectations rise
Iceland's central bank left its key interest rate unchanged at 4.25 percent but said long-term inflation expectations had risen somewhat above its target and "if inflation expectations continue to rise and remain persistently at a level above the target, it will call for a tighter monetary stance."
The Central Bank of Iceland (CBI) raised its forecast for consumer price inflation this year to 2.7 percent from a previous 2.6 percent, slightly above its target of 2.5 percent.
In its August monetary bulletin, CBI also raised its inflation forecast for next year to 2.8 percent from May's forecast of 2.6 percent but lowered the 2020 forecast to 2.7 percent from 2.8 percent.
Last year inflation in Iceland averaged 1.8 percent and in July this year inflation rose to 2.7 percent from 2.6 percent in June as petrol prices have risen and the exchange has weakened.
The central bank's monetary policy committee said it "'has both the will and the tools necessary to keep inflation at target over the long term," adding that its policy stance in the near term will depend on the interaction between a narrower output gap, wage setting decisions and developments in inflation and inflation expectations.
The CBI has kept its rate steady since a cut in October 2017 but warned in June that a tight monetary stance was needed in light of rapid growth in economic growth and wage pressures.
Iceland's economy has benefitted from tourism in recent years and its Gross Domestic Product grew by an annual 5.4 percent in the first quarter of this year, up from 1.5 percent in the previous quarter while wages grew 3.5 percent in July from a year ago, up from 3.3 percent in June.
The CBI raised its forecast for the economy to expand by 3.6 percent this year, up from 3.3 percent, and the same rate as in 2017, as strong trade outweighs slower growth in domestic demand.
Economic growth is still expected to cool next year to 2.7 percent from a previous forecast of 3.0 percent as exports weaken along with domestic demand. In 2020 the economy is seen growing 3.0 percent, up from 2.7 percent forecast in May.
The Icelandic krona, which soared against the U.S. dollar from 2015 to mid-2017, has eased this year though it has firmed a bit in the last week.
The krona was trading at 107.09 to the dollar today, down 3.3 percent this year.
The Central Bank of Iceland (CBI) raised its forecast for consumer price inflation this year to 2.7 percent from a previous 2.6 percent, slightly above its target of 2.5 percent.
In its August monetary bulletin, CBI also raised its inflation forecast for next year to 2.8 percent from May's forecast of 2.6 percent but lowered the 2020 forecast to 2.7 percent from 2.8 percent.
Last year inflation in Iceland averaged 1.8 percent and in July this year inflation rose to 2.7 percent from 2.6 percent in June as petrol prices have risen and the exchange has weakened.
The central bank's monetary policy committee said it "'has both the will and the tools necessary to keep inflation at target over the long term," adding that its policy stance in the near term will depend on the interaction between a narrower output gap, wage setting decisions and developments in inflation and inflation expectations.
The CBI has kept its rate steady since a cut in October 2017 but warned in June that a tight monetary stance was needed in light of rapid growth in economic growth and wage pressures.
Iceland's economy has benefitted from tourism in recent years and its Gross Domestic Product grew by an annual 5.4 percent in the first quarter of this year, up from 1.5 percent in the previous quarter while wages grew 3.5 percent in July from a year ago, up from 3.3 percent in June.
The CBI raised its forecast for the economy to expand by 3.6 percent this year, up from 3.3 percent, and the same rate as in 2017, as strong trade outweighs slower growth in domestic demand.
Economic growth is still expected to cool next year to 2.7 percent from a previous forecast of 3.0 percent as exports weaken along with domestic demand. In 2020 the economy is seen growing 3.0 percent, up from 2.7 percent forecast in May.
The Icelandic krona, which soared against the U.S. dollar from 2015 to mid-2017, has eased this year though it has firmed a bit in the last week.
The krona was trading at 107.09 to the dollar today, down 3.3 percent this year.
Tuesday, August 28, 2018
Jamaica holds rate but will cut if credit doesn't expand
Jamaica's central bank left its policy rate steady at 2.0 percent but said it "will make further cuts to the policy rate" if the current expansion of private sector credit does not continue.
The Bank of Jamaica (BOJ), which has cut its benchmark overnight deposit rate by 125 basis points this year, said the decision to maintain the rate comes amid signs of a pickup in the rate of expansion in private sector credit and reflect its view that inflation will rise towards the lower end of its target by March 2019 and approach the middle of the target range thereafter.
"However, Bank of Jamaica is closely monitoring these credit conditions and will make further cuts to the policy rate if required," BOJ said, adding that economic data continue to be positive, international reserves are at healthy levels and the current account will remain at a sustainable level even if it is projected to widen.
Jamaica's inflation rate picked up to 3.2 percent in July from 2.8 percent in June but is below the lower bound of the BOJ's target range of 4.0 - 6.0 percent target range.
It was the highest rate of inflation in the last four months, with the central bank saying the current path still reflects slack in the economy.
However, the BOJ said its outlook for inflation for the rest of this year and the first part of 2019 is largely predicated on an expected increase in agricultural prices, continued elevated oil prices and higher economic growth, supported by this year's policy easing.
Since July 2017, when BOJ adopted the overnight deposit rate as its signal rate, it has lowered the rate by a total of 175 basis points.
Jamaica is in the midst of a structural reform program supported by the International Monetary Fund (IMF) that includes a new central bank act, expected to be approved in October.
As part of the US$1.64 billion IMF agreement from November 2016, Jamaica's finance ministry in September last year approved a medium-term inflation target for the first time and the BOJ has also taken steps to enhance its policy transparency and modernized the foreign exchange market.
The new central bank act will establish the BOJ as an independent central bank that will be accountable for maintaining price stability as its primary mandate, formalizing the current regime that Bryan Wynter, BOJ governor, has described as 'inflation-targeting lite.'
Jamaica's Gross Domestic Product grew by an annual 1.4 percent in the first quarter of this year, up from 1.2 percent in the previous quarter.
The Bank of Jamaica (BOJ), which has cut its benchmark overnight deposit rate by 125 basis points this year, said the decision to maintain the rate comes amid signs of a pickup in the rate of expansion in private sector credit and reflect its view that inflation will rise towards the lower end of its target by March 2019 and approach the middle of the target range thereafter.
"However, Bank of Jamaica is closely monitoring these credit conditions and will make further cuts to the policy rate if required," BOJ said, adding that economic data continue to be positive, international reserves are at healthy levels and the current account will remain at a sustainable level even if it is projected to widen.
Jamaica's inflation rate picked up to 3.2 percent in July from 2.8 percent in June but is below the lower bound of the BOJ's target range of 4.0 - 6.0 percent target range.
It was the highest rate of inflation in the last four months, with the central bank saying the current path still reflects slack in the economy.
However, the BOJ said its outlook for inflation for the rest of this year and the first part of 2019 is largely predicated on an expected increase in agricultural prices, continued elevated oil prices and higher economic growth, supported by this year's policy easing.
Since July 2017, when BOJ adopted the overnight deposit rate as its signal rate, it has lowered the rate by a total of 175 basis points.
Jamaica is in the midst of a structural reform program supported by the International Monetary Fund (IMF) that includes a new central bank act, expected to be approved in October.
As part of the US$1.64 billion IMF agreement from November 2016, Jamaica's finance ministry in September last year approved a medium-term inflation target for the first time and the BOJ has also taken steps to enhance its policy transparency and modernized the foreign exchange market.
The new central bank act will establish the BOJ as an independent central bank that will be accountable for maintaining price stability as its primary mandate, formalizing the current regime that Bryan Wynter, BOJ governor, has described as 'inflation-targeting lite.'
Jamaica's Gross Domestic Product grew by an annual 1.4 percent in the first quarter of this year, up from 1.2 percent in the previous quarter.
Sunday, August 26, 2018
This week in monetary policy: Kyrgyzstan, Jamaica, Iceland, Israel, Gambia, Mozambique, South Korea, Bulgaria & Dominican Rep.
