Monetary policy: Week in review (March 24, 2012)

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The article below comes courtesy of Central Bank News, an authoritative source on monetary policy developments.

The past week in monetary policy saw 8 central banks announcing monetary policy decisions.  Of those that changed interest rate levels, Mauritius cut its rate -50bps to 4.90%, and Ukraine cut -25bps to 7.50%, while Iceland increased +25bps to 5.00%.  Those that held interest rates unchanged were: Nigeria 12.00%, Egypt 9.25%, Thailand 3.00%, Taiwan 1.875%, and Colombia 5.25%.  On the required reserves front, Egypt cut its banks required reserve ratio by 200 basis points, Ukraine also eased reserve requirements, and the People’s Bank of China selectively eased reserve requirements for 396 branches of the Agricultural Bank of China.

Looking at the central bank calendar, the week ahead sees the central banks of Israel, Hungary, Turkey, and South Africa meeting to review monetary policy settings. The base case would be for no change among all of these emerging market central banks. Elsewhere next week features speeches from Fed Chairman Ben Bernanke, ECB president Mario Draghi, Bank of Canada Governor, Mark Carney, and the Bank of England puts out its quarterly bulletin.

Mar-26ILSIsraelBank of Israel
Mar-27HUFHungaryThe Magyar Nemzeti Bank
Mar-27TRYTurkeyCentral Bank of Turkey
Mar-29ZARSouth AfricaSouth African Reserve Bank

Source: Central Bank News, March 23, 2012.

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Monetary policy: Week in review (Feb 18, 2012)

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The article below comes courtesy of Central Bank News, an authoritative source on monetary policy developments.

The past week in monetary policy saw 3 monetary policy interest rate changes; Kazakhstan -50bps to 7.00%, Sweden -25bps to 1.50%, and Ghana +100bps to 13.50%.  Meanwhile the central banks of Pakistan 12.00%, Japan 0.10%, Chile 5.00%, and Georgia 6.50% all held interest rates unchanged.  The other key headline was the Bank of Japan expanding its quantitative easing program by another 10 trillion Yen to 65 trillion. The Reserve Bank of India also made a technical adjustment to one of its old policy rates.

Following are some of the key quotes and comments from the central bankers that met to review monetary policy settings over the past week:

  • Bank of Japan (held rate at 0.10%, added to 10T to APP):  “Japan’s economic activity has been more or less flat, mainly due to the effects of a slowdown in overseas economies and the appreciation of the yen.  On the other hand, financial  conditions in Japan have continued to ease.  On the price front, the year-on-year rate of  change in the CPI (all items less fresh food) is around 0 percent.”
  • Sweden’s Riksbank (cut rate -25bps to 1.50%):  “Inflationary pressures in the Swedish economy are low. The economic outlook in Sweden has weakened as a result of developments abroad. In order to stabilise inflation around 2 per cent and resource utilisation in the economy around a normal level, the Executive Board of the Riksbank has decided to cut the repo rate by 0.25 percentage points to 1.50 per cent. The repo rate is expected to remain at this level until some time in 2013.”
  • Bank of Ghana (hiked rate 100bps to 13.50%):  “The Committee concluded that the balance of risks to inflation is elevated. To contain future inflation pressures and realign interest rates in favour of domestic assets, it is necessary that monetary policy continues to be fine tuned to ensure that inflation expectations remain anchored to keep inflation within the target band.”
  • Banco Central de Chile (held rate at 5.00%):  “Domestically, economic activity and domestic demand have tended to outperform forecasts from the latest Monetary Policy Report. The labor market is still tight. Credit market conditions are stable. Y‐o‐y CPI inflation is slightly above the tolerance range, while core inflation measures have normalized.  Inflation expectations remain around the target.”
  • National Bank of Georgia (held rate at 6.50%):  “Despite low inflation the real exchange rate had been appreciating in the end of last year. This is related to the faster nominal appreciation of the national currency vs. currencies of main trade partners. Real appreciation on one hand causes further widening of the trade deficit and on the other causes weakening of the demand.”

Looking at the central bank calendar, the only major central bank scheduled to meet next week is the Central Bank of Turkey.  Elsewhere the Bank of England will release its recent monetary policy meeting minutes (where it increased its APP by GBP 75B) on Wednesday; likewise the Reserve Bank of Australia will release its most recent monetary policy meeting minutes on Tuesday.

  • TRY – Turkey (Central Bank of Turkey) expected to hold at % on the 21st of Feb

Also during the past week Central Bank News released data, extending back to January 1999, for the Global Monetary Policy Rate Index – Developed Markets.

