The Central Bank of the Dominican Republic (BCRD) cut its monetary policy rate by 50 basis points to 5.25 percent as inflation is forecast to approach the lower limit of the bank's target range in the monetary policy horizon.
It is BCRD's first change in rates since a 25 basis point rate hike on April 2 when inflation was accelerating.
But since then, the international environment has changed, the central bank said, pointing to a moderation in oil prices and a more gradual process of normalization of U.S. monetary policy, with the Federal Reserve now expected to maintain an accommodative policy stance the rest of the year.
In addition, the International Monetary Fund (IMF) downgraded U.S. growth for 2017 and 2018, arguing there would be no fiscal stimulus in the short term.
Headline inflation in the Dominican Republic declined to 2.55 percent in June from 3.11 percent in May and below the central bank's target range of 4.0 percent, plus/minus 1 percentage point.
Underlying inflation in June was 2.18 percent, the BCRD added.
Preliminary data for the second quarter show that economic growth is "significantly below its potential," the central bank said, affected by a sharp slowdown in private investment and a significant reduction in public spending.
Total loans to the private sector are also growing slower due to lower demand for credit.
The central bank said it had also reduced its legal reserve ratio by 2.2 percentage point to help stimulate economic activity through credit and help economic growth and inflation.
Gross Domestic Product in the Dominican Republic grew by an annual rate of 5.2 percent in the first quarter of this year, down from 5.9 percent in the previous quarter.
www.CentralBankNews.info
Monday, July 31, 2017
Saturday, July 29, 2017
This week in monetary policy: Angola, Bulgaria, Dominican Rep., Australia, India, Albania, Sri Lanka, UK, Czech Rep., Ukraine & Romania
This week (July 30 through August 5) central banks from 11 countries or
jurisdictions are scheduled to decide on monetary policy: Angola, Bulgaria, Dominican Republic, Australia, India, Albania, Sri Lanka, United Kingdom, Czech Republic, Ukraine and Romania.
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 31 | ||||||
| JUL 30 - AUG 5, 2017: | ||||||
| COUNTRY | DATE | RATE | LATEST | YTD | 1 YR AGO | MSCI |
| ANGOLA | 31-Jul | 16.00% | 0 | 0 | 16.00% | |
| BULGARIA | 31-Jul | 0.00% | 0 | 0 | 0.00% | FM |
| DOMINICAN REP. | 31-Jul | 5.75% | 0 | 25 | 5.00% | |
| AUSTRALIA | 1-Aug | 1.50% | 0 | 0 | 1.50% | DM |
| INDIA | 2-Aug | 6.25% | 0 | 0 | 6.50% | EM |
| ALBANIA | 2-Aug | 1.25% | 0 | 0 | 1.25% | |
| SRI LANKA | 3-Aug | 7.25% | 0 | 25 | 7.00% | FM |
| UNITED KINGDOM | 3-Aug | 0.25% | 0 | 0 | 0.25% | DM |
| CZECH REPUBLIC | 3-Aug | 0.05% | 0 | 0 | 0.05% | EM |
| UKRAINE | 3-Aug | 12.50% | 0 | -150 | 15.50% | FM |
| ROMANIA | 4-Aug | 1.75% | 0 | 0 | 1.75% | FM |
Friday, July 28, 2017
Trinidad & Tobago holds rate as economy still sluggish
The Central bank of Trinidad and Tobago (DBTT) kept its benchmark repo rate at 4.75 percent, unchanged since December 2015, but expressed concern over a further narrowing of the differential between short-term domestic debt and that of the U.S. amid a recent scaling back of financial markets' expectations for further Federal Reserve rate hikes this year.
The central bank added inflation and credit growth in Trinidad and Tobago was very low, with both energy and non-energy data pointing to "continued sluggishness in the domestic economy."
The economy of the twin-island close to Venezuela has been shrinking for the last two years as oil and gas exports have slumped. In the third quarter of 2016 its Gross Domestic Product fell by 10.8 percent year-on-year, shrinking for the eight consecutive quarter.
Economic activity in the first quarter of 2017 remained subdued, the central bank said, with output from the oil and natural gas sector not yet recovering strongly.
However, exploratory activity is up, with higher rig days and depth drilling being reported, leading to expectations of higher output.
Inflation in the twin-island state has been contained since early 2016, with the annual rate falling to 1.7 percent in May from 1.8 percent in April
Trinidad's dollar (TTD) fell sharply last year and was also caught up in the overall drop in emerging market currencies following the election of Donald Trump as U.S. president.
This year TTD has continued to decline, though at a much slower pace, and was trading at 6.76 to the U.S. dollar today, down 1 percent this year.
The yield differential between TT and U.S. 10 three-month Treasury securities narrowed further to only 14 basis points by mid-July as a firmer U.S. economy and Fed rate hikes pushed up bond yields.
The current yield differential compares with a differential of 94 basis points in June 2016, 67 points in January 2017, 43 points in March and 29 points in mid-May.
In February the government issued an oversubscribed TTD1 billion US$1billion, 8-year, 4.10% bond, its second bond for fiscal 2016/17. The first TTD1billion bond was issued in December last year.
The central bank added inflation and credit growth in Trinidad and Tobago was very low, with both energy and non-energy data pointing to "continued sluggishness in the domestic economy."
