Month: March 2014
18th February 2014
Turkey’s central bank maintained its short-term interest rates, including the one-week repo rate at 10.0 percent, and reiterated that a “tight monetary policy stance will be maintained until there is a significant improvement in the inflation outlook.”
At an emergency meeting of its policy committee last month, the Central Bank of the Republic of Turkey (CBRT) raised its rates in response to a sharp fall in the lira currency and growing inflationary pressures, and pledged to maintain a tight stance until the outlook for inflation improved.
Following today’s meeting, the central bank said inflation was likely to hover above its 5.0 percent target “for some time due to recent tax adjustments, exchange rate developments, and elevated food prices” while the current account deficit was expected to show a “significant improvement” this year.
The growth of lending has slowed due to its tight policy stance, weak capital flows and other measures and data from the first quarter of this year showed a deceleration in domestic demand.
“Meanwhile, with the help of the recovery in foreign demand, the contribution of net exports to economic growth in expected to increase,” the CBRT said.
Turkey’s inflation rate rose to 7.75 in January from 7.4 percent in December.
In its January inflation report, the CBRT raised its 2014 inflation forecast by 1.3 percentage points, with the lira’s depreciation accounting for an estimated 0.5 percentage points of that increase and higher taxes for another 0.5 percentage points.
The central bank forecast that inflation would to ease in the second half of this year and fluctuate between 5.2 percent and 8.0 percent before ending the year at 6.6 percent.
In 2015 inflation is projected to fall further, fluctuating between 3.1 precedent and 6.9 percent, and stabilize around the bank’s 5.0 percent target by mid-2015.
In addition to raising its one-week repo rate to 10.0 percent from 4.50 percent on Jan. 28, the CBRT also said this would once again become its primary tool for providing liquidity to markets. At that meeting, the central bank also shifted its overnight rate corridor upwards by raising the marginal funding rate, the ceiling in the corridor, to 12.0 percent from 7.75 percent, and the borrowing rate, or the floor, to 8.0 percent from 3.5 percent.
“It should be emphasized that any new data or information may lead the Committee to revise its stance,” the CBRT said today.
In the summary of its Jan. 28 meeting, the central bank said that the current policy stance should be enough to anchor inflation expectations and if necessary, its liquidity policy may be tightened further to invert the slope of the yield curve.
Economists had expected the central bank to maintain rates today after last month’s surprisingly aggressive move that helped calm financial markets and seems to have put a floor under the lira.
The lira has been declining ever since early May 2013 and fell to a record low of 2.37 to the U.S. dollar on Jan. 27. Since the rate hike, the lira has strengthened by 8 percent, but is still down 1.4 percent since the beginning of the year. The lira was trading at 2.18 to the dollar today.
Turkey’s current account deficit widened to US$ 8.322 billion in December from November’s $4.098 billion while its Gross Domestic Product expanded by 0.9 percent in the third quarter from the second quarter for annual growth of 4.4 percent, down from the second quarter’s 4.5 percent rate.
Earlier this month, Standard & Poor’s cut its outlook on Turkey to negative from stable, citing risks of a hard economic landing amid a less predictable political environment. The rating’s agency said a corruption scandal involving the government of Prime Minister Tayyip Erdogan along with falls in the lira and inflationary pressures had raised concerns about political and economic stability
14th February 2014
Russia’s central bank maintained its key policy rate at 5.50 percent, but warned that it is ready to raise rates if there signs that inflation will exceed the bank’s target of 5.0 percent by end-2014.
The Bank of Russia said it still expects the downward trend in consumer price inflation to continue and inflation to converge toward its target by the end of this year as output is expected to remain below the economy’s potential due to the slow recovery of external demand and weak investment activity while the impact of a recent rise in food prices also unwinds. A slow growth of overall monetary aggregates should also help contain inflation this year.
Although Russia’s headline inflation rate eased to 6.1 percent in January on lower food prices, the central bank noted that inflation had risen to 6.5 percent in December, with 0.5 percentage points of that increase due to higher prices of fruits and vegetables along with some milk and poultry products.