Source: Central Bank News, February 19, 2012.

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Monetary policy: Week in review (Jan, 2012)

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The article below comes courtesy of Central Bank News, an authoritative source on monetary policy developments.

The past week in monetary policy saw interest rate decisions announced by 8 central banks, with 4 of those announcing interest rate cuts, reflecting the ongoing European sovereign debt crisis and slowing global growth.  Those announcing interest rate cuts were Brazil -50bps to 10.50%, Georgia -25bps to 6.50%, Philippines -25bps to 4.25%, and Serbia -25bps to 9.50%.  Meanwhile those that held rates unchanged were Canada 1.00%, South Africa 5.50%, Mexico 4.50%, and Latvia 3.50% (Latvia did however reduce its required reserve ratios 100bps).  Also making headlines was a widening of the interest rate corridor, an effective easing, in Indonesia.

Following are some of the key quotes and comments from the monetary policy statements and media releases issued by the central banks announcing rate decisions:

  • Brazil (cut rate 50bps to 10.50%):  “The Monetary Policy Committee believes that the timely mitigate the effects coming from a more restrictive global environment, a moderate adjustment in the level of the base rate is consistent with the scenario of convergence of inflation to the target in 2012.”
  • Philippines (cut rate 25bps to 4.25%):  “the inflation outlook remains comfortably within the target range, with expectations well-anchored. Latest baseline forecasts indicate that average annual inflation rates are likely to fall within the lower half of the 3-5 percent target range up to 2013. Pressures on global commodity prices are seen to continue to abate amid weaker global growth prospects. However, the impact of strong capital inflows on domestic liquidity and the effect of geopolitical tensions in the MENA region on global oil supplies will continue to pose upside risks to inflation.
  • Bank of Canada (held rate at 1.00%): “While the economy had more momentum than anticipated in the second half of 2011, the pace of growth going forward is expected to be more modest than previously envisaged, largely due to the external environment. Prolonged uncertainty about the global economic and financial environment is likely to dampen the rate of growth of business investment, albeit to a still-solid pace.  Net exports are expected to contribute little to growth, reflecting moderate foreign demand and ongoing competitiveness challenges, including the persistent strength of the Canadian dollar.  In contrast, very favourable financing conditions are expected to buttress consumer spending and housing activity. Household expenditures are expected to remain high relative to GDP and the ratio of household debt to income is projected to rise further.”
  • South African Reserve Bank (held rate at 5.50%): “The MPC remains of the view that inflation pressures are primarily of a cost-push nature, but is concerned that a persistent upward trend in inflation and prolonged breach of the inflation target could have an adverse effect on inflation expectations which could reinforce the upward inflation dynamics. However, the MPC is also cognisant of the slowing domestic economy and feels that given the lack of demand pressures, monetary tightening at this stage would not be appropriate. At the same time, the nominal policy rate is at a long term low and the real policy rate is slightly negative, indicating a monetary policy stance that is accommodative and supportive of the real economy.”

Looking at the central bank calendar, the week ahead has 8 central banks scheduled to review monetary policy settings.  The one on many people’s minds will be the US FOMC, which is unlikely to announce anything but people will be watching for clues of any further quantitative easing measures.  The key emerging market economy, India, will also be closely watched, but with inflation still high is unlikely to move just yet.  Other than that, the broad geography of banks on the calendar next week will provide a timely insight into the status of the global economy.

  • ILS – Israel (Bank of Israel) expected to hold at 2.75% on the 23rd of Jan
  • JPY – Japan (Bank of Japan) expected to hold at 0.10% on the 24th of Jan
  • INR – India (Reserve Bank of India) expected to hold at 8.50% on the 24th of Jan
  • HUF – Hungary (Magyar Nemzeti Bank) expected to hold at 7.00% on the 24th of Jan
  • TRY – Turkey (Central Bank of Turkey) expected to hold at 5.75% on the 24th of Jan
  • USD – USA (Federal Reserve) expected to hold at 0.25% on the 25th of Jan
  • THB – Thailand (Bank of Thailand) expected to hold at 3.25% on the 25th of Jan
  • NZD – New Zealand (Reserve Bank of New Zealand) expected to hold at 2.50% on the 26th of Jan

Source: Central Bank News, January 21, 2012.

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Monetary policy: Week in review (Jan 14, 2012)

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The article below comes courtesy of Central Bank News, an authoritative source on monetary policy developments.