The economy of the twin-island close to Venezuela has been shrinking for the last two years as oil and gas exports have slumped. In the third quarter of 2016 its Gross Domestic Product fell by 10.8 percent year-on-year, shrinking for the eight consecutive quarter.
Economic activity in the first quarter of 2017 remained subdued, the central bank said, with output from the oil and natural gas sector not yet recovering strongly.
However, exploratory activity is up, with higher rig days and depth drilling being reported, leading to expectations of higher output.
Inflation in the twin-island state has been contained since early 2016, with the annual rate falling to 1.7 percent in May from 1.8 percent in April
Trinidad's dollar (TTD) fell sharply last year and was also caught up in the overall drop in emerging market currencies following the election of Donald Trump as U.S. president.
This year TTD has continued to decline, though at a much slower pace, and was trading at 6.76 to the U.S. dollar today, down 1 percent this year.
The yield differential between TT and U.S. 10 three-month Treasury securities narrowed further to only 14 basis points by mid-July as a firmer U.S. economy and Fed rate hikes pushed up bond yields.
The current yield differential compares with a differential of 94 basis points in June 2016, 67 points in January 2017, 43 points in March and 29 points in mid-May.
In February the government issued an oversubscribed TTD1 billion US$1billion, 8-year, 4.10% bond, its second bond for fiscal 2016/17. The first TTD1billion bond was issued in December last year.
Russia maintains rate but still sees room for cuts in H2
Russia's central bank kept its key interest rate unchanged at 9.0 percent, as expected by many economists, but reiterated that it still sees room for cutting the rate in the second half of the year with the decision based on the risks to inflation.
But in contrast to its monetary policy statement from last month, the Bank of Russia expressed concern about the recent rise in inflation, saying the risks to inflation persist and the past decline in inflation expectations had come to a halt in response to higher fruit and vegetable prices.
"For inflation to become anchored close to the 4% target, a sustainable decline in inflation expectations is required," the central bank said.
Russia's central bank most recently cut its rate in June and at that point said inflation was now close to its 4.0 percent target and inflation expectations had kept declining.
But inflation picked up speed to 4.4 percent in June from 4.1 percent in May and the central bank again said it would conduct a "moderately tight monetary policy" for a long time to anchor inflation close to its target.
The Bank of Russia has cut its rate three times this year by a total of 100 basis points following cuts of 100 points in 2016 and 600 points in 2015 as it it gradually lowers the rate from 17 percent that was hit in December 2014.
While inflation rose more than expected in June, the central bank said the trend toward lower inflation was still in place and there were no risks to inflation from recovering consumer demand. The cost of fruit and vegetable should come down in coming months as the harvest comes in.
Although Russia's ruble weakened in June and July, the central bank said this had no "meaningful" implications for inflation and inflation expectations given its "substantial strengthening" earlier in the year.
In addition to the risk to inflation from fruit and vegetable prices, the central bank pointed to volatility in commodity and financial markets, including the exchange rate "amid elevated geopolitical risks" that may have negative implications for the exchange rate and thus inflation.
The U.S. Senate on Thursday approved new sanctions against Russia for meddling in the U.S. presidential election, forcing President Donald Trump to decide whether to toughen his stance against Russia or veto the bill in a move that would be seen as politically damaging.
After rising steadily since January 2016, the ruble has been weakening since early June but was still up 3 percent this year and trading at 59.5 to the U.S. dollar today.
After recession in 2015 and 2016 due to Western sanctions over Ukraine and the fall in crude oil prices, Russia's economy has been rebounding this year, with the central bank forecasting growth of 1.3 to 1.8 percent.
Industrial production is gaining momentum, the central bank said, adding that freight turnover was growing, construction had now recovered and household consumption was up along with higher investment and production.
But growth is also nearing the country's potential, the central bank cautioned, saying shortages of labor was already visible in some sectors and further economic growth over 1.5 to 2.0 percent a year is only attainable if structural reforms are carried out.
But in contrast to its monetary policy statement from last month, the Bank of Russia expressed concern about the recent rise in inflation, saying the risks to inflation persist and the past decline in inflation expectations had come to a halt in response to higher fruit and vegetable prices.
"For inflation to become anchored close to the 4% target, a sustainable decline in inflation expectations is required," the central bank said.
Russia's central bank most recently cut its rate in June and at that point said inflation was now close to its 4.0 percent target and inflation expectations had kept declining.
But inflation picked up speed to 4.4 percent in June from 4.1 percent in May and the central bank again said it would conduct a "moderately tight monetary policy" for a long time to anchor inflation close to its target.
The Bank of Russia has cut its rate three times this year by a total of 100 basis points following cuts of 100 points in 2016 and 600 points in 2015 as it it gradually lowers the rate from 17 percent that was hit in December 2014.
While inflation rose more than expected in June, the central bank said the trend toward lower inflation was still in place and there were no risks to inflation from recovering consumer demand. The cost of fruit and vegetable should come down in coming months as the harvest comes in.
Although Russia's ruble weakened in June and July, the central bank said this had no "meaningful" implications for inflation and inflation expectations given its "substantial strengthening" earlier in the year.
In addition to the risk to inflation from fruit and vegetable prices, the central bank pointed to volatility in commodity and financial markets, including the exchange rate "amid elevated geopolitical risks" that may have negative implications for the exchange rate and thus inflation.
The U.S. Senate on Thursday approved new sanctions against Russia for meddling in the U.S. presidential election, forcing President Donald Trump to decide whether to toughen his stance against Russia or veto the bill in a move that would be seen as politically damaging.