“If the negative impact of these factors spills over to the prices of a wide range of goods and services and to household expectations, the possibility of inflation deviating from the mid-term targets will increase. In this case, the Bank of Russia will be ready to tightens its monetary policy.”
The central bank acknowledged that the impact of the ruble’s deprecation and the factors behind higher prices at the end of last year represented “a major source of uncertainty” for its forecast.
The Russian ruble started weakening against the U.S. dollar in February last year and fell until early September before it rebounded. But in late October it again started to decline for a 7.1 percent fall in 2013. The sharp depreciation continued in January, along with many other emerging market currencies, but this month the ruble has bounced back along with other currencies.
So far this year, the ruble is down by 6.2 percent against the dollar, trading at 35.07 today, a level that has not been seen since March 2009 in the midst of the global financial crises.
Amid January’s currency selloff, the central bank on Jan. 30 pledged to launch unlimited interventions in the foreign exchange market if the ruble strays outside its target corridor.
Since 1999, the central bank has operated a managed floating exchange regime and plans to let the ruble float freely in 2015. Under the current regime, the central bank intervenes when the ruble approaches the boundaries of a seven ruble corridor against a dual-currency basket of currencies that comprises 55 percent U.S. dollars and 45 percent euros, a proxy that reflects Russia’s trade relations.
Russia’s economic growth remains sluggish with Gross Domestic Product expanding by only 1.2 percent in the third quarter from the same 2012 quarter, steady from the pace in the second quarter, as industrial output continues to stagnate.
Russia’s statistics office has estimated growth of 1.3 percent in 2013, below the government’s 1.4 percent forecast. This year the government has forecast growth of 2.5 percent but the economics ministry has already questioned whether that can be achieved.
Weak investment activity is caused by overall economic uncertainty and low profits and consumer demand remains the main driver of growth due to growth in retail lending and wages, the bank said.
“Demand for bank loans has not demonstrated any growth amid the slack in economic activity,” the bank said, adding that it does not consider the lack of lending dynamics to be restraining growth.
The central bank, which is moving to an inflation-targeting regime and introduced the one-week repo rate on auctions as its “key” rate in September, also said in a separate statement that from Feb. 17 it would introduce one- to six-day deposit auctions with a maximum rate that equals the key rate to help absorb excess liquidity that exceeds banks’ demand.
“These instruments are aimed at preventing the excessive volatility of money market rates in case of considerable liquidity fluctuations,” the central bank said
6th January 2014
Internet-connected devices growing in popularity
WASHINGTON, D.C. — The International Consumer Electronics Show (CES) this week allows technology developers to showcase the latest gadgets that may become must-haves for many Americans. As attendees get a glimpse of the industry’s future, Gallup finds that the devices Americans own have changed over the past decade, with ownership of laptops (64%) and iPods/MP3 players (45%) up most dramatically from 2005. Meanwhile, far smaller proportions of Americans now own VCRs and basic cellphones, which were a staple to many in the past.
These results come from a Dec. 5-8 Gallup telephone survey of 1,031 national adults, with roughly half of the respondents reached on cellphones and half on landlines.
Technology and consumer electronics is a dynamic field; devices that are commonplace can quickly become obsolete as new products emerge. That Gallup did not ask about a number of electronic products and services in 2005 that were included in the current update is testimony to these changes.
Compared with 2005, fewer Americans today have desktop computers, VCRs, and basic cellphones, while there have been substantial increases in ownership of MP3 players and laptops, with slight increases in ownership of video game systems and satellite TV. Meanwhile, most Americans say they have Internet access at home through Wi-Fi (73%) or have smartphones with Web access (62%).
Still, even in the face of such rapid innovation, some items have showed remarkable staying power since 2005. Ownership of cable TV (68%) has not changed, even as speculation abounds that Internet streaming services such as Hulu, Netflix, or Roku could displace cable. Essentially the same share of Americans own DVD or Blu-ray players as in 2005, 80%, and this is the most commonly owned electronic device.