This week - August 26 through September 1- central banks from 9 countries or jurisdictions are scheduled to decide on monetary policy: Kyrgyz Republic, Jamaica, Iceland, Israel, Gambia, Mozambique, South Korea, Bulgaria and the Dominican Republic.
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, the rate one year ago, and the country’s MSCI classification.
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, the rate one year ago, and the country’s MSCI classification.
The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.
| WEEK 35 | |||||
| AUG 26 - SEP 1, 2018: | |||||
| COUNTRY | DATE | RATE | LATEST | YTD | 1 YR AGO |
| KYRGYZSTAN | 27-Aug | 4.75% | 0 | -25 | 5.00% |
| JAMAICA | 28-Aug | 2.00% | -50 | -125 | 3.50% |
| ICELAND | 29-Aug | 4.25% | 0 | 0 | 4.50% |
| ISRAEL | 29-Aug | 0.10% | 0 | 0 | 0.10% |
| GAMBIA | 30-Aug | 13.50% | -150 | -150 | 15.00% |
| MOZAMBIQUE | 30-Aug | 15.75% | -75 | -375 | 21.50% |
| SOUTH KOREA | 31-Aug | 1.50% | 0 | 0 | 1.25% |
| BULGARIA | 31-Aug | 0.00% | 0 | 0 | 0.00% |
| DOMINICAN REP. | 31-Aug | 5.50% | 25 | 25 | 5.25% |
Tuesday, August 21, 2018
Hungary maintains rate and commitment to easy policy
Hungary's central bank left its key interest rates steady, as expected, and confirmed that it still considers a steady base rate and loose monetary conditions to be necessary to reach its inflation target in a sustainable manner from mid-2019 as the temporary rise in inflation from higher oil prices fades.
The National Bank OF Hungary (NBH), which has kept its base rate at 0.90 percent since May 2016, also reiterated that the "current volatile international environment continues to suggest a more cautious approach," a reference to a renewed bout of uncertainty in markets from events in Turkey, global trade policy, oil prices and tighter monetary policy in advanced economies.
Hungary's inflation rate has been accelerating since March and rose to 3.4 percent in July for the highest rate since August 2016, reflecting higher oil prices.
The rise in inflation to above the central bank's 3.0 percent target, but still within its plus/minus 1 percentage point tolerance range, was expected by NBH, which in June forecast that inflation would remain above 3 percent in coming months.
But with inflation expectations still low, the central bank doesn't expect higher oil prices to generate second-round effects so inflation should ease and settle around the target from the middle of next year.
With inflation rising and forecast to remain close to the central bank's target, economists are starting to look ahead to a withdrawal of monetary stimulus.
While the NBH has kept its key policy rate steady for more than 2 years, last year it lowered its overnight deposit rate and launched a series of unconventional measures to keep long term rates low.
This includes limits on the stock of deposits that banks can hold at the central bank to ensure they lend out funds along with interest rate swaps and purchases of mortgage notes.
"All in all, this calls for some removal of the monetary accommodation, starting with unconventional measures," the International Monetary Fund (IMF) said earlier this month, welcoming the central bank's recent emphasis on its commitment to its inflation target.
The central bank current has a target of crowding out at least 400-600 billion forints for the third quarter of this year along with a 75-billion upper limit on banks' 3-month deposits.
In September the central bank's council will consider how much liquidity should be crowded out.
Hungary's economy continued to grow strongly in the second quarter of this year and NBH said recent data showed that "robust economic growth is likely to continue," with lending to households and businesses continuing to expand in June and labour demand still strong.
Hungary's Gross Domestic Product grew by an annual 4.6 percent in the second quarter of this year, up from 4.4 percent in the previous two quarters, and higher than expected.
The central bank expects growth this year of 4.4 percent this year, up from 2017's 4.0 percent, but the pace of growth is then expected to ease gradually from 2019.
The forint hit a record low against the euro of almost 330 in early July but then rebounded the rest of the month. In the second week of August the forint then weakened again but has remained above the record low set in early July.
Today the forint was trading at 323.7 to the euro, down 3.7 percent this year.
The National Bank OF Hungary (NBH), which has kept its base rate at 0.90 percent since May 2016, also reiterated that the "current volatile international environment continues to suggest a more cautious approach," a reference to a renewed bout of uncertainty in markets from events in Turkey, global trade policy, oil prices and tighter monetary policy in advanced economies.
Hungary's inflation rate has been accelerating since March and rose to 3.4 percent in July for the highest rate since August 2016, reflecting higher oil prices.
The rise in inflation to above the central bank's 3.0 percent target, but still within its plus/minus 1 percentage point tolerance range, was expected by NBH, which in June forecast that inflation would remain above 3 percent in coming months.
But with inflation expectations still low, the central bank doesn't expect higher oil prices to generate second-round effects so inflation should ease and settle around the target from the middle of next year.
With inflation rising and forecast to remain close to the central bank's target, economists are starting to look ahead to a withdrawal of monetary stimulus.
While the NBH has kept its key policy rate steady for more than 2 years, last year it lowered its overnight deposit rate and launched a series of unconventional measures to keep long term rates low.
This includes limits on the stock of deposits that banks can hold at the central bank to ensure they lend out funds along with interest rate swaps and purchases of mortgage notes.
"All in all, this calls for some removal of the monetary accommodation, starting with unconventional measures," the International Monetary Fund (IMF) said earlier this month, welcoming the central bank's recent emphasis on its commitment to its inflation target.
The central bank current has a target of crowding out at least 400-600 billion forints for the third quarter of this year along with a 75-billion upper limit on banks' 3-month deposits.
In September the central bank's council will consider how much liquidity should be crowded out.
Hungary's economy continued to grow strongly in the second quarter of this year and NBH said recent data showed that "robust economic growth is likely to continue," with lending to households and businesses continuing to expand in June and labour demand still strong.
Hungary's Gross Domestic Product grew by an annual 4.6 percent in the second quarter of this year, up from 4.4 percent in the previous two quarters, and higher than expected.
The central bank expects growth this year of 4.4 percent this year, up from 2017's 4.0 percent, but the pace of growth is then expected to ease gradually from 2019.
The forint hit a record low against the euro of almost 330 in early July but then rebounded the rest of the month. In the second week of August the forint then weakened again but has remained above the record low set in early July.
Today the forint was trading at 323.7 to the euro, down 3.7 percent this year.
Monday, August 20, 2018
Mauritius maintains rate and lowers inflation forecast
The central bank of the island of Mauritius left its benchmark repurchase rate steady at 3.50 percent, saying its monetary policy committee had unanimously concluded that its current policy stance was supporting growth in an environment where inflationary pressures were contained and the forecast for this year and next year was lowered.
The Bank of Mauritius (BOM), which has maintained its rate since cutting it in September 2017, confirmed its forecast for the economy to expand by 4.0 percent in 2018 and 2019, up from 2017's 3.5 percent, amid a global economic environment where risks have shifted to the downside.
"The outlook on the domestic economy remains quite upbeat," BOM said, adding there is still some spare capacity in the economy.
Economic activity is sustained due to the contribution of the services and construction sectors while pro-growth budget measures, household consumption and capital spending on infrastructure projects are supporting growth, BOM said, and business and consumer confidence is rising.
Mauritius' Gross Domestic Product grew by an annual rate of 4.0 percent in the first quarter of this year, up from 3.8 percent in the previous quarter.
Inflation has declined in recent months after an adverse shock to food prices subsided and there was a downward adjustment to prices of administered goods, BOM said.
BOM said headline inflation fell to 4.0 percent in July from 5 percent in March and April and lowered its forecast for inflation to average 3.5 percent this year, down from May's estimate of 4.2 percent.
For 2019 inflation is forecast at 3.0 percent, down from an earlier estimate of 3.8 percent.
CPI inflation fell to 1.7 percent in July from 7.0 percent in February.