After rising steadily since January 2016, the ruble has been weakening since early June but was still up 3 percent this year and trading at 59.5 to the U.S. dollar today.
After recession in 2015 and 2016 due to Western sanctions over Ukraine and the fall in crude oil prices, Russia's economy has been rebounding this year, with the central bank forecasting growth of 1.3 to 1.8 percent.
Industrial production is gaining momentum, the central bank said, adding that freight turnover was growing, construction had now recovered and household consumption was up along with higher investment and production.
But growth is also nearing the country's potential, the central bank cautioned, saying shortages of labor was already visible in some sectors and further economic growth over 1.5 to 2.0 percent a year is only attainable if structural reforms are carried out.
Thursday, July 27, 2017
Colombia cuts rate 7th time but inflation now in target
Colombia's central bank cut its benchmark rate for the seventh time to counter economic weakness and the risk of a further economic slowdown from continued low oil prices.
The Central Bank of Colombia cut its key intervention rate by another 25 basis points to 5.50 percent, as expected, and has now cut it by 200 basis points this year and by 225 basis points since beginning on an easing cycle in December 2016.
One member of the bank's board of directors voted to keep the rate steady while the other six members voted in favor of the rate cut. As in previous months, the central bank said the current real interest rate was contractionary.
While the central bank has been trying to boost economic activity and reduce excess capacity in the economy by lowering rates, Colombia's inflation rate in June finally dropped into the central bank's target range for the first time since January 2015.
Headline inflation eased to 3.99 percent from 4.37 percent in May, within the central bank's target range of 2 -4 percent. Analysts' inflation expectations for December 2017 and 2018 also fell further to 4.28 percent and 3.52 percent, respectively.
In May the International Monetary Fund forecast end-2017 inflation of 4.1 percent compared with end-2016 inflation of 5.75 percent.
The fall in inflation has been helped by a slowdown in food prices and a relative stable exchange rate but the central bank cautioned that the decline in food prices may reverse in the second half of the year so inflation is forecast to increase slightly in the period.
Colombia's peso was trading around 3,012 to the U.S. dollar today, down 0.3 percent this year.
Colombia's economy shrank by 0.2 percent in the first quarter of this year from the previous quarter and the central bank said recent data suggested that output in the second quarter would be similar to the first quarter although domestic demand was "somewhat better" than three months ago.
On an annual basis, Colombia's Gross Domestic Product rose 1.1 percent in the first quarter of this year, down from 1.6 percent in the previous quarter.
The IMF has forecast 2.3 percent GDP growth this year, up from 2.0 percent in 2016.
The Central Bank of Colombia cut its key intervention rate by another 25 basis points to 5.50 percent, as expected, and has now cut it by 200 basis points this year and by 225 basis points since beginning on an easing cycle in December 2016.
One member of the bank's board of directors voted to keep the rate steady while the other six members voted in favor of the rate cut. As in previous months, the central bank said the current real interest rate was contractionary.
While the central bank has been trying to boost economic activity and reduce excess capacity in the economy by lowering rates, Colombia's inflation rate in June finally dropped into the central bank's target range for the first time since January 2015.
Headline inflation eased to 3.99 percent from 4.37 percent in May, within the central bank's target range of 2 -4 percent. Analysts' inflation expectations for December 2017 and 2018 also fell further to 4.28 percent and 3.52 percent, respectively.
In May the International Monetary Fund forecast end-2017 inflation of 4.1 percent compared with end-2016 inflation of 5.75 percent.
The fall in inflation has been helped by a slowdown in food prices and a relative stable exchange rate but the central bank cautioned that the decline in food prices may reverse in the second half of the year so inflation is forecast to increase slightly in the period.
Colombia's peso was trading around 3,012 to the U.S. dollar today, down 0.3 percent this year.
Colombia's economy shrank by 0.2 percent in the first quarter of this year from the previous quarter and the central bank said recent data suggested that output in the second quarter would be similar to the first quarter although domestic demand was "somewhat better" than three months ago.
On an annual basis, Colombia's Gross Domestic Product rose 1.1 percent in the first quarter of this year, down from 1.6 percent in the previous quarter.
The IMF has forecast 2.3 percent GDP growth this year, up from 2.0 percent in 2016.
Fiji maintains rate and accommodative policy stance
Fiji's central bank kept its Overnight Policy Rate (OPR) at 0.50 percent, unchanged since October 2011, and said a continuation of the accommodative monetary policy stance reflects no "significant impending risks" to the bank's dual mandates of inflation and foreign reserves.
Fiji's inflation rate fell to 2.0 percent in June from 2.5 percent in May and the Reserve Bank of Fiji (RBF) left its year-end projection at 3.0 percent.
As part of the government's 2017/18 budget, there will be an increase in duties on alcohol, cigarettes and tobacco that is likely to push up prices in coming months but the central bank said this would largely be offset by lower prices of a few other categories.
Fiji's foreign reserves rose to a record of $2.307 billion as of July 20 from $2.283 billion in June and are expected to rise further to $2.314 billion on July 28, the equivalent of 5.7 months of imports.
"Looking ahead, foreign reserves are expected to remain adequate until the end of the year," the central bank's acting governor, Ariff Ali, said in a statement.