Generational Differences in Technology Ownership
The youngest American adults — those aged 18 to 29 — favor a different portfolio of technology devices than their older compatriots do. Smartphone ownership among the young is nearly universal (88%), and it is the most common device among this group. Eighty-three percent of 18- to 29-year-olds have wireless Internet access at home, and another 79% have a laptop.
Less common among younger Americans are items that are familiar to individuals of a different generation — about four in 10 younger Americans have a VCR (41%), and an identical percentage have a desktop computer. Meanwhile, a basic cellphone, which 86% of 18- to 29-year-olds owned in 2005, is now the least commonly owned technology device among this age group (24%).
This is not to say that older generations have been left behind as technology changes. Recent research suggests that the largest growth in Facebook over the past year came from the oldest cohort of Americans, aged 65 and older. But older Americans are most likely to have older forms of technology, including cable TV (74%) and the now essentially obsolete VCR (74%), although 70% own DVD players. A majority of Americans aged 65 and older own a basic cellphone (61%), while one-quarter own a smartphone.
About half of older Americans have wireless Internet access in their homes. Portable Internet-based or Internet-providing devices are less popular with American seniors: one-quarter have tablet computers, while 16% have an iPod or MP3 player and 15% have an Internet streaming service. Video game systems are the least popular electronic product among older Americans, at 10%.
All in all, the five devices that skew the youngest are smartphones, video game systems, Internet streaming services, iPod or MP3 players, and laptop computers. And the five devices that skew the oldest are satellite TV, cable TV, desktop computers, VCRs, and basic cellphones.
The week’s CES show could unveil another electronic device that will soon be ubiquitous in American life. Of course, in the process, these new devices will begin displacing other popular technology. The constantly evolving nature of the technology scene is why so many people find it exciting, and as this Gallup poll shows, technology ownership has changed dramatically since 2005. Portable Internet-connected devices such as laptops and smartphones are generally more favored, while older forms of technology such as desktop computers, VCRs, and basic cellphones are falling out of fashion.
Mozambique Central Bank holds Interest rates , cuts monetary base target again : February Monetary Policy Review
12th February 2014
Mozambique’s central bank maintained its benchmark standing facility rate at 8.25 percent, saying the decision reflected the current conditions in the foreign exchange market and the need to preserve stability in light of the international, regional and domestic risks.
The Bank of Mozambique, which cut its rate by 125 basis points in 2013, also said it would ensure that the monetary base does not exceed 44.884 billion meticais in February, down from the target of 45.892 billion in January and 47.493 in December.
Mozambique’s inflation rate eased to 3.16 percent in January from 3.54 percent in December, well below the 2014 inflation target of 5.6 percent.
After a stable 2013, Mozambique’s metical currency has weakened sharply since mid-January, down 3.2 percent to 31 meticais to the U.S. dollar today from the end of 2013. The central bank said Reserves International Net (RIL) fell by US$ 90.5 to $2.9051 billion in January, with the fall in net reserves mainly reflecting the central bank’s interventions in the foreign exchange market. The bank sold $120.5 million, of which $85.7 million was for imported fuels and $49.1 million for potential foreign exchange losses.
“The Monetary Policy Committee took note of the strengthening of the dollar in the international market that was reflected in the current conditions in the domestic foreign exchange market, compounded by the seasonal characteristics of higher demand for foreign exchange,” the bank said.
Last week the bank’s governor said in Kenya that Mozambique’s economy was expected to expand by 8.1 percent in 2014 and 8.0 percent in 2015, with aging railways limiting mining projects and thus economic growth.
Mozambique’s Gross Domestic Product expanded by 1.4 percent in the third quarter from the second quarter for annual growth of 8.1 percent, down from 8.4 percent in the second quarter.
The governor also said that average inflation of 4.2 percent in 2013 was likely to increase in 2014, but still remain in line with the bank’s target.
12th February 2014
Iceland’s central bank held its policy rates steady but warned that “the outlook for stronger domestic growth will require that the monetary stance be tightened sooner and more than previously expected.”