After slipping in the first five months of the year, the Mauritian rupee has stabilised in the last couple of months and was trading at 34.8 to the U.S. dollar today, down 2.6 percent this year.
The Bank of Mauritius (BOM), which has maintained its rate since cutting it in September 2017, confirmed its forecast for the economy to expand by 4.0 percent in 2018 and 2019, up from 2017's 3.5 percent, amid a global economic environment where risks have shifted to the downside.
"The outlook on the domestic economy remains quite upbeat," BOM said, adding there is still some spare capacity in the economy.
Economic activity is sustained due to the contribution of the services and construction sectors while pro-growth budget measures, household consumption and capital spending on infrastructure projects are supporting growth, BOM said, and business and consumer confidence is rising.
Mauritius' Gross Domestic Product grew by an annual rate of 4.0 percent in the first quarter of this year, up from 3.8 percent in the previous quarter.
Inflation has declined in recent months after an adverse shock to food prices subsided and there was a downward adjustment to prices of administered goods, BOM said.
BOM said headline inflation fell to 4.0 percent in July from 5 percent in March and April and lowered its forecast for inflation to average 3.5 percent this year, down from May's estimate of 4.2 percent.
For 2019 inflation is forecast at 3.0 percent, down from an earlier estimate of 3.8 percent.
CPI inflation fell to 1.7 percent in July from 7.0 percent in February.
After slipping in the first five months of the year, the Mauritian rupee has stabilised in the last couple of months and was trading at 34.8 to the U.S. dollar today, down 2.6 percent this year.
Sunday, August 19, 2018
This week in monetary policy: Mauritius, Hungary, Zambia, Botswana and Paraguay
This week - August 19 through August 25 - central banks from 5 countries or jurisdictions are scheduled to decide on monetary policy: Mauritius, Hungary, Zambia, Botswana and Paraguay.
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, the rate one year ago, and the country’s MSCI classification.
The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.
| WEEK 34 | |||||
| AUG 19- AUG 25, 2018: | |||||
| COUNTRY | DATE | RATE | LATEST | YTD | 1 YR AGO |
| MAURITIUS | 20-Aug | 3.50% | 0 | 0 | 4.00% |
| HUNGARY | 21-Aug | 9.00% | 0 | -50 | 10.00% |
| ZAMBIA | 22-Aug | 9.75% | 0 | -50 | 11.00% |
| BOTSWANA | 23-Aug | 5.00% | 0 | 0 | 5.50% |
| PARAGUAY | 23-Aug | 5.25% | 0 | 0 | 5.25% |
Thursday, August 16, 2018
Egypt holds rate as inflation nears fourth quarter target
Egypt's central bank left its key policy rates unchanged for the third time, saying the current rates are consistent with the outlook for inflation and achieving the target of 13 percent, plus/minus 3 percentage points, in the fourth quarter of this year.
The Central Bank of Egypt (CBE) has kept its key rates steady since the last cut in March while inflation continues to decelerate and has been below the upper limit of the target range since February.
Core inflation, however, has continued to fall for 12 months in a row and fell further to 8.54 percent in July, the lowest rate since March 2016.
Inflation surged last year after the government slashed subsidies to energy and raised taxes in connection with a US$12 billion International Monetary Fund (IMF) aid package.
In November 2016 the central bank also floated the pound, which quickly lost more than half its value, boosting import prices and thus inflation.
In response the CBE raised its rates sharply but this year it has cut the rate by a total of 200 basis points following cuts in February and March.
The CBE said Egypt's economy had stabilized in the second quarter of this year at the growth rate that was seen in the first quarter, driven by foreign demand and domestic investments.
Egypt's Gross Domestic Product expanded by an annual 5.4 percent in the first quarter of this year, up from 5.3 percent in the fourth quarter of last year, for the seventh consecutive quarter of accelerating growth.
In July the IMF said Egypt's economic situation had continued to improve and the near-term growth outlook is favorable, supported by a recovery in tourism and natural gas production.
The IMF forecast economic growth in the 2017/18 financial year, which ended July 1, of 5.2 percent, rising to 5.5 percent in 2018/19.
Average inflation was forecast to decline to 14.4 percent in 2018/19 from an estimated 20.8 percent last financial year.
The Central Bank of Egypt (CBE) has kept its key rates steady since the last cut in March while inflation continues to decelerate and has been below the upper limit of the target range since February.
Egypt's inflation rate has come down sharply since a record high of almost 33 percent in July 2017 though the headline rate rose slightly in June and July due to higher regulated prices, such as electricity, tobacco and government fees, and some volatile food items.
In July consumer price inflation eased to 13.5 percent from 14.4 percent in June.Core inflation, however, has continued to fall for 12 months in a row and fell further to 8.54 percent in July, the lowest rate since March 2016.
Inflation surged last year after the government slashed subsidies to energy and raised taxes in connection with a US$12 billion International Monetary Fund (IMF) aid package.
In November 2016 the central bank also floated the pound, which quickly lost more than half its value, boosting import prices and thus inflation.
In response the CBE raised its rates sharply but this year it has cut the rate by a total of 200 basis points following cuts in February and March.
The CBE kept its overnight deposit rate, the overnight lending rate and the rate on the main operation at 16.75 percent, 17.75 percent and 17.25 percent, respectively.
In May last year the CBE set a target for inflation of 13 percent, plus/minus 3 percentage points, for the fourth quarter of 2018 and then single digits thereafter after the temporary effect of fiscal supply shocks dissipates.The CBE said Egypt's economy had stabilized in the second quarter of this year at the growth rate that was seen in the first quarter, driven by foreign demand and domestic investments.
Egypt's Gross Domestic Product expanded by an annual 5.4 percent in the first quarter of this year, up from 5.3 percent in the fourth quarter of last year, for the seventh consecutive quarter of accelerating growth.
In July the IMF said Egypt's economic situation had continued to improve and the near-term growth outlook is favorable, supported by a recovery in tourism and natural gas production.
The IMF forecast economic growth in the 2017/18 financial year, which ended July 1, of 5.2 percent, rising to 5.5 percent in 2018/19.
Average inflation was forecast to decline to 14.4 percent in 2018/19 from an estimated 20.8 percent last financial year.
Norway holds rate, outlook and risks as forecast in June
Norway's central bank left its key policy rate at 0.5 percent but said the upturn in the country's economy is broadly continuing as forecast in June when the executive board said the key policy rate most likely will be raised in September.
Norges Bank (NB), which has maintained its rate since cutting it in March 2016, added that underlying inflation is below the bank's target but is still expected to rise.
"The outlook and the balance of risks do not appear to have changed substantially since the June Report," NB Governor Oeystein Olsen said in a statement.
In March NB began preparing investors for its first rate hike since May 2011 and then repeated this in its June monetary policy report when it forecast that the average monetary rate would rise to 0.6 percent this year and then 1.1 percent in 2019, implying two rate hikes of 25 basis points each.
Next month NB will update its economic forecasts and the executive board is scheduled to issue its policy decision at a press conference on Sept. 20.
In its meeting yesterday, the bank's executive board compared recent developments with its June forecast and concluded there had been little new information about the country's economy and developments among its trading partners was broadly as expected.
Despite trade conflicts and political tensions that have pushed down some equity prices and the the exchange rate of some currencies, policy rates among Norway's trading partners have been raised in recent months and forward interest rates still indicate a gradual rise in global interest rates.
In Norway consumption of goods fell in June and was somewhat lower than expected but manufacturing output rose in the second quarter, oil prices were little changed, house prices have edged higher and unemployment has evolved largely as expected, NB said.
Inflation, however, has risen and is higher than expected, mainly due to higher electricity prices.
Norway's consumer price inflation rose to 3.0 percent in July from 2.6 percent in June, and well above the central bank's recently-revised target of 2.0 percent.
In March Norway's government lowered the inflation target from the 2.5 percent target that had been in place for 17 years, putting Norway in the same camp as most other developed economies.
In June NB raised its forecast for average 2018 headline inflation to 2.3 percent from 2.1 percent.
