Month: May 2013
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Expect the best ……… face the rest …….. forget the pest
Brazil’s central bank raised its benchmark Selic rate by 50 basis points to 8.0 percent to help bring down inflation and “ensure that this trend will continue next year.”
In a brief statement, the Central Bank of Brazil said its policy committee, known as Copom, had agreed on the rate rise unanimously and it did not issue a bias about the future trend of policy.
It is the second consecutive rate rise by Brazil’s central bank following a 25 basis point rise in April, bringing this year’s total rate increase to 75 basis points. In 2012 the central bank cut rates by 375 basis points in response to declining economic growth before freezing rates from November through March.
Today’s rate rise was largely expected and follows recent warnings by the central bank’s governor that he would do “what is needed, in a timely manner, to ensure inflation declines.”
Brazil’s inflation rate eased to 6.46 percent in the rolling one-month period through May 15 from 6.49 percent in April, close to the upper limit of the central bank’s target range of 4.5 percent, plus/minus two percentage points. It was first decline since inflation started to accelerate in July 2012.
The central bank has forecast inflation of 5.7 percent this year and 5.3 percent in 2014.
Brazil’s Gross Domestic Product expanded by 0.6 percent in the first quarter, the same quarterly rate as in the fourth quarter, for annual growth of 1.9 percent, up from 1.4 percent in the fourth quarter, continuing a rebound since hitting a recent low of 0.5 percent in the second quarter of 2012.
Nevertheless, growth in the first quarter was below expectations as industrial output dropped, driven by a 6.6 percent drop in mining, along with lower construction activity.
Earlier today, the central bank lowered its 2013 growth forecast to 2.93 percent from 2.98 percent but maintained the 2014 forecast at 3.5 percent. In 2012 the economy expanded by only 0.9 percent.
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Ahead of your own fear …….lies the path of Success
Thailand’s central bank cut its policy rate by 25 basis points to 2.50 percent due to continued concern over financial stability and said it was closely monitoring economic developments, financial stability risks and capital flows and “stands ready to take appropriate action as warranted.”
The Bank of Thailand (BOT), on the front lines of the currency wars, said downside economic risks had increased from lower-than-expected growth in the first quarter and “as inflation remains well within the target, monetary policy has room to further cushion against downside risk to domestic demand.”
Thailand’s Gross Domestic Product contracted by 2.2 percent in the first quarter from the fourth for annual growth of 5.3 percent, sharply down from the fourth quarter’s 19.1 percent expansion when growth was boosted by fiscal stimulus measures.
The BOT’s rate cut was largely expected and follows a recent statement by the bank’s governor that monetary policy could be eased if the economy was losing momentum. On Monday Thailand’s finance minister said he hoped the BOT would cut the policy rate by more than 25 basis points.
The rate cut signals a sharp worsening in the BOT’s outlook since its last regularly scheduled policy meeting on April 3 when it said inflationary pressures warranted monitoring though it was also concerned that a volatile exchange rate and capital flows could pose a risk to financial stability.
Thailand’s headline inflation rate eased to 2.42 percent in April, down from 2.69 percent in March. The BOT, which targets inflation of 0.5-3.0 percent, has forecast inflation of 2.8 percent this year.
In 2012 the BOT cut its policy rate by 50 basis points and this is the first change in rates this year.
The BOT said it still expects the Thai economy to continue to expand, but the slowdown in the first quarter from “tepid domestic demand” could weigh on overall economic momentum, particularly if there are delays in the government’s infrastructure investment that is expected to start later this year.
It added that exports were subject to downside risks from lower growth in regional economies, especially China, and inflationary pressures have eased due to lower production costs. Growth of private credit and household debt, however, remain elevated.
In April the BOT had said it expected exports to expand slowly, in line with global growth.
But global growth has been slower than expected with Chinese and Asian economies expanding less than expected and this could cause a delay in the recovery of Thai exports, the BOT said.
In added that the Japanese economy was starting to benefit from economic stimulus.
“Global financial markets remain volatile, leading to persistent capital flows into the region and exchange rate volatility,” the BOT said after a meeting of its monetary policy committee.