The central bank also confirmed its 3.8 percent forecast for economic growth this year as strong performances by its tourism, electricity, construction and sugar sectors are compensating for weak outcomes in mining and timber.
In addition, the expansionary fiscal stance and incentives in the national budget "should augur well for growth in the near and medium terms," Ali added.
Fiji's economy was hit hard last year by Tropical Cyclone Winston - the worst ever cyclone in the Southern Hemisphere - with growth slowing to 2.0 percent from 3.6 percent in 2015.
Fiji's inflation rate fell to 2.0 percent in June from 2.5 percent in May and the Reserve Bank of Fiji (RBF) left its year-end projection at 3.0 percent.
As part of the government's 2017/18 budget, there will be an increase in duties on alcohol, cigarettes and tobacco that is likely to push up prices in coming months but the central bank said this would largely be offset by lower prices of a few other categories.
Fiji's foreign reserves rose to a record of $2.307 billion as of July 20 from $2.283 billion in June and are expected to rise further to $2.314 billion on July 28, the equivalent of 5.7 months of imports.
"Looking ahead, foreign reserves are expected to remain adequate until the end of the year," the central bank's acting governor, Ariff Ali, said in a statement.
The central bank also confirmed its 3.8 percent forecast for economic growth this year as strong performances by its tourism, electricity, construction and sugar sectors are compensating for weak outcomes in mining and timber.
In addition, the expansionary fiscal stance and incentives in the national budget "should augur well for growth in the near and medium terms," Ali added.
Fiji's economy was hit hard last year by Tropical Cyclone Winston - the worst ever cyclone in the Southern Hemisphere - with growth slowing to 2.0 percent from 3.6 percent in 2015.
Turkey keeps rate, confirms it will keep tight stance
Turkey's central bank kept its key short-term interest rates at their current level and confirmed its recent guidance that it will maintain will a tight monetary stance, and if necessary, tighten further if there is a risk of higher inflation.
While the Central Bank of the Republic of Turkey (CBRT) has maintained its key one-week repurchase rate since hiking it by 50 basis points in November 2016, it has been tightening its policy stance by other means, such as raising other key rates, the rate it pays on local lenders' U.S dollar reserves and required reserve ratios in a bid to boost the value of the lira and slow down inflation.
In April, for example, the CBRT raised its late liquidity lending rate for the third time this year. The rate, which is used by the central bank to provide a large portion of the funds that banks need, has been raised by 225 basis points so far this year.
The benchmark one-week repo rate is currently at 8.0 percent.
In today's policy statement, the CBRT reiterated its view from last month that economic activity was continuing to recover on improving domestic demand and exports were developing in a positive manner due to exports to the European Union.
And while food prices and other improvements to cost factors should help lower inflation, the current rate of inflation still poses a risk to prices so the tight monetary policy stance will be kept.
Turkey's inflation rate eased to 10.9 percent in June from 11.72 percent in May.
In its latest quarterly inflation report from April the central bank raised its 2017 inflation forecast to 8.50 percent from 8.0 percent forecast in January.
By the end of 2018, inflation is seen falling to 6.4 percent, up from 6.8 percent previously seen, before stabilizing around the central bank's 5.0 percent target in the medium term.
The central bank's third inflation report will be published Aug. 1.
After falling sharply in the last two months of 2016, Turkey's lira has been firming in recent months after hitting a historic low of 3.87 to the U.S. dollar in late January, helped by the central bank's various tightening measures.
Today the lira was trading at 3.53 to the dollar, unchanged since the start of this year.
While the Central Bank of the Republic of Turkey (CBRT) has maintained its key one-week repurchase rate since hiking it by 50 basis points in November 2016, it has been tightening its policy stance by other means, such as raising other key rates, the rate it pays on local lenders' U.S dollar reserves and required reserve ratios in a bid to boost the value of the lira and slow down inflation.
In April, for example, the CBRT raised its late liquidity lending rate for the third time this year. The rate, which is used by the central bank to provide a large portion of the funds that banks need, has been raised by 225 basis points so far this year.
The benchmark one-week repo rate is currently at 8.0 percent.
In today's policy statement, the CBRT reiterated its view from last month that economic activity was continuing to recover on improving domestic demand and exports were developing in a positive manner due to exports to the European Union.
And while food prices and other improvements to cost factors should help lower inflation, the current rate of inflation still poses a risk to prices so the tight monetary policy stance will be kept.
Turkey's inflation rate eased to 10.9 percent in June from 11.72 percent in May.
In its latest quarterly inflation report from April the central bank raised its 2017 inflation forecast to 8.50 percent from 8.0 percent forecast in January.
By the end of 2018, inflation is seen falling to 6.4 percent, up from 6.8 percent previously seen, before stabilizing around the central bank's 5.0 percent target in the medium term.
The central bank's third inflation report will be published Aug. 1.
After falling sharply in the last two months of 2016, Turkey's lira has been firming in recent months after hitting a historic low of 3.87 to the U.S. dollar in late January, helped by the central bank's various tightening measures.
Today the lira was trading at 3.53 to the dollar, unchanged since the start of this year.
Wednesday, July 26, 2017
Brazil cuts rate 100 bps again, lowers inflation forecast
Brazil's central bank cut its benchmark Selic rate by 100 basis points for the third time in a row and said a continuation of this pace of monetary easing in September would depend on how economic activity evolves, the balance of risks as well as inflation and inflation forecasts.