NB added today that the exchange rate of the krone was somewhat weaker than NB had assumed.
As most currencies, the krone has fallen against the U.S. dollar this year and was trading at 8.45 today, down 3 percent.
Against the euro, the krone has been slightly firmer, trading at 9.61 today, up 2.4 percent this year.
After several years of weak growth, Norway's economy has improved since the start of 2017, helped by rising oil prices, pushing up wages and capacity utilization.
But in the first quarter of this year the economy grew only 0.3 percent year-on-year, down from 1.6 percent in the previous quarter.
In June the central bank forecast that Norway's mainland economy, which excludes the offshore oil and gas industry, would expand 2.6 percent this year and then 2.3 percent in 2019.
Norges Bank (NB), which has maintained its rate since cutting it in March 2016, added that underlying inflation is below the bank's target but is still expected to rise.
"The outlook and the balance of risks do not appear to have changed substantially since the June Report," NB Governor Oeystein Olsen said in a statement.
In March NB began preparing investors for its first rate hike since May 2011 and then repeated this in its June monetary policy report when it forecast that the average monetary rate would rise to 0.6 percent this year and then 1.1 percent in 2019, implying two rate hikes of 25 basis points each.
Next month NB will update its economic forecasts and the executive board is scheduled to issue its policy decision at a press conference on Sept. 20.
In its meeting yesterday, the bank's executive board compared recent developments with its June forecast and concluded there had been little new information about the country's economy and developments among its trading partners was broadly as expected.
Despite trade conflicts and political tensions that have pushed down some equity prices and the the exchange rate of some currencies, policy rates among Norway's trading partners have been raised in recent months and forward interest rates still indicate a gradual rise in global interest rates.
In Norway consumption of goods fell in June and was somewhat lower than expected but manufacturing output rose in the second quarter, oil prices were little changed, house prices have edged higher and unemployment has evolved largely as expected, NB said.
Inflation, however, has risen and is higher than expected, mainly due to higher electricity prices.
Norway's consumer price inflation rose to 3.0 percent in July from 2.6 percent in June, and well above the central bank's recently-revised target of 2.0 percent.
In March Norway's government lowered the inflation target from the 2.5 percent target that had been in place for 17 years, putting Norway in the same camp as most other developed economies.
In June NB raised its forecast for average 2018 headline inflation to 2.3 percent from 2.1 percent.
NB added today that the exchange rate of the krone was somewhat weaker than NB had assumed.
As most currencies, the krone has fallen against the U.S. dollar this year and was trading at 8.45 today, down 3 percent.
Against the euro, the krone has been slightly firmer, trading at 9.61 today, up 2.4 percent this year.
After several years of weak growth, Norway's economy has improved since the start of 2017, helped by rising oil prices, pushing up wages and capacity utilization.
But in the first quarter of this year the economy grew only 0.3 percent year-on-year, down from 1.6 percent in the previous quarter.
In June the central bank forecast that Norway's mainland economy, which excludes the offshore oil and gas industry, would expand 2.6 percent this year and then 2.3 percent in 2019.
Wednesday, August 15, 2018
Indonesia raises rate 25 bps, trims 2018 growth forecast
Indonesia's central bank raised its main interest rates for the fourth time this year, as expected, to maintain the attractiveness of the country's assets, especially the rupiah, while it lowered its 2018 growth forecast slightly.
Bank Indonesia (BI) raised its benchmark BI 7-day reverse repo rate by a further 25 basis points to 5.50 percent and has now raised it by a total of 125 basis points since mid-May to bolster the exchange rate of the rupiah and maintain financial stability amid a general outflow of funds from many emerging markets toward U.S. dollar assets.
BI also raised its deposit facility and lending facility rates today by 25 points to 4.75 and 6.25 percent, respectively.
"The decision is consistent with ongoing efforts to maintain the attractiveness of the domestic financial markets and manage the current account deficit within an acceptable threshold," BI said.
Indonesia has become vulnerable to the swings of sentiment in global financial markets due to its widening current account deficit and BI said it supported the government's measures to reduce the deficit by stimulating exports and reducing imports while it postpones some projects that carry a high content of imports.
The current account deficit widened by 67.4 percent to US$8.0 billion in the second quarter of this year - or 3 percent of Gross Domestic Product - from $5.7 billion in the first quarter for the largest deficit since the third quarter of 2014.
BI said the deficit had risen due to a surge in imports of raw materials, capital and consumer goods from an uptick in domestic activity, which outpaced export growth. In July BI estimated the current account deficit would remain within 3 percent of GDP this year, a level it considers acceptable.
At the same time, the surplus of the capital and financial accounts rose to a record US$4.0 billion in the second quarter from $2.4 billion in the first quarter.
Indonesia's reserves declined to $118.3 billion at the end of July, the equivalent of 6.7 months of imports and debt servicing, from $119.8 billion in June and $132 billion in January as BI uses some of its reserves to prevent excessive volatility in the currency markets.
"Moving forward, Bank Indonesia perceives solid Balance of Payment (BOP) performance and the current account deficit maintained within an acceptable threshold that will reinforce external sector resilience," BI said.
Although the rupiah has depreciated this year against the U.S. dollar, BI said volatility had subsided during July and it had "defied intense depreciatory pressures." While it fell 3.94 percent during the second quarter, it had fallen 0.62 percent in July, BI said.
BI said the rupiah had depreciated less than the currencies of India, Brazil, South African and Russia while foreign capital had returned to its domestic markets, drawn to all asset types.
"Bank Indonesia will continue to monitor the risk of global financial market uncertainty, while stabilizing the rupiah in line with the currency's fundamental value and maintaining market mechanisms, backed by financial market deepening initiatives," BI said.
The rupiah strengthened slightly in response to today's rate hike and was trading at 14,597 to the dollar, down 7.0 percent this year.
Indonesia's economy has been accelerating in recent months on strong domestic demand and grew by an annual rate of 5.27 percent in the second quarter, up from 5.06 percent in the first quarter, and the fastest rate since the final quarter of 2013.
Although second quarter growth was faster than expected, it remains below the government's target of 5.4 percent and BI lowered its 2018 growth forecast to 5.0 - 5.4 percent from last month's forecast that growth would be in the lower end of 5.1 - 5.5 percent range.
For 2019 BI forecast growth would accelerate to 5.1 - 5.5 percent.
Indonesia's inflation rate is low and stable and rose to 3.18 percent in July from 3.12 percent in June as regulated prices eased.
BI confirmed it expects inflation to remain within its target corridor of 3.5 percent, plus/minus 1 percentage point, this year.
Bank Indonesia (BI) raised its benchmark BI 7-day reverse repo rate by a further 25 basis points to 5.50 percent and has now raised it by a total of 125 basis points since mid-May to bolster the exchange rate of the rupiah and maintain financial stability amid a general outflow of funds from many emerging markets toward U.S. dollar assets.
BI also raised its deposit facility and lending facility rates today by 25 points to 4.75 and 6.25 percent, respectively.
"The decision is consistent with ongoing efforts to maintain the attractiveness of the domestic financial markets and manage the current account deficit within an acceptable threshold," BI said.
Indonesia has become vulnerable to the swings of sentiment in global financial markets due to its widening current account deficit and BI said it supported the government's measures to reduce the deficit by stimulating exports and reducing imports while it postpones some projects that carry a high content of imports.
The current account deficit widened by 67.4 percent to US$8.0 billion in the second quarter of this year - or 3 percent of Gross Domestic Product - from $5.7 billion in the first quarter for the largest deficit since the third quarter of 2014.
BI said the deficit had risen due to a surge in imports of raw materials, capital and consumer goods from an uptick in domestic activity, which outpaced export growth. In July BI estimated the current account deficit would remain within 3 percent of GDP this year, a level it considers acceptable.
At the same time, the surplus of the capital and financial accounts rose to a record US$4.0 billion in the second quarter from $2.4 billion in the first quarter.
