Month: February 2013
Last week four central banks took monetary policy decisions with two banks (Turkey and Colombia) taking further steps to ease their stance while the other two (Thailand and Namibia) kept rates on hold, illustrating how monetary policy on a global scale remains accomodative despite fresh signs that the cycle of loose policy is nearing its end.
|COUNTRY||MSCI||NEW RATE||OLD RATE||1 YEAR AGO|
|COUNTRY||MSCI||MEETING||RATE||1 YEAR AGO|
|TRINIDAD & TOBAGO||28-Feb||2.75%||3.00%|
Namibia’s central bank held its benchmark repo rate steady at 5.50 percent, saying the current low interest rate should be maintained to mitigate the impact of slow growth in many of the country’s trading partners.
The Bank of Namibia, which cut its rate by 50 basis points in 2012, said economic growth is expected to ease slightly in 2013, in line with key trading partners “although growth of domestic demand may remain strong, while elevated inflation may persist,” the bank said in a statement from its governor, Ebson Uangutu.
Namibia’s economy is estimated to have expanded by 4.6 percent in 2012 and is forecast to grow by 4.4 percent in 2013, driven by secondary industries, particularly construction, the bank said. In 2011 the economy grew by 4.8 percent.
The mining sector, which was estimated to have expanded by 17 percent in 2012, is expected to see moderate growth of 3.8 percent this year.
Namibia’s Gross Domestic Product contracted by 5.4 percent in the third quarter from the second for an annual decline of 1.3 percent, down from the second quarter’s annual growth rate of 10.7 percent.
Namibia’s inflation rate rose to 6.6 percent in January, above 2012’s average rate of 6.5 percent, and December’s 6.34 percent rate.
The increase in inflation was due to annual increases in administered prices, particularly education and housing, while food inflation remained elevated, the bank said.
Domestic demand remains strong with private sector credit extension up an annual 17 percent in December, the second highest level seen in almost six years. Credit to businesses grew by 22.2 percent at the end of December while credit for mortgages was up by 13.1 percent, below November’s 14.3 percent.
Namibia’s dollar currency depreciated against major currencies in January, December and November, based on its peg to the South African Rand which has declined due to the sale of rand-based assets, including government bonds, the Bank of Namibia said.
But Namibia’s stock of international reserves is sufficient to cover the fixed exchange rate peg with foreign reserves equal to 3.4 months of import cover.
Turkey’s central bank kept its policy rate steady at 5.50 percent but continued to shift its daily interest rate corridor downwards to support growth but tightened its reserve requirements to slow down the growth of credit from a continuing inflow of capital that is putting upward pressure on the Turkish lira.
The Central Bank of the Republic of Turkey (CBRT), which started narrowing its interest rate corridor in September 2012, cut the overnight lending rate, which forms the ceiling of the corridor, by 25 basis points to 8.50 percent and the overnight borrowing rate, which forms the floor, to 4.50 percent.
“The Committee has indicated that credit growth displays a significant acceleration amid
strong capital inflows,” the central bank said following a meeting of its monetary policy committee.
“Accordingly, it was deemed appropriate to implement a measured tightening through reserve
requirements, while delivering a limited downward shift in the interest rate corridor,” it added.
The reserve requirements were raised by 25 basis points for lira deposits for up to one year but less than three years and by 50 basis points on most foreign currency deposits, effective March 1, draining some $940 million from the market.
The central bank said domestic demand remained moderate “while exports continue to increase despite weak global activity,” which is narrowing the current account deficit.
The central bank also said the daily funding of liquidity via one-week actions would be set between 0.2 and 6.5 billion Turkish lira until the policy committee’s next meeting and the upper limit for one-month repo auctions was set at 2.5 billion lira.
In the event that liquidity conditions change, the bank said it would provide funds beyond the limits.
“Ongoing uncertainties regarding the global economy necessitate the monetary policy to
remain flexible in both directions,” the CBRT said.
Turkey’s inflation rate rose to 7.31 percent in January, up from December’s 6.16 percent, but the bank said in its statement that it expects inflation to continue to decline.
The central bank targets annual inflation of 5.0 percent, the same as in 2012 when inflation averaged 6.2 percent, down from 10.4 percent in 2011.
While narrowing and shifting the interest rate corridor downward last year, the CBRT kept the benchmark one-week repo rate steady until December when it was cut by 25 basis points, the first cut since August 2011.
Turkey’s Gross Domestic Product rose by 0.2 percent in the third quarter from the second quarter for annual growth of 1.6 percent, down from 3.2 percent in the second and 2.3 percent in the first quarter.
The economy is estimated to have expanded by 2.5 percent last year, down from 8.5 percent in 2011. The central bank forecasts 2013 growth of 4 percent or higher.
Last week 12 central banks took monetary policy decisions with just one bank (Georgia) cutting rates while the other 11 central banks kept rates unchanged (Mozambique, Indonesia, Russia, Ghana, Armenia, Sweden, Botswana, Japan, Korea, Sri Lanka and Chile), reinforcing this year’s trend toward stable policy rates after last year’s hectic pace of monetary easing.
Through the first seven weeks of this year, 77 percent of 65 policy decisions taken by the 90 banks covered by Central Bank News have resulted in unchanged interest rates while 18 percent have resulted in rate cuts. . . . . .