The Central Bank of Brazil has now cut its policy rate by 500 basis points since beginning its easing campaign in October 2016 and by 450 basis points this year. The rate now stands at 9.25 percent.
Copom, the central bank's monetary committee, was unanimous in its decision and lowered its assumption for the Selic policy rate to end this year at 8.0 percent from the May forecast of 8.50 percent. As in May, Copom expects the Selic rate to remain at that level until the end of 2018.
"Inflation developments remain favorable," the central bank said, adding disinflation is widespread and so far the short-run effects of uncertainty surrounding government reforms was neither inflationary, nor disinflationary.
Today's one percentage point cut in the Selic rate comes after the central bank at its previous meeting in May said a smaller cut was likely appropriate in July.
But Copom said economic conditions were continuing to allow for the same pace of easing as in May and April despite an increase in uncertainty as far as economic reforms.
Copom's 2017 inflation forecast based on its weekly Focus survey dropped to 3.6 percent from May's forecast of 4.0 percent. For 2018 Copom forecast inflation of 4.3 percent as inflation expectations dropped to 3.3 percent this year and 4.2 percent next year.
Brazil's inflation rate dropped to 3.0 percent in June from 3.6 percent in May for the lowest rate since April 2007 and at the lower boundary of its inflation target of 4.5 percent, plus/minus 1.5 percentage points.
Brazil's real has been trending firmer this year after depreciating steadily the previous six years.
The real was trading at 3.14 to the U.S. dollar today, up 3.8 percent this year.
The Central Bank of Brazil has now cut its policy rate by 500 basis points since beginning its easing campaign in October 2016 and by 450 basis points this year. The rate now stands at 9.25 percent.
Copom, the central bank's monetary committee, was unanimous in its decision and lowered its assumption for the Selic policy rate to end this year at 8.0 percent from the May forecast of 8.50 percent. As in May, Copom expects the Selic rate to remain at that level until the end of 2018.
"Inflation developments remain favorable," the central bank said, adding disinflation is widespread and so far the short-run effects of uncertainty surrounding government reforms was neither inflationary, nor disinflationary.
Today's one percentage point cut in the Selic rate comes after the central bank at its previous meeting in May said a smaller cut was likely appropriate in July.
But Copom said economic conditions were continuing to allow for the same pace of easing as in May and April despite an increase in uncertainty as far as economic reforms.
Copom's 2017 inflation forecast based on its weekly Focus survey dropped to 3.6 percent from May's forecast of 4.0 percent. For 2018 Copom forecast inflation of 4.3 percent as inflation expectations dropped to 3.3 percent this year and 4.2 percent next year.
Brazil's inflation rate dropped to 3.0 percent in June from 3.6 percent in May for the lowest rate since April 2007 and at the lower boundary of its inflation target of 4.5 percent, plus/minus 1.5 percentage points.
Brazil's real has been trending firmer this year after depreciating steadily the previous six years.
The real was trading at 3.14 to the U.S. dollar today, up 3.8 percent this year.
US Fed maintains rate to ensure return to 2% inflation
The U.S. Federal Reserve kept its benchmark federal funds rate at 1 - 1.25 percent and reiterated that its monetary policy stance remains accommodative to support a further strengthening of the labor market and thus a sustained return to 2 percent inflation.
The Fed, which has raised its rate twice this year by a total of 50 basis points, largely repeated its view from June that the labor market had continued to strengthen while economic activity was rising "moderately" so far this year, with solid job gains and declining unemployment.
However, inflation, both headline and excluding food and energy, remains below the Fed's 2.0 percent objective.
The only real change to its statement from June concerns the Fed's plan for reducing its massive balance sheet. The Fed's balance sheet has risen to some $4.5 trillion since the global financial crises due to its purchases of U.S. Treasuries and housing-related debt to help hold down long-term interest rates and aid economic recovery.
In today's statement, the Federal Open Market Committee (FOMC) - the Fed's policy-making arm - said it was maintaining its policy of reinvesting principal payments from its holdings of securities "for the time being," a slight change to its previous statement when it said that it was "maintaining its existing policy."
Importantly, however, the Fed added it "expects to begin implementing its balance sheet normalization program relatively soon, provided that the economy evolves broadly as anticipated," a change from last month when it said that it would begin the process of normalizing its balance sheet "this year."
Last month the FOMC outlined its plan for slowly reducing reinvestments from principal payments from its securities and said today that it would follow those plans.
The Fed also reiterated that the risks to its economic outlook were roughly balanced and it was monitoring inflation closely.
While the U.S. unemployment rate declined to 4.4 percent in June - a level that is largely seen as around full employment - headline inflation remains low and fell for the fourth month in a row to 1.6 percent in June, the lowest since October last year and further away from the Fed's objective due to lower gasoline prices.
The Fed, which has raised its rate twice this year by a total of 50 basis points, largely repeated its view from June that the labor market had continued to strengthen while economic activity was rising "moderately" so far this year, with solid job gains and declining unemployment.
However, inflation, both headline and excluding food and energy, remains below the Fed's 2.0 percent objective.
The only real change to its statement from June concerns the Fed's plan for reducing its massive balance sheet. The Fed's balance sheet has risen to some $4.5 trillion since the global financial crises due to its purchases of U.S. Treasuries and housing-related debt to help hold down long-term interest rates and aid economic recovery.