Indonesia's reserves declined to $118.3 billion at the end of July, the equivalent of 6.7 months of imports and debt servicing, from $119.8 billion in June and $132 billion in January as BI uses some of its reserves to prevent excessive volatility in the currency markets.
"Moving forward, Bank Indonesia perceives solid Balance of Payment (BOP) performance and the current account deficit maintained within an acceptable threshold that will reinforce external sector resilience," BI said.
Although the rupiah has depreciated this year against the U.S. dollar, BI said volatility had subsided during July and it had "defied intense depreciatory pressures." While it fell 3.94 percent during the second quarter, it had fallen 0.62 percent in July, BI said.
BI said the rupiah had depreciated less than the currencies of India, Brazil, South African and Russia while foreign capital had returned to its domestic markets, drawn to all asset types.
"Bank Indonesia will continue to monitor the risk of global financial market uncertainty, while stabilizing the rupiah in line with the currency's fundamental value and maintaining market mechanisms, backed by financial market deepening initiatives," BI said.
The rupiah strengthened slightly in response to today's rate hike and was trading at 14,597 to the dollar, down 7.0 percent this year.
Indonesia's economy has been accelerating in recent months on strong domestic demand and grew by an annual rate of 5.27 percent in the second quarter, up from 5.06 percent in the first quarter, and the fastest rate since the final quarter of 2013.
Although second quarter growth was faster than expected, it remains below the government's target of 5.4 percent and BI lowered its 2018 growth forecast to 5.0 - 5.4 percent from last month's forecast that growth would be in the lower end of 5.1 - 5.5 percent range.
For 2019 BI forecast growth would accelerate to 5.1 - 5.5 percent.
Indonesia's inflation rate is low and stable and rose to 3.18 percent in July from 3.12 percent in June as regulated prices eased.
BI confirmed it expects inflation to remain within its target corridor of 3.5 percent, plus/minus 1 percentage point, this year.
Monday, August 13, 2018
Uganda holds rate but sees rising inflation, strong growth
Uganda's central bank kept its benchmark Central Bank Rate (CBR) at 9.0 percent, saying a neutral monetary policy stance is warranted in order to keep inflation close to target and maintain sustainable economic growth.
The Bank of Uganda (BOU) forecast that core inflation will continue to rise and peak around 6 -7 percent in the second half of the current 2018/19 financial year before stabilizing around its medium-term target of 5 percent by the end of 2019.
The BOU, which has maintained its key rate since February this year, after a 2-year easing cycle, also cautioned about a rise in inflation in its June policy statement but attributed this to stemmed a recovery in food prices, the expected closure of the output gap and higher taxes.
Food prices, however, are no longer seen as a major risk to the inflation outlook and are projected to remain low though this can quickly change depending on weather conditions.
The BOU today said that higher oil prices and a depreciation of the shilling's exchange rate could result in higher inflation.
In July headline inflation rose to 3.1 percent from 2.2 percent while core inflation jumped to 2.5 percent from 0.8 percent on a combination of higher oil prices, shilling depreciation and a one-off rise in communications taxes, and fuel excise taxes
"A key risk to the inflation outlook is the shilling exchange rate which remains vulnerable to domestic market conditions and the possibility of tighter global financial conditions," BOU said.
The shilling fell from March to late June when BOU on June 27 sold U.S. dollar for the third time that month after the shilling hit a new all-time record low of around 3,900 to the dollar.
"The heightened depreciation pressures experienced during the last quarter of FY 2017/18 were in part driven by speculate activity in the foreign exchange market, which resulted in the exchange rate overshooting its long-run equilibrium," BOU said, adding its reserves remain adequate to maintain stability in the currency market.
The shilling recovered during July but fell 2.2 percent today to 3,749 following the BOU's decision and general dollar strength on heightened fears around Turkey. This year the shilling is down 3 percent against the dollar.
Uganda's economy is continuing to strengthen, BOU said, estimating Gross Domestic Product growth for 2017/18, which began July 1, of 5.8 percent compared with 3.9 percent in 2016/17.
In 2018/19 the economy is forecast to strengthen further to 6 percent and then average growth of about 6.3 percent in the medium term, supported by public infrastructure investments, improving agricultural productivity, a recovery in foreign direct investment and strengthening private sector credit growth due to past monetary policy easing.
BOU said weighted average lending rate fell to 17.7 percent in June from 25.2 percent in February 2016 when it began easing policy. Between April 2016 and February 2018 the BOU cut CBR by a total of 800 basis points.
www.CentralBankNews.info
The Bank of Uganda (BOU) forecast that core inflation will continue to rise and peak around 6 -7 percent in the second half of the current 2018/19 financial year before stabilizing around its medium-term target of 5 percent by the end of 2019.
The BOU, which has maintained its key rate since February this year, after a 2-year easing cycle, also cautioned about a rise in inflation in its June policy statement but attributed this to stemmed a recovery in food prices, the expected closure of the output gap and higher taxes.
Food prices, however, are no longer seen as a major risk to the inflation outlook and are projected to remain low though this can quickly change depending on weather conditions.
The BOU today said that higher oil prices and a depreciation of the shilling's exchange rate could result in higher inflation.
In July headline inflation rose to 3.1 percent from 2.2 percent while core inflation jumped to 2.5 percent from 0.8 percent on a combination of higher oil prices, shilling depreciation and a one-off rise in communications taxes, and fuel excise taxes
"A key risk to the inflation outlook is the shilling exchange rate which remains vulnerable to domestic market conditions and the possibility of tighter global financial conditions," BOU said.
The shilling fell from March to late June when BOU on June 27 sold U.S. dollar for the third time that month after the shilling hit a new all-time record low of around 3,900 to the dollar.
"The heightened depreciation pressures experienced during the last quarter of FY 2017/18 were in part driven by speculate activity in the foreign exchange market, which resulted in the exchange rate overshooting its long-run equilibrium," BOU said, adding its reserves remain adequate to maintain stability in the currency market.
The shilling recovered during July but fell 2.2 percent today to 3,749 following the BOU's decision and general dollar strength on heightened fears around Turkey. This year the shilling is down 3 percent against the dollar.
Uganda's economy is continuing to strengthen, BOU said, estimating Gross Domestic Product growth for 2017/18, which began July 1, of 5.8 percent compared with 3.9 percent in 2016/17.
In 2018/19 the economy is forecast to strengthen further to 6 percent and then average growth of about 6.3 percent in the medium term, supported by public infrastructure investments, improving agricultural productivity, a recovery in foreign direct investment and strengthening private sector credit growth due to past monetary policy easing.
BOU said weighted average lending rate fell to 17.7 percent in June from 25.2 percent in February 2016 when it began easing policy. Between April 2016 and February 2018 the BOU cut CBR by a total of 800 basis points.
www.CentralBankNews.info
Sunday, August 12, 2018
This week in monetary policy: Uganda, Armenia, Namibia, Norway, Indonesia and Egypt
This week - August 11 through August 18 - central banks from 6 countries or jurisdictions are scheduled to decide on monetary policy: Uganda, Armenia, Namibia, Norway, Indonesia and Egypt.
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, the rate one year ago, and the country’s MSCI classification.
The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.
| WEEK 33 | |||||
| AUG 12- AUG 18, 2018: | |||||
| COUNTRY | DATE | RATE | LATEST | YTD | 1 YR AGO |
| UGANDA | 13-Aug | 9.00% | 0 | -50 | 10.00% |
| ARMENIA | 14-Aug | 6.00% | 0 | 0 | 6.00% |
| NAMIBIA | 15-Aug | 6.75% | 0 | 0 | 6.75% |
| NORWAY | 16-Aug | 0.50% | 0 | 0 | 0.50% |
| INDONESIA | 16-Aug | 5.50% | 0 | 100 | 4.50% |
| EGYPT | 16-Aug | 16.75% | 0 | -200 | 18.75% |
Thursday, August 9, 2018
Philippines raises rate 50 bps, signals in may now pause
The central bank of the Philippines raised its monetary policy rate for the third month in a row to "rein in inflation expectations and prevent sustained supply-side price pressures from driving further second-round effects," but signaled that it may now pause in its tightening campaign.