The Central Bank of Iceland, which maintained its benchmark seven-day lending rate at 6.0 percent in 2013 after raising it by 125 basis points in 2012, raised its forecast for growth and inflation due to the government’s debt relief measures that the bank’s expects will “boost private consumption considerably in the near future.”
The pace of the central bank’s rate tightening will depend on inflation – the central bank targets inflation of 2.5 percent – along with the government’s fiscal policy, the central bank added.
In its latest Monetary Bulletin the bank revised upwards its estimate for Iceland’s Gross Domestic Product growth in 2013 to 3.0 percent from its November forecast of 2.3 percent, helped by a strong recovery in the labour market and trade. The forecast for this year and the following two years has also been revised up so the slack in the economy will disappear earlier than expected.
Iceland’s GDP is forecast to expand by an unchanged 2.6 percent in 2014 but then grow by 3.7 percent in 2015, up from a previously-expected 2.8 percent, and by 3.0 percent in 2016, up from 2.0 percent forecast in November.
“If the forecast materializes, output growth will average 3.1 percent over the forecast horizon, which is above the 30-year average and well above the average projection for Iceland’s main trading partners,” the bank said.
Inflation in 2014 is expected to ease to an average of 2.7 percent, down from an estimated 3.9 percent in 2013, and lower than 3.2 percent forecast in November. The reason for the lower-than-expected inflation rate is because the rise in unit labour costs will be smaller than forecast by the bank provided that the wage talks concluded in December would be applied to the entire labor market.
In January Iceland’s headline inflation rate eased to 3.1 percent from 4.2 percent in December.
“The inflation outlook for the coming two years has deteriorated since the November forecast, however, as the outlook if for the slack in the economy to give way to an output gap during the period,” the central bank said.
In 2015 the bank expects inflation to average 3.4 percent, up from a previous 2.8 percent forecast, and 3.2 percent in 2016, up from 2.6 percent.
The central bank’s latest survey of market expectations from early February showed the bank’s collateralised lending rate remaining unchanged at 6.0 percent until the end of 2014, 0.5 percentage points lower in nominal terms than in the November survey.
But markets currently expect the central bank to raise its rate by 25 basis points in the first quarter of next year, rising to 6.5 percent in two years. Forward rates indicated that investors expect the bank’s policy rate to by by 50 basis points this year, 25 basis points higher than forward rates indicated in November.
The government’s debt relief package will be implemented over four years, estimated to cost 150 billion Icelandic krona, or 8.5 percent of the estimated value of Iceland’s GDP in 2013.
The central bank projects the measures will boost private consumption by 1.5 percentage points in 2014 and 2015, partly crowding out investment, but boosting GDP growth by about 0.2 percentage points. Imports will also rise, leading to a 1.0-1.5 percentage points drop in the forecast for the current account balance, putting pressure on the krona, which will boost inflation.
Iceland’s current account balance was estimated at a surplus of 3.0 percent of GDP in 2013, but this would decline to a surplus of only 0.8 percent this year, a deficit of 1.0 percent in 2015 and a deficit of 2.8 percent in 2016.
Private consumption in Iceland is now forecast to expand by 4.6 percent this year, up from an estimated 1.6 percent in 2013 and a previous forecast of 2.3 percent. In 2015 private consumption is forecast to rise by 4.3 percent, up from a previous 2.5 percent, and by 2.9 percent in 2016, up from 2.5 percent previously forecast.
“In part the effects of the debt relief package are absorbed through higher interest rates,” the bank said.
According to the bank’s quarterly macroeconomic monetary policy rule, the central bank’s policy rate will be some 0.3 percentage points higher than previously forecast in 2014, 0.6 percentage points higher in 2015 and nearly 1 percentage point higher from 2016.
“Higher interest rates therefore offset the impact of the debt relief measures on domestic demand, the exchange rate of the krona, and inflation,” the bank said in its bulletin.
However, the bank cautioned there was a great deal of uncertainty about the impact of the package due to the lack of historical precedent. Households could save more than assumed, growth and inflation will depend on how much the increased demand is directed toward imports versus domestic factors, and this will again affect the exchange rate. The government could also act to mitigate some of the negative effects of the measures, it said.