In today's statement, the Federal Open Market Committee (FOMC) - the Fed's policy-making arm - said it was maintaining its policy of reinvesting principal payments from its holdings of securities "for the time being," a slight change to its previous statement when it said that it was "maintaining its existing policy."
Importantly, however, the Fed added it "expects to begin implementing its balance sheet normalization program relatively soon, provided that the economy evolves broadly as anticipated," a change from last month when it said that it would begin the process of normalizing its balance sheet "this year."
Last month the FOMC outlined its plan for slowly reducing reinvestments from principal payments from its securities and said today that it would follow those plans.
The Fed also reiterated that the risks to its economic outlook were roughly balanced and it was monitoring inflation closely.
While the U.S. unemployment rate declined to 4.4 percent in June - a level that is largely seen as around full employment - headline inflation remains low and fell for the fourth month in a row to 1.6 percent in June, the lowest since October last year and further away from the Fed's objective due to lower gasoline prices.
Meanwhile, the
U.S. economy grew 2.1 percent year-on-year in the first quarter of this year,
up from 2.0 percent in the previous quarter and the third consecutive quarter
of accelerating growth.
The
U.S. dollar has been trending lower all year against the euro in light of
improving growth prospects in Europe along with stronger global growth that is
encouraging U.S. investors to move out of the dollar and into foreign
currencies.
The
dollar was trading at 1.16 to the euro today, down 9.5 percent this year.
The members of the FOMC were unanimous in today's decision, as in February and May, when it maintained its rate. In March and June, when the fed funds rate was raised, Minneapolis Fed President Neel Kashkari dissented and voted to keep the rate steady.
Georgia holds rate, confirms rate to fall to neutral level
Georgia's central bank kept its benchmark refinancing rate unchanged at 7.0 percent for the second month in a row, reiterating it saw no need to tighten policy and "the policy rate is expected to decrease to its neutral level" as inflation is expected to decline in the second half of the year.
In May the National Bank of Georgia (NBG) raised its rate for the second time this year - for total hikes of 50 basis points - but said then and in June that further rate increases were not expected as inflation was expected to decline to its target level in 2018 as temporary factors die out.
Georgia's inflation rate rose to a 2017-high of 7.1 percent in June from 6.6 percent in May, in line with the central bank's forecast, with the increase in tobacco products and fuel contributing to 2.6 percentage points of the inflation rate.
Inflation is expected to decline in second half of this year but still remain above the NBG's target before meeting the target next year.
This year NBG targets inflation of 4.0 percent, down from its 2016 target of 5.0 percent. For 2018 the NBG will lower the target further to 3.0 percent, the rate it considers the long-run rate.
Georgia's economy performed better than expected in the first half of this year, helped by exports, tourism and remittances from abroad. However, domestic demand and overall economic activity are still below potential and is therefore not creating any demand side pressure on inflation, NBG said.
Georgia's economy grew by an annual rate of 5.1 percent in the first quarter of this year, up from 2.8 percent in the previous quarter and 3.3 percent in the year ago quarter.
The exchange rate of Georgia's lari has been firming steadily since mid-December 2016 and was trading around 2.4 to the U.S. dollar, up almost 11 percent this year.
In May the National Bank of Georgia (NBG) raised its rate for the second time this year - for total hikes of 50 basis points - but said then and in June that further rate increases were not expected as inflation was expected to decline to its target level in 2018 as temporary factors die out.
Georgia's inflation rate rose to a 2017-high of 7.1 percent in June from 6.6 percent in May, in line with the central bank's forecast, with the increase in tobacco products and fuel contributing to 2.6 percentage points of the inflation rate.
Inflation is expected to decline in second half of this year but still remain above the NBG's target before meeting the target next year.
This year NBG targets inflation of 4.0 percent, down from its 2016 target of 5.0 percent. For 2018 the NBG will lower the target further to 3.0 percent, the rate it considers the long-run rate.
Georgia's economy performed better than expected in the first half of this year, helped by exports, tourism and remittances from abroad. However, domestic demand and overall economic activity are still below potential and is therefore not creating any demand side pressure on inflation, NBG said.
Georgia's economy grew by an annual rate of 5.1 percent in the first quarter of this year, up from 2.8 percent in the previous quarter and 3.3 percent in the year ago quarter.
The exchange rate of Georgia's lari has been firming steadily since mid-December 2016 and was trading around 2.4 to the U.S. dollar, up almost 11 percent this year.
Tuesday, July 25, 2017
Nigeria maintains rate to safeguard FX market stability
Nigeria's central bank kept its monetary policy rate (MPR) at 14.0 percent "to safeguard the stability achieved in the foreign exchange market, and to allow time for past policies to work through the economy."
The Central Bank of Nigeria (CBN), which has maintained its rate since raising it by 200 basis points in July 2016, said its monetary policy committee was faced with the choice of either keeping the rate steady or easing its policy based on a fragile economic recovery that could "relapse int a more protracted recession if strong and bold monetary and fiscal policies are not activated immediately to sustain it."
However, the central bank also noted the implications of continued U.S. monetary policy normalization and a strong U.S. dollar, a weak recovery of commodity prices and the uncertainty of U.S. fiscal policy.
Six of the committee's members in attendance voted to maintain the MPR rate, along with other key rates, while two members wanted to cut the rate, arguing this would signal a sensitivity to growth and employment concerns by encouraging the flow of credit and reduce the cost of debt service, which is crowding out government expenditure.