Bangko Sentral Ng Pilipinas (BSP) raised its benchmark overnight reverse repurchase facility (RRP) rate by a sharp 50 basis points to 4.0 percent and has now raised it by a total of 100 points this year following increases in May and June as inflation continues to accelerate.
The rate hike was expected and follows the BSP's warning in its June policy statement that it was prepared to take further action and statements last month by its governor, Nestor Espenilla, that the central bank is considering strong action to curb inflation, which he said may first peak in the third quarter, and dampen volatility in the foreign exchange market.
BSP said the latest forecasts have shifted upward and show that inflation may also exceed the central bank's target in 2019. Up to now, BSP was confident that inflation would return to its target of 2 - 4 percent, around a 3.0 percent midpoint, next year.
"Upside risks also continue to dominate the inflation outlook, as the sustained increase in core inflation suggests broadening price pressures amid resilient aggregate demand conditions," BSP said, adding that inflation expectations remain elevated though still within the target for 2019.
Inflation in the Philippines rose for the seventh month in a row to 5.7 percent in June, the highest reading since March 2009, and the fifth month it has topped the BSP's upper inflation limit.
BSP has previously forecast that inflation would average 4.5 percent this year and then 3.3 percent in 2019.
But the central bank's monetary board also signaled that it may now pause in further rate hikes, saying its actions so far this year "will help reduce further risks to inflation," including those emanating from the normalization of monetary policy in advanced economies and its impact on currency markets and help bring inflation toward its target.
Although the Philippine economy slowed in the second quarter, BSP seemed confident that its tighter policy would not result in a economic slump.
"Favorable conditions arising from sustained domestic growth also suggests that the economy can accommodate a further tightening of monetary policy settings," BSP said.
The Gross Domestic Product of the Philippines slowed to quarterly growth of 1.3 percent in the second quarter of this year for annual growth of 6.0 percent, down from 6.6 percent in the first quarter.
After falling sharply between January and mid-July on broad-based U.S. dollar strength, the Philippine peso has staged a comeback in recent weeks and was trading around 53.0 to the dollar today, up from lows around 53.6 on July 19 but still down 5.7 percent since the start of this year.
Last month the International Monetary Fund raised its 2018 inflation forecast for the Philippines to 4.7 percent from an earlier 4.2 percent and said the BSP would have to consider further monetary tightening to douse inflation expectations.
The IMF also lowered its 2018 growth forecast to 6.7 percent from 6.8 percent.
Bangko Sentral Ng Pilipinas (BSP) raised its benchmark overnight reverse repurchase facility (RRP) rate by a sharp 50 basis points to 4.0 percent and has now raised it by a total of 100 points this year following increases in May and June as inflation continues to accelerate.
The rate hike was expected and follows the BSP's warning in its June policy statement that it was prepared to take further action and statements last month by its governor, Nestor Espenilla, that the central bank is considering strong action to curb inflation, which he said may first peak in the third quarter, and dampen volatility in the foreign exchange market.
BSP said the latest forecasts have shifted upward and show that inflation may also exceed the central bank's target in 2019. Up to now, BSP was confident that inflation would return to its target of 2 - 4 percent, around a 3.0 percent midpoint, next year.
"Upside risks also continue to dominate the inflation outlook, as the sustained increase in core inflation suggests broadening price pressures amid resilient aggregate demand conditions," BSP said, adding that inflation expectations remain elevated though still within the target for 2019.
Inflation in the Philippines rose for the seventh month in a row to 5.7 percent in June, the highest reading since March 2009, and the fifth month it has topped the BSP's upper inflation limit.
BSP has previously forecast that inflation would average 4.5 percent this year and then 3.3 percent in 2019.
But the central bank's monetary board also signaled that it may now pause in further rate hikes, saying its actions so far this year "will help reduce further risks to inflation," including those emanating from the normalization of monetary policy in advanced economies and its impact on currency markets and help bring inflation toward its target.
Although the Philippine economy slowed in the second quarter, BSP seemed confident that its tighter policy would not result in a economic slump.
"Favorable conditions arising from sustained domestic growth also suggests that the economy can accommodate a further tightening of monetary policy settings," BSP said.
The Gross Domestic Product of the Philippines slowed to quarterly growth of 1.3 percent in the second quarter of this year for annual growth of 6.0 percent, down from 6.6 percent in the first quarter.
After falling sharply between January and mid-July on broad-based U.S. dollar strength, the Philippine peso has staged a comeback in recent weeks and was trading around 53.0 to the dollar today, up from lows around 53.6 on July 19 but still down 5.7 percent since the start of this year.
Last month the International Monetary Fund raised its 2018 inflation forecast for the Philippines to 4.7 percent from an earlier 4.2 percent and said the BSP would have to consider further monetary tightening to douse inflation expectations.
The IMF also lowered its 2018 growth forecast to 6.7 percent from 6.8 percent.
Wednesday, August 8, 2018
New Zealand holds rate, pushes back rate hike to 2020
New Zealand's central bank left its benchmark Official Cash Rate (OCR) at 1.75 percent, as expected, and said it was expecting to maintain this rate through next year and into 2020, one year longer than projected in May, to maximize employment and maintain low and stable inflation.
But the Reserve Bank of New Zealand (RBNZ), which has kept its rate steady since cutting it in November 2016, also repeated that "the direction of our next OCR move could be up or down."
In his third statement since taking over as RBNZ governor in March, Adrian Orr's reference to employment and inflation reflects the central bank's new mandate that added employment to its previous mandate that only focused on inflation.
While most central banks purely focus on inflation, New Zealand this year joined the central banks of the United States, Australia and Norway in having twin mandates.
"We will keep the OCR at an expansionary level for a considerable time to contribute to maximizing sustainable employment, and maintaining low and stable inflation," Orr said.
While the RBNZ has often said it would keep monetary policy expansionary for a considerable time for many months, today it pushed back its expected date for the OCR to rise to 1.9 percent from 1.8 percent by 12 months to September 2020 from September 2019 that was projected in May.
In an update to its monetary policy statement, RBNZ sees OCR rising to 2.0 percent in December 2020, 2.1 percent by March 2021, 2.2 percent by June 2021 and 2.3 percent by September 2021.
While RBNZ lowered its growth forecast for this year slightly, Orr said there were now "welcome early signs of core inflation rising," with inflation increasing towards the central bank's 2 percent midpoint target as the economy's output tops capacity.
"This path may be bumpy however, with one-off price changes from global oil prices, a lower exchange rate, and and announces petrol excise tax rises expected," Orr said, adding the central bank would look through this volatility and only respond to persistent movements in inflation.
RNBZ expects inflation to hit its 2 percent target in March 2021 as compared with December 2020 in May.
In the second quarter of this year, New Zealand's inflation rate averaged 1.5 percent, up from 1.1 percent in the previous quarter.
But the Reserve Bank of New Zealand (RBNZ), which has kept its rate steady since cutting it in November 2016, also repeated that "the direction of our next OCR move could be up or down."
In his third statement since taking over as RBNZ governor in March, Adrian Orr's reference to employment and inflation reflects the central bank's new mandate that added employment to its previous mandate that only focused on inflation.
While most central banks purely focus on inflation, New Zealand this year joined the central banks of the United States, Australia and Norway in having twin mandates.
"We will keep the OCR at an expansionary level for a considerable time to contribute to maximizing sustainable employment, and maintaining low and stable inflation," Orr said.
While the RBNZ has often said it would keep monetary policy expansionary for a considerable time for many months, today it pushed back its expected date for the OCR to rise to 1.9 percent from 1.8 percent by 12 months to September 2020 from September 2019 that was projected in May.
