Month: March 2013

What is Accommodative Monetary Policy?

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An accommodative monetary policy is an effort by the U.S. Federal Reserve Board or another central bank to stimulate its nation’s economy. Lower interest rates are the hallmark of an accommodative monetary policy. An interest rate is the cost of borrowing money; when money becomes cheaper through an accommodative monetary policy, it costs businesses and consumers less to borrow, thus they spend more. The additional spending of an accommodative monetary policy has a multiplier effect, and business picks up throughout the economy. At some point under an accommodative monetary policy, the economy tends to overheat. In other words, an accommodative monetary policy results in too much money chasing too few goods, or inflation. At that point, an accommodative monetary policy loses favor, as consumers and producers watch prices rise. The Fed then changes course from an accommodative monetary policy to “tighter money,” i.e. it takes steps to raise interest rates, tamp down business activity, and reduce inflation. A reasonably accommodative monetary policy is liked by investors inequities, because more business activity usually produces greater earnings and higherstock prices.

 

Accommodative Monetary Policy Definition – What is Accommodative Monetary Policy?.

Canada’s economy moves at a crawl – BNN News

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Canada’s economy moves at a crawl – BNN News.

Canada’s economy is just inching along.

Gross domestic product expanded by just 0.6 percent, on an annualized basis, in the fourth quarter of 2012, Statistics Canada said Friday, slightly better than expected but a weak end to a year that saw crucial commodity prices soften, the housing market slow down, and retail spending slip.

On a monthly basis, GDP contracted by 0.2 percent in December alone.

The weak numbers were little surprise, especially after recent retail sales figures showed a 2.1-percent drop in December, the largest decline since April 2010.

The key question now is whether Canada’s economy can show some improvement in 2013, and come close to the Bank of Canada’s expectations of 2-percent growth over the year.

Many economists expect to see economic growth considerably below that level, especially after last Tuesday’s report from Statistics Canada on capital spending intentions for 2013.

The survey of private and public sector organizations suggested they expect to increase investment on construction, machinery and equipment by just 1.7 percent in 2013, the smallest boost since 2009. If the biggest spenders aren’t opening their wallets, there’s not much hope the economy can thrive.

Indeed, some economists say the moribund economy could prompt the Bank of Canada to cut interest rates, rather than raise them, as the central bank has suggested.

David Madani of Capital Economics in Toronto, who predicts annual GDP growth of just 1 per cent in Canada in 2013, said rates could fall later this year or early in 2014 if exports and business investment doesn’t pick up.

Business leaders, too, are expecting modest growth at best for the rest of this year.

“I think the economy is going to be weak” for the balance of 2013, said David Ross, chief financial officer at Calgary oilfield services company Bonnett’s Energy Corp.

He thinks the slack in the economy could last for as long as another two years.

“I don’t see any catalysts out there that are cause to change those (slow growth) expectations.”

Matt Campbell, CEO of Rocky Mountain Dealerships Inc., a chain of agriculture and construction equipment dealers based in Calgary, said he thinks the Canadian economy will follow the U.S. in maintaining an extended period of slow growth.

While there are some modest signs of improvement in the U.S., it will not be enough to cause a significant uptick in Canada before the end of 2013, he predicted. The continuing uncertainty in Europe will also weigh on Canada’s economy, Campbell said.

Some others are slightly more optimistic.

Brian Doody, CEO of electronics firm Teledyne Dalsa Inc. in Waterloo, Ont., said he feels those who predict doom and gloom for the Canadian economy over the short term will be wrong.

“I’m not quite convinced that the indicators we are seeing are a death knell for the Canadian economy over the next year or two. If the U.S. economy does recover a little, as the experts are beginning to indicate, I suspect we are going to see some benefit of that,” he said. “I think that we’ve still got some opportunity in Canada to stay on the positive side of the line.”

Dominican Republic’s – Central Bank News

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The Central Bank of the Dominican Republic (CBDR) kept its Monetary Policy Reference (MPR) rate steady at 5.0 percent as inflation is forecast to be within the bank’s target this year and next and economic growth is also in line with expectations.
The CBDR, which cut its rate by 175 basis points in 2012 but also left the rate unchanged last month, said the domestic economy expanded by 3.9 percent last year, higher than the average in Latin America and liquidity in international financial markets was good, which could help the flow of capital to emerging economies. In 2011 the Dominican Republic’s economy grew by 4.5 percent.
“Credit to the private sector in the national currency continues to show a recovery and projections suggest that by the end of the year the funding would grow faster than nominal GDP,” the central bank said, adding that higher credit would allow faster recovery in consumption and private investment.
Inflation in the Dominican Republic rose to by a monthly 1.26 percent in January to an annual rate of 4.76 percent, up from December’s 3.9 percent, due to the impact of tax reform, the bank said.
The CBDR targets inflation of 5.0 percent, plus/minus one percentage point in 2013 and 4.5 percent, plus/minus one percentage point, in 2014.
www.CentralBankNews.info

Dominican Republic holds rate steady, inflation on target – Central Bank News.

Trinidad and Tobago’s Central Bank News

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The central bank of Trinidad and Tobago held its benchmark repo rate steady at 2.75 percent, saying its current accommodative policy stance was appropriate in light of contained inflationary pressures and the expectation that economic activity will improve in 2013.
The Central Bank of Trinidad & Tobago, which cut its rate by 25 basis points in 2012, said headline inflation rose by 7.3 percent in January, slightly above December’s 7.2 percent with food inflation up an annual 13.8 percent from 12.7 percent due to faster price increases for most food and vegetables.
The core inflation rate eased to a 2.2 percent rate in January from December’s 3.1 percent.
Private sector credit slowed down unexpectedly towards the end of 2012 after a slow but steady rise earlier in the year with the growth rate down to 2.1 percent in December from 3.8 percent in November and a 0.8 percent fall in business lending following a 2.6 percent rise in November.
With underlying inflationary pressures still well contained and continuing expectation for a turnaround in economic activity in 2013, the Bank views its present accommodative monetary stance as appropriate,” the central bank said.
    Last month the governor of the central bank said he was cautiously optimistic for 2013 and forecast economic growth of 2.5 percent.

Trinidad & Tobago’s Gross Domestic Product contracted by an annual 1.79 percent in the second quarter of 2012, wider than the 0.49 percent contraction in the first quarter.

 

Trinidad & Tobago keeps rate steady on contained inflation – Central Bank News.