The MPC said it was not "unmindful" of the high cost of capital and its implications for the "still ailing economy, which arguably necessitates and accommodating monetary policy stance."
But it added the risks from an easing would upstage the "modest stability" achieved in the foreign exchange market, lead to a possible exit of foreign portfolio investors, reignite inflation following the 2017 budget and further pull down real interest rates into negative territory.
Nigeria's inflation rate eased to 16.1 percent in June, the fifth consecutive month of decline from 18.72 percent in January, partly due to the relative stability in the foreign exchange market from the central bank's improved management that has promoted increased inflows.
But CBN said inflation still has a strong base effect that is expected to wane by August and remains concerned about the "unabating pressure from food inflation" though it is hopeful that this would dampen in the third quarter as harvests are brought in.
It is noted the impact of high energy and transportation costs as well as other infrastructural constraints on consumer prices and expressed hope the government would fast-track reforms.
Nigeria has been suffering from a shortage of U.S. dollars since the fall in crude oil prices in 2014 and has only recently been easing some of the restrictions and capital controls that were imposed in 2015 to shore up the naira's exchange rate.
The central bank operates a series of exchange rates in addition to the official rate, which has been largely unchanged around 315 to the U.S. dollar since August 2016. In June 2016 the CBN removed a 197 naira peg to the dollar, which then led to a 30 percent drop in its value.
In recent months the CBN has been pumping dollars into the market to narrow the spread between the official naira rate and black market rates along with other regulatory steps. Last month, for example, the CBN introduced a new spread limit on interbank transactions and allowed traders to buy hard currency from each other without its prior approval.
"Against this backdrop, the Committee reiterated its commitment to sustain and deepen flexibility in the foreign exchange market to further enhance foreign exchange flow in the economy," it said.
In June total foreign exchange flows through the central bank rose by 35.41 percent from May while outflows fell by 12.73 percent due to reduced interventions so positive net flows helped improve gross external reserves to US$30.3 billion end-June from $29.81 billion end May.
The Central Bank of Nigeria (CBN), which has maintained its rate since raising it by 200 basis points in July 2016, said its monetary policy committee was faced with the choice of either keeping the rate steady or easing its policy based on a fragile economic recovery that could "relapse int a more protracted recession if strong and bold monetary and fiscal policies are not activated immediately to sustain it."
However, the central bank also noted the implications of continued U.S. monetary policy normalization and a strong U.S. dollar, a weak recovery of commodity prices and the uncertainty of U.S. fiscal policy.
Six of the committee's members in attendance voted to maintain the MPR rate, along with other key rates, while two members wanted to cut the rate, arguing this would signal a sensitivity to growth and employment concerns by encouraging the flow of credit and reduce the cost of debt service, which is crowding out government expenditure.
The MPC said it was not "unmindful" of the high cost of capital and its implications for the "still ailing economy, which arguably necessitates and accommodating monetary policy stance."
But it added the risks from an easing would upstage the "modest stability" achieved in the foreign exchange market, lead to a possible exit of foreign portfolio investors, reignite inflation following the 2017 budget and further pull down real interest rates into negative territory.
Nigeria's inflation rate eased to 16.1 percent in June, the fifth consecutive month of decline from 18.72 percent in January, partly due to the relative stability in the foreign exchange market from the central bank's improved management that has promoted increased inflows.
But CBN said inflation still has a strong base effect that is expected to wane by August and remains concerned about the "unabating pressure from food inflation" though it is hopeful that this would dampen in the third quarter as harvests are brought in.
It is noted the impact of high energy and transportation costs as well as other infrastructural constraints on consumer prices and expressed hope the government would fast-track reforms.
Nigeria has been suffering from a shortage of U.S. dollars since the fall in crude oil prices in 2014 and has only recently been easing some of the restrictions and capital controls that were imposed in 2015 to shore up the naira's exchange rate.
The central bank operates a series of exchange rates in addition to the official rate, which has been largely unchanged around 315 to the U.S. dollar since August 2016. In June 2016 the CBN removed a 197 naira peg to the dollar, which then led to a 30 percent drop in its value.
In recent months the CBN has been pumping dollars into the market to narrow the spread between the official naira rate and black market rates along with other regulatory steps. Last month, for example, the CBN introduced a new spread limit on interbank transactions and allowed traders to buy hard currency from each other without its prior approval.
"Against this backdrop, the Committee reiterated its commitment to sustain and deepen flexibility in the foreign exchange market to further enhance foreign exchange flow in the economy," it said.
In June total foreign exchange flows through the central bank rose by 35.41 percent from May while outflows fell by 12.73 percent due to reduced interventions so positive net flows helped improve gross external reserves to US$30.3 billion end-June from $29.81 billion end May.
Monday, July 24, 2017
Ghana cuts rate another 150 bps as disinflation continues
Ghana's central bank cut its monetary policy rate by a further 150 basis points to 21.0 percent, saying the trend of disinflation is likely to continue until the end of the third quarter and expected stability in the exchange rate should help ensure price stability.
The Bank of Ghana (BOG) has now cut its key interest rate three times this year by a total of 450 basis points this year and by 500 points since November 2016 when it began its easing cycle.
"In the outlook, expectations are for the observed decline in headline inflation to continue and converge towards the medium-term target in 2018," the BOG said, confirming its view from May.
The BOG targets inflation of 8 percent, plus/minus 2 percentage points.