In an update to its monetary policy statement, RBNZ sees OCR rising to 2.0 percent in December 2020, 2.1 percent by March 2021, 2.2 percent by June 2021 and 2.3 percent by September 2021.
While RBNZ lowered its growth forecast for this year slightly, Orr said there were now "welcome early signs of core inflation rising," with inflation increasing towards the central bank's 2 percent midpoint target as the economy's output tops capacity.
"This path may be bumpy however, with one-off price changes from global oil prices, a lower exchange rate, and and announces petrol excise tax rises expected," Orr said, adding the central bank would look through this volatility and only respond to persistent movements in inflation.
RNBZ expects inflation to hit its 2 percent target in March 2021 as compared with December 2020 in May.
In the second quarter of this year, New Zealand's inflation rate averaged 1.5 percent, up from 1.1 percent in the previous quarter.
Thailand holds rate as one MPC member votes to hike
Thailand's' central bank left its policy rate steady at 1.50 percent but for the third time this year one member of the monetary policy committee (MPC) voted to raise the rate.
The Bank of Thailand (BOT), which has maintained the rate since April 2015, reiterated that monetary policy should continue to remain accommodative and there was still a need to monitor the strength of domestic demand, inflation, financial stability, the impact of trade protection and the risk of lower-than-expected growth in the tourism sector.
But in general, "the Thai economy as a whole was projected to continue to gain further traction driven by both external and domestic factors," the MPC said.
The MPC's reference to lower-than-expected growth of the tourism sector is new compared to the previous policy statement from June and comes after more than 40 tourists, mostly Chinese, died in early July when a tour boat sank in a storm off the southern Thai resort island of Phuket.
In March this year one MPC member voted to raise the rate by 25 basis points, the first time there was dissent in the committee in almost three years. In May the vote was unanimous but in June one member again voted for a rate hike.
As in June, the dissenting MPC member argued that the economic expansion was sufficiently robust and prolonged monetary accommodation might induce households and businesses to underestimate potential changes in financial conditions.
A rate hike now would thus help curb financial stability and start building policy space.
However, the other 6 MPC members argued the current accommodative policy stance was conducive to economic growth and appropriate given the inflation target.
In addition, the outlook for economic growth was still subject to risks from U.S. foreign trade policies and retaliatory measures from trading partners.
Thailand's economy grew by an annual rate of 4.8 percent in the first quarter of this year and in June the International Monetary Fund forecast growth this year of 3.9 percent in 2018, unchanged from 2017, as investments are seen jumping 6.8 percent and consumption rising 3.7 percent.
Thailand is benefitting from strong growth in exports, tourism and rising domestic demand, with BOT expecting merchandise exports to rise more than earlier expected due as some industries have relocated their production.
The outlook for inflation is largely unchanged from previous assessments, with the annual average rate expected to be within BOT's target of 1 - 4 percent.
As most other currencies, the Thai baht has depreciated this year against the U.S. dollar and BOT said the movements in the baht was in line with most regional currencies.
"Looking ahead, the baht would likely remain volatile and thus the Committee would continue to closely monitor exchange rate developments as well as impacts on the economy," BOT said.
The baht was trading at 33.2 to the dollar, down 1.8 percent this year.
The Bank of Thailand (BOT), which has maintained the rate since April 2015, reiterated that monetary policy should continue to remain accommodative and there was still a need to monitor the strength of domestic demand, inflation, financial stability, the impact of trade protection and the risk of lower-than-expected growth in the tourism sector.
But in general, "the Thai economy as a whole was projected to continue to gain further traction driven by both external and domestic factors," the MPC said.
The MPC's reference to lower-than-expected growth of the tourism sector is new compared to the previous policy statement from June and comes after more than 40 tourists, mostly Chinese, died in early July when a tour boat sank in a storm off the southern Thai resort island of Phuket.
In March this year one MPC member voted to raise the rate by 25 basis points, the first time there was dissent in the committee in almost three years. In May the vote was unanimous but in June one member again voted for a rate hike.
As in June, the dissenting MPC member argued that the economic expansion was sufficiently robust and prolonged monetary accommodation might induce households and businesses to underestimate potential changes in financial conditions.
A rate hike now would thus help curb financial stability and start building policy space.
However, the other 6 MPC members argued the current accommodative policy stance was conducive to economic growth and appropriate given the inflation target.
In addition, the outlook for economic growth was still subject to risks from U.S. foreign trade policies and retaliatory measures from trading partners.
Thailand's economy grew by an annual rate of 4.8 percent in the first quarter of this year and in June the International Monetary Fund forecast growth this year of 3.9 percent in 2018, unchanged from 2017, as investments are seen jumping 6.8 percent and consumption rising 3.7 percent.
Thailand is benefitting from strong growth in exports, tourism and rising domestic demand, with BOT expecting merchandise exports to rise more than earlier expected due as some industries have relocated their production.
The outlook for inflation is largely unchanged from previous assessments, with the annual average rate expected to be within BOT's target of 1 - 4 percent.
As most other currencies, the Thai baht has depreciated this year against the U.S. dollar and BOT said the movements in the baht was in line with most regional currencies.
"Looking ahead, the baht would likely remain volatile and thus the Committee would continue to closely monitor exchange rate developments as well as impacts on the economy," BOT said.
The baht was trading at 33.2 to the dollar, down 1.8 percent this year.
Tuesday, August 7, 2018
Argentina's new Copom sets Leliq policy rate at 40 pct
Argentina's central bank kept its monetary policy stance steady and set the interest rate on 7-day liquidity paper, known as Leliq, as its new monetary policy rate at 40.0 percent, the same rate of its key rate since early May.
The Central Bank of the Argentine Republic (BCRA), which has raised its policy rates three times by 12.75 percentage points since April 27 in an effort to shore up the peso's exchange rate, also reiterated its guidance that it will maintain the contractionary bias of monetary policy until the trajectory of inflation and expected inflation is aligned with the 2019 target.
BCRA's board said the reason for maintaining the rate was that inflation in June had accelerated more than expected, mainly due to the temporary impact of peso depreciation in May and June. And while inflation is forecast to decelerate in July, this will be less than expected.
The baseline forecast is for core inflation to decline in August, September and October from a record in July while headline inflation is expected to show a smaller decline due to higher regulated prices in August and October.
Despite the expected decline in inflation in coming months from July, the central bank said it recognizes that a longer period of financial stability will be required to reduce the risk of a greater than expected transfer of the exchange rate to retail prices.
Argentina's national headline inflation rate rose to 29.5 percent in June from 26.3 percent in May while core inflation rose to 26.9 percent from 23.6 percent.
After falling sharply in late April through June, the peso has been steady this month and was trading at 27.39 to the U.S. dollar today, down 32 percent this year.
In June the International Monetary Fund and Argentina agreed on a 3-year, $50 billion support package that included new inflation targets for BCRA and a new central bank law that will strengthen its operational and financial autonomy.
The new targets are for inflation below 22 percent for the second quarter of 2019 and for inflation of 17 percent for 2019. For 2020 an inflation target of 13 percent has been set and for 2021 a target of 9 percent. By 2022 BCRA is targeting 5 percent inflation, its estimate of price stability.
In a separate statement, BCRA also said it had set up a new monetary policy committee, Copom, composed of Luis Caputo, central bank's president, Vice President Gustavo Canonero, Director Enrique Szewach, who is appointed by the central bank's board, and on an interim basis, Mauro Alessandro, head of strategy and monetary policy communications.
On a permanent basis, the fourth member of Copom will be the deputy general manager of economic research.
In the event of a tied vote, President Caputo's vote will be deciding. In mid-June Caputo, a former finance minister, took over as BCRA president from Federico Sturzenegger.
The primary purpose of Copom will be to set BCRA's policy rates and conditions to execute the bank's monetary policy, including lowering the rate on the declining number of 35-day Lebac securities which functioned as a policy rate until January 2017 when BCRA began using the 7-day interbank lending rate as its reference rate.