The past week in monetary policy saw interest rate decisions announced by 11 central banks, with just one announcing a change in rates (Chile -25bps to 5.00%). Those that held rates unchanged were: Sri Lanka 7.00%, Poland 4.50%, Kenya 18.00%, the EU 1.00%, UK 0.50%, Indonesia 6.00%, South Korea 3.25%, Mozambique 15.00%, Peru 4.25%, and Armenia 8.00%. Also making the news during the week in central banking was reports that Iran‘s central bank had raised interest rates, and the resignation of Swiss National Bank Chairman, Philipp Hildebrand.

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

  • European Central Bank (held rate at 1.00%): “Inflation is likely to stay above 2% for several months to come, before declining to below 2%. At the same time, the underlying pace of monetary expansion remains moderate. As expected, ongoing financial market tensions continue to dampen economic activity in the euro area, while, according to some recent survey indicators, there are tentative signs of a stabilisation in activity at low levels. The economic outlook remains subject to high uncertainty and substantial downside risks. In such an environment, cost, wage and price pressures in the euro area should remain modest and inflation rates should develop in line with price stability over the policy-relevant horizon.”
  • Banco Central de Chile (dropped rate 25bps to 5.00%): “Domestically, output and demand have evolved in line with forecasts in the latest Monetary Policy Report. The labor market is still tight. The money market has normalized, while financing conditions for some agents are tighter than a few months ago. December’s headline and core inflation was higher than expected due to the prices of perishables and other foods and the lagged incidence of the peso depreciation in the fourth quarter of 2011. Inflation expectations remain near the target.”
  • Bank Indonesia (held rate at 6.00%):  “Board of Governors views that current BI rate is still consistent with inflation targets, financial system stability, and remains conducive to propel domestic economic expansion amidst global economic uncertainty. In 2011, Indonesian economy showed strong performance with low inflation, higher economic growth, stable exchange rate, and stable financial system. The achievement was supported by various policies implemented by Bank Indonesia and the government.”
  • Bank of Korea (held rate at 3.25%): “In Korea, exports have kept up their steady increase, but domestic demand has been subdued with consumption and construction investment decreasing from the previous month. On the employment front, the number of persons employed has sustained its large scale of increase, led by the private sector. The Committee anticipates that domestic economic growth will gradually return to its long-term trend level going forward, after remaining subdued for some time due mostly to the impact of external risk factors.”
  • National Bank of Poland (held rate at 4.50%): “In the opinion of the Council, in the medium term inflation will be curbed by gradually decelerating domestic demand amidst fiscal tightening, including reduced public investment spending, and interest rate increases implemented in the first half of 2011, as well as the expected global economic slowdown. The impact  of the situation in the global financial markets on zloty exchange rate together with a possible rise in commodity prices continues to be an upside risk to domestic price developments.”

Looking at the central bank calendar, the week ahead is largely dominated by emerging market central bank action. However it is likely that only Brazil will make a move, likely cutting another 50 basis points. But these banks will likely be wary of the external environment, particularly financial market stress emanating from the Eurozone. Elsewhere the European Central Bank will release its monthly report on Thursday.

  • CAD – Canada (Bank of Canada) expected to hold at 1.00% on the 17th of Jan
  • BRL – Brazil (Banco Central do Brasil) expected to cut 50bps from 11.00% on the 18th of Jan
  • PHP – Philippines (Central Bank of Philippines) expected to hold at 4.50% on the 19th of Jan
  • ZAR – South Africa (South African Reserve Bank) expected to hold at 5.50% on the 19th of Jan
  • MXN – Mexico (Banco de Mexico) expected to hold at 4.50% on the 20th of Jan

Source: Central Bank News, January 13, 2011.

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Monetary policy: Week in review (Jan 7, 2011)

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The article below comes courtesy of Central Bank News, an authoritative source on monetary policy developments.

The past week in central banking and monetary policy was relatively quiet, with just five central banks announcing interest rate decisions. Those changing interest rate settings were: Romania -25bps to 5.75%, Bangladesh +50bps to 7.75%, and Cape Verde +150bps to 5.75%. Those that held rates unchanged were Uganda at 23.00%, and Trinidad & Tobago at 3.00%. Also making news was the signing into law of sanctions against Iran’s central bank by the US, Chinese leaders commenting on the direction of monetary policy in 2012, and the ECB appointing Belgian, Peter Praet, as Chief Economist; replacing the outgoing Jurgen Stark.