In its statement, the BOT did not mention any initiatives to cushion the impact of the rise in the baht currency on the competitiveness of Thai exports.
The Thai central bank and the finance ministry are currently considering four measures to combat the strength of the baht, including limits on foreign investors ability to buy some Thai bonds, fees on the profits made by foreign investors from investing in bonds and mandatory hedging by foreign investors of their exchange rate risk.
The Bank of Japan’s launch of aggressive monetary easing in early April has lead to a sharp fall in the value of the yen and triggered fears of large capital inflows into higher-yielding currencies, such as the Thai baht.
Until recently, the BOT had been reluctant to cut its interest rate in response to the rise in the baht, attributing its appreciation to foreign investors’ confidence in the Thai economy and arguing that a rate cut would do little to affect capital flows.
But on April 30 the BOT met with government and private sector representatives to hammer out a plan to address the growing competitive pressures and voiced its concern over the rapid rise and volatility in the exchange rate.
The baht was largely stable against the U.S. dollar from 2010 through early 2012. But then it started to rise, hitting a high of 28.6 bath per U.S. dollar in late April from around 30-32 baht in 2010.
But since late April, the baht has eased, first on speculation that the BOT would intervene but later on news that the central bank is planning to take action to curb the rise in the baht.
news that the central bank is planning to take action to curb the rise in the baht.
Today the baht was trading just over 30 baht to the U.S. dollar.
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The Central Bank of Trinidad and Tobago held its benchmark repo rate steady at 2.75 percent, saying its accommodative policy stance was appropriate in light of contained price pressures and economic growth that remains weaker than expected.
The central bank, which cut rates by 25 basis points in 2012, said private sector credit growth remained subdued but the financial system was highly liquid and it “stands ready to employ additional measures in the coming months to contain excessive build-ups in financial system liquidity.”
In response to the large build-up of liquidity – commercial banks’ daily excess reserves at the central bank averaged $6.5 billion during May 1-21, up from $5.3 billion in April – the central bank facilitated the issue of a $1 billion liquidity absorption bond. With the proceeds sterilized, excess reserves fell to $5.8 billion on May 21 from over $7 billion earlier in the month.
In addition, the central bank sold foreign currency, removing $637 million from the system and rolled over a $1 billion fixed deposit held by commercial banks at the central bank.
“Nevertheless, with liquidity still at elevated levels, there was no activity on the inter-bank market and banks did not access the central bank’s repo facility,” the bank said.
Given the high levels of liquidity, treasury rates have remained depressed and banks lowered their lending rates early this year to encourage credit demand.
Headline inflation rose by 1.5 percent in April from March, but on an annual basis, the inflation rate fell to 5.5 percent from 6.9 percent.
For the first time since October 2011, food price inflation slowed to single digits, reaching 9.4 percent in April, down from 26.2 percent in April 2012 and 15.0 percent in April 2011.
“The recent slowdown in headline inflation and the continued stability in core inflation suggest that general price pressures are contained, although food price pressures may increase in coming months with the advent of the rainy season,” the central bank said, adding that “economic growth is still not as strong as expected, underlined by the further contraction in business credit.
On an annual basis private sector credit granted by the financial system grew by 2.0 percent in March, down marginally from 2.1 percent in February while business lending contracted for the fourth consecutive month, down by 2.4 percent year-on-year in March.
Trinidad & Tobago’s Gross Domestic Product contracted by an annual 0.39 percent in the fourth quarter of 2012 and earlier this month the central bank said in its monetary policy report that it was still forecasting 2.5 percent growth this year, up from 0.2 percent in 2012, based on a rebound in natural gas production.
This entry was posted in Banking , Central Banks ,Monetary Policy , Interest rate, Business , Economic and finance related Information , Knowledge & Training, Business , Economic and Financial News, Currency , Currency News , Forex and tagged bank reserve, business lending, Central Bank of Trinidad and Tobago. inflation, credit demand, Economic growth, food prices, foreign currency, lending rates, liquidity, monetary policy, natural gas producer, private sector credit.