Ghana's headline inflation rate declined to 12.1 percent in June from 12.6 percent in May, continuing to decline from a record high of 19.2 percent in March last year due to tight monetary policy, relative stability in the exchange rate of the cedi and with favorable base effects.
Core inflation, which excludes energy and utilities, has also been trending downwards to 12.8 percent in June from 13.7 percent in April and 13.3 percent in May.
"These trends in headline, core and inflation expectations suggest dampening underlying inflation pressures," the BOG said.
After appreciating in March and April due to the issue of a US$1 billion bond and the BOG's first quarter auction of $120 million, the cedi has depreciated since early May and was trading at 4.38 to the U.S. dollar today, down 2.3 percent this year.
"Foreign exchange market conditions remain stable supported by improved liquidity conditions, the trade surplus and increased reserves," the central bank said, adding gross international reserves rose to US$5.9 billion at the end of June, up from $4.9 billion end-December 2016.
Helped by a rebound in crude oil production, economic activity has been improving and is expected to remain in line with the trends seen in the first half of the year, with bank's Composite Index of Economic Activity (CIEA) suggesting "some pickup in economic activity in the first five months of 2017," driven by exports, construction and credit to the private sector.
Ghana's Gross Domestic Product grew by an annual rate of 6.6 percent in the first quarter of this year, up from 4.1 percent in the previous quarter and 4.4 percent in the first 2016 quarter.
But stronger growth was largely driven by the oil sector while the non-oil sector grew by 3.9 percent in the first quarter, down form 6.3 percent in the same period last year, reflecting low activity in the services sector.
The Bank of Ghana (BOG) has now cut its key interest rate three times this year by a total of 450 basis points this year and by 500 points since November 2016 when it began its easing cycle.
"In the outlook, expectations are for the observed decline in headline inflation to continue and converge towards the medium-term target in 2018," the BOG said, confirming its view from May.
The BOG targets inflation of 8 percent, plus/minus 2 percentage points.
Ghana's headline inflation rate declined to 12.1 percent in June from 12.6 percent in May, continuing to decline from a record high of 19.2 percent in March last year due to tight monetary policy, relative stability in the exchange rate of the cedi and with favorable base effects.
Core inflation, which excludes energy and utilities, has also been trending downwards to 12.8 percent in June from 13.7 percent in April and 13.3 percent in May.
"These trends in headline, core and inflation expectations suggest dampening underlying inflation pressures," the BOG said.
After appreciating in March and April due to the issue of a US$1 billion bond and the BOG's first quarter auction of $120 million, the cedi has depreciated since early May and was trading at 4.38 to the U.S. dollar today, down 2.3 percent this year.
"Foreign exchange market conditions remain stable supported by improved liquidity conditions, the trade surplus and increased reserves," the central bank said, adding gross international reserves rose to US$5.9 billion at the end of June, up from $4.9 billion end-December 2016.
Helped by a rebound in crude oil production, economic activity has been improving and is expected to remain in line with the trends seen in the first half of the year, with bank's Composite Index of Economic Activity (CIEA) suggesting "some pickup in economic activity in the first five months of 2017," driven by exports, construction and credit to the private sector.
Ghana's Gross Domestic Product grew by an annual rate of 6.6 percent in the first quarter of this year, up from 4.1 percent in the previous quarter and 4.4 percent in the first 2016 quarter.
But stronger growth was largely driven by the oil sector while the non-oil sector grew by 3.9 percent in the first quarter, down form 6.3 percent in the same period last year, reflecting low activity in the services sector.
Sunday, July 23, 2017
This week in monetary policy: Ghana, Nigeria, Argentina, Georgia, Moldova, USA, Brazil, Turkey, Fiji, Colombia, Russia and Trinidad & Tobago
This week (July 23 through July 29) central banks from 12 countries or
jurisdictions are scheduled to decide on monetary policy: Ghana, Nigeria, Argentina, Georgia, Moldova, United States, Brazil, Turkey, Fiji, Colombia, Russia, and Trinidad and Tobago.
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 30 | ||||||
| JUL 23 - JUL 29, 2017: | ||||||
| COUNTRY | DATE | RATE | LATEST | YTD | 1 YR AGO | MSCI |
| GHANA | 24-Jul | 22.50% | -100 | -300 | 26.00% | FM |
| NIGERIA | 25-Jul | 14.00% | 0 | 0 | 14.00% | FM |
| ARGENTINA | 25-Jul | 26.25% | 0 | 150 | 30.25% | FM |
| GEORGIA | 26-Jul | 7.00% | 0 | 50 | 6.75% | |
| MOLDOVA | 26-Jul | 8.00% | -100 | -100 | 10.00% | |
| UNITED STATES | 26-Jul | 1.25% | 25 | 50 | 0.50% | DM |
| BRAZIL | 26-Jul | 10.25% | -100 | -350 | 14.25% | EM |
| TURKEY | 27-Jul | 8.00% | 0 | 0 | 7.50% | EM |
| FIJI | 27-Jul | 0.50% | 0 | 0 | 0.50% | |
| COLOMBIA | 27-Jul | 5.75% | -50 | -175 | 7.75% | EM |
| RUSSIA | 28-Jul | 9.00% | -25 | -100 | 10.50% | EM |
| TRINIDAD & TOBAGO | 28-Jul | 4.75% | 0 | 0 | 4.75% | |
Subscribe to:
Posts (Atom)