Following are some of the key quotes from the central bankers that announced decisions last week:

  • Romania (cut 25bps to 5.75%): “The recovery of the Romanian economy has continued – underpinned by favourable dynamics of exports, as well as of industrial and farming output – whereas the growing uncertainties regarding global and European growth amid a worsened global risk appetite and heightened sovereign debt crisis in the euro zone are hindering the short-term outlook for the overall economic activity in Romania.”
  • Uganda (held at 23.00%): “I acknowledge the fact that the long-term solution to controlling inflation rests on addressing the structural constraints and improving productivity, but controlling inflation in the short to medium term is extremely crucial in stimulating this long-term economic growth.”
  • Trinidad & Tobago (held at 3.00%): “While there are signs that credit demand may be increasing, the basis for a sustained economic recovery is still to be established.” The Bank also noted “The increase in the headline inflation rate was mainly attributable to higher food prices. Core inflation, which excludes the impact of food prices, has been relatively well contained for most of 2011, indicative of the overall sluggish demand conditions in the economy.”
  • Cape Verde (increased 150bps to 5.75%): “The unfavorable balance of payments, the persistence of serious financial problems at the international level – in particular in the euro area – which could have impact on the evolution of the economy and domestic economic developments, require the making of monetary policy measures consistent with ensuring exchange rate stability and financial system.”

Looking at the central bank calendar, there’s a few key central bank meetings scheduled in the week ahead. The market will be closely watching the decisions from the Bank of England and ECB; while neither are expected to change policy settings just yet, the statement from the ECB will merit close study. Also due in the week ahead is China’s quarterly data dump, many are picking the PBOC will cut the RRR before Chinese Lunar New Year (23 Jan), and the data may (or may not) provide an additional excuse to move. The Fed is also scheduled to release its Beige Book economic report on Wednesday.

  • PLN – Poland (National Bank of Poland) expected to hold at 4.50% on Jan 11
  • GBP – UK (Bank of England) expected to hold at 0.50% on Jan 12
  • EUR – EU (European Central Bank) expected to hold at 1.00% on Jan 12
  • IDR – Indonesia (Bank Indonesia) expected to hold at 6.00% on the Jan 12

Source: Central Bank News, January 6, 2011.

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Monetary policy: Week in review (Dec 24, 2011)

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The article below comes courtesy of Central Bank News, an authoritative source on monetary policy developments.

The past week in monetary policy featured decisions from 8 central banks around the world from Europe to Africa. Those that changed interest rates were; Sweden -25bps to 1.75%, Hungary +50bps to 7.00%, and Russia -25bps to 8.00%. Meanwhile, those that announced no changed to interest rates were; Morocco 3.25%, Japan 0.10%, the Czech Republic 0.75%, Ghana 12.50%, and Turkey 5.75%. Brazil also announced some fine tuning measures to the way it pays interest on reserves, effectively further loosening monetary policy settings.

Many of the central banks which met over the past week made mention of and are particularly wary about the ongoing European sovereign debt crisis, and uncertainty on the global economic growth outlook.  Below are listed some of the key quotes from the central banks that announced monetary policy decisions:

  • Central Bank of Russia (cut rate 25bps to 8.00%):  “The said decision was made considering the assessment of inflation risks and risks to the sustainability of economic growth, including those associated with the global economic uncertainty. Narrowing of the gap between interest rates on the Bank of Russia liquidity providing and absorbing operations is neutral in terms of monetary policy stance. It should contribute to restraining money market rates volatility and strengthening of the interest rate channel of monetary policy transmission to inflation.”
  • Hungary (increased rate 50bps to 7.00%):  “The Monetary Council decided to raise the base rate by 50 basis points in view of increased perceptions of the risks associated with the economy and upside risks to inflation. If risk perceptions and the outlook for inflation deteriorate significantly further, it may prove necessary to raise interest rates again.”
  • Sweden (cut rate 25bps to 1.75%):  “There is still considerable uncertainty regarding the public-finance problems in, above all, the euro area and several euro countries are expected to implement more stringent fiscal tightening than was previously assumed. Growth in the euro area is therefore expected to be low in the period ahead. However, the global economy as a whole is growing at a relatively good rate.”
  • Bank of Japan (held rate at 0-0.10%):  “The pick-up in Japan’s economic activity has paused, mainly due to the effects of a slowdown in overseas economies and of the appreciation of the yen.  As for domestic demand, business fixed investment has been on a moderate increasing trend and private consumption has remained firm.  On the other hand, exports and production have remained more or less flat, due in part to the effects of the slowdown in overseas economies and of the yen’s appreciation as well as of the flooding in Thailand. Improvement in business sentiment has slowed on the whole despite steady improvement in domestic demand-oriented sectors.”

There is no major central bank activity scheduled for next week. Happy holidays to all our loyal readers, and may the new year bring you prosperity and happiness.

Source: Central Bank News, December 23, 2011.

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