In January this year Leliq securities were introduced to give BCRA an additional tools to mob up short-term excess liquidity.
From now on Copom will meet on the second Tuesday of each month to discuss the monetary policy rate and issue its decision at 5 p.m. local. On the third Tuesday of each month Copom will meet to determine how much to cut the Lebac rate.
The first meeting of the new Copom is Sept. 11.
www.CentralBankNews.info
The Central Bank of the Argentine Republic (BCRA), which has raised its policy rates three times by 12.75 percentage points since April 27 in an effort to shore up the peso's exchange rate, also reiterated its guidance that it will maintain the contractionary bias of monetary policy until the trajectory of inflation and expected inflation is aligned with the 2019 target.
BCRA's board said the reason for maintaining the rate was that inflation in June had accelerated more than expected, mainly due to the temporary impact of peso depreciation in May and June. And while inflation is forecast to decelerate in July, this will be less than expected.
The baseline forecast is for core inflation to decline in August, September and October from a record in July while headline inflation is expected to show a smaller decline due to higher regulated prices in August and October.
Despite the expected decline in inflation in coming months from July, the central bank said it recognizes that a longer period of financial stability will be required to reduce the risk of a greater than expected transfer of the exchange rate to retail prices.
Argentina's national headline inflation rate rose to 29.5 percent in June from 26.3 percent in May while core inflation rose to 26.9 percent from 23.6 percent.
After falling sharply in late April through June, the peso has been steady this month and was trading at 27.39 to the U.S. dollar today, down 32 percent this year.
In June the International Monetary Fund and Argentina agreed on a 3-year, $50 billion support package that included new inflation targets for BCRA and a new central bank law that will strengthen its operational and financial autonomy.
The new targets are for inflation below 22 percent for the second quarter of 2019 and for inflation of 17 percent for 2019. For 2020 an inflation target of 13 percent has been set and for 2021 a target of 9 percent. By 2022 BCRA is targeting 5 percent inflation, its estimate of price stability.
In a separate statement, BCRA also said it had set up a new monetary policy committee, Copom, composed of Luis Caputo, central bank's president, Vice President Gustavo Canonero, Director Enrique Szewach, who is appointed by the central bank's board, and on an interim basis, Mauro Alessandro, head of strategy and monetary policy communications.
On a permanent basis, the fourth member of Copom will be the deputy general manager of economic research.
In the event of a tied vote, President Caputo's vote will be deciding. In mid-June Caputo, a former finance minister, took over as BCRA president from Federico Sturzenegger.
The primary purpose of Copom will be to set BCRA's policy rates and conditions to execute the bank's monetary policy, including lowering the rate on the declining number of 35-day Lebac securities which functioned as a policy rate until January 2017 when BCRA began using the 7-day interbank lending rate as its reference rate.
In January this year Leliq securities were introduced to give BCRA an additional tools to mob up short-term excess liquidity.
From now on Copom will meet on the second Tuesday of each month to discuss the monetary policy rate and issue its decision at 5 p.m. local. On the third Tuesday of each month Copom will meet to determine how much to cut the Lebac rate.
The first meeting of the new Copom is Sept. 11.
www.CentralBankNews.info
Monday, August 6, 2018
Romania maintains rate, sees inflation falling rest of year
Romania's central bank left its monetary policy rate steady for the second consecutive time, saying the latest inflation report confirms that inflation will decelerate in the third quarter and then fall in the final months of this year towards the upper bound to the target range.
The National Bank of Romania (NBR) added the August inflation report, which will be presented on Aug. 8, largely mirrors the projected path of inflation in the short term as outlined in the May inflation report. But over a longer term horizon, inflation has been revised slightly downwards.
The NBR has raised its rate three times this year by a total of 75 basis points as inflation accelerated but headline and core inflation has leveled off while economic growth is moderating.
Headline consumer inflation was steady in June and May at 5.4 percent as the rise in fuel, fruit and vegetable prices was offset by slower growth in tobacco prices and a slight fall in core inflation.
CORE2 inflation, which excludes administered prices, volatile prices, tobacco and alcohol, continued to decline to 2.9 percent in June form 2.99 percent in May, NBR said, attributing this to changes in some international food prices and a rise in the leu's exchange rate against the euro.
In its May inflation report, the central bank forecast headline inflation would ease to 3.6 percent in the fourth quarter of this year from 4.9 percent in the third quarter and 5.2 percent in the second quarter.
In 2019 inflation was seen ending the year at 3.0 percent, within the NBR's target range of 1.5 - 3.5 percent.
Romania's economy has slowed in the last two quarters, with annual growth easing to 4.0 percent in the first quarter from 6.7 percent in the fourth quarter as aggregated demand contracts, returning the economy's growth rate to that of its potential.
Recent date shows decelerating annual growth in industrial output in April-May from the first quarter of this year while there was a significant rise in the growth of new manufacturing orders.
The construction industry is continuing to decline on an annual basis due to lower residential building but the annual change in unit wage costs in the industrial sector climbed to 8.6 percent in May, up by 2.4 percentage points from April, NBR said.
The National Bank of Romania (NBR) added the August inflation report, which will be presented on Aug. 8, largely mirrors the projected path of inflation in the short term as outlined in the May inflation report. But over a longer term horizon, inflation has been revised slightly downwards.
The NBR has raised its rate three times this year by a total of 75 basis points as inflation accelerated but headline and core inflation has leveled off while economic growth is moderating.
Headline consumer inflation was steady in June and May at 5.4 percent as the rise in fuel, fruit and vegetable prices was offset by slower growth in tobacco prices and a slight fall in core inflation.
CORE2 inflation, which excludes administered prices, volatile prices, tobacco and alcohol, continued to decline to 2.9 percent in June form 2.99 percent in May, NBR said, attributing this to changes in some international food prices and a rise in the leu's exchange rate against the euro.
In its May inflation report, the central bank forecast headline inflation would ease to 3.6 percent in the fourth quarter of this year from 4.9 percent in the third quarter and 5.2 percent in the second quarter.
In 2019 inflation was seen ending the year at 3.0 percent, within the NBR's target range of 1.5 - 3.5 percent.
Romania's economy has slowed in the last two quarters, with annual growth easing to 4.0 percent in the first quarter from 6.7 percent in the fourth quarter as aggregated demand contracts, returning the economy's growth rate to that of its potential.
Recent date shows decelerating annual growth in industrial output in April-May from the first quarter of this year while there was a significant rise in the growth of new manufacturing orders.
The construction industry is continuing to decline on an annual basis due to lower residential building but the annual change in unit wage costs in the industrial sector climbed to 8.6 percent in May, up by 2.4 percentage points from April, NBR said.
Sunday, August 5, 2018
This week in monetary policy: Romania, Australia, Argentina, Thailand, New Zealand, Philippines, Serbia and Peru
This week - August 5 through August 11 - central banks from 8 countries or jurisdictions are scheduled to decide on monetary policy: Romania, Australia, Argentina, Thailand, New Zealand, Philippines, Serbia 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, the rate one year ago, and the country’s MSCI classification.
The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.
| WEEK 32 | |||||
| AUG 5- AUG 11, 2018: | |||||
| COUNTRY | DATE | RATE | LATEST | YTD | 1 YR AGO |
| ROMANIA | 6-Aug | 2.50% | 0 | 75 | 1.75% |
| AUSTRALIA | 7-Aug | 1.50% | 0 | 0 | 1.50% |
| ARGENTINA | 7-Aug | 40.00% | 0 | 1125 | 26.25% |
| THAILAND | 8-Aug | 1.50% | 0 | 0 | 1.50% |
| NEW ZEALAND | 9-Aug | 1.75% | 0 | 0 | 1.75% |
| PHILIPPINES | 9-Aug | 3.50% | 25 | 50 | 3.00% |
| SERBIA | 9-Aug | 3.00% | 0 | -50 | 4.00% |
| PERU | 9-Aug | 2.75% | 0 | -50 | 3.75% |
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