Last week was quiet on the monetary policy front as only two central
banks, the Dominican Republic and Uganda, took policy decisions. Both banks kept
interest rates unchanged.
The two central banks cut rates substantially last year and are now starting to see the positive economic
impact of those cuts while inflationary pressures remain low - a pattern that is likely to
become one of the main themes of 2013.
The Dominican Republic’s
central bank, which cut rates by 1.75 percentage points in 2012, expects growth
in 2013 to remain below potential but noted that private credit has been
expanding in response to lower rates and growth could top forecasts.
Uganda’s central bank, 2012's second highest rate cutter worldwide with total rate reductions of 11
percentage points, turned more optimistic since its November meeting and is now
looking ahead to economic recovery in the second half of this year. Citing the
lag in the monetary transmission, the bank expects commercial lending rates to
decline further, boosting private sector
credit and spending.
LAST WEEK’S
(WEEK 1) MONETARY POLICY DECISIONS:
| COUNTRY | MSCI | NEW RATE | OLD RATE | 1 YEAR AGO |
| DOMINICAN REP. | 5.00% | 5.00% | 6.75% | |
| UGANDA | 12.00% | 12.00% | 23.00% |
NEXT WEEK (Week 2) financial markets and central bankers return from their holiday break with nine policy meetings scheduled, including four in emerging market countries, two in frontier markets and two in developed markets.
All but the Bank of England is
starting the year with key interest rates lower than a year ago, but that is
only because the UK central bank has held rates at close to zero since March
2009 and has used quantitative easing to stimulate growth.
The other monetary policy
meetings scheduled next week include two of last year’s largest rate cutters,
Kenya and Mozambique. In addition, meetings are scheduled in Romania, Thailand,
Poland, Indonesia, the European Central Bank and South Korea.
| COUNTRY | MSCI | MEETING | RATE | 1 YEAR AGO |
| ROMANIA | FM | 7-Jan | 5.25% | 5.75% |
| THAILAND | EM | 9-Jan | 2.75% | 3.00% |
| POLAND | EM | 9-Jan | 4.25% | 4.75% |
| INDONESIA | EM | 10-Jan | 5.75% | 6.00% |
| UNITED KINGDOM | DM | 10-Jan | 0.50% | 0.50% |
| EURO AREA | DM | 10-Jan | 0.75% | 1.00% |
| KENYA | FM | 10-Jan | 11.00% | 18.00% |
| SOUTH KOREA | EM | 11-Jan | 2.75% | 3.25% |
| MOZAMBIQUE | 11-Jan | 9.50% | 15.00% |
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