benchmark refinancing rate

ECB European Central Bank cuts rate by 25 bps to 0.50%

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ECB cuts rate by 25 bps to 0.50% – Central Bank News.

The European Central Bank (ECB) cut the rate on its benchmark refinancing facility by 25 basis points to 0.50 percent, as widely expected, along with a 50 basis point cut on the rate on its marginal lending facility to 1.0 percent. The rate on its deposit facility will remain steady at 0.0 percent, the ECB said in a brief statement.
   ECB President Mario Draghi will comment on the decision by the ECB council at a press conference later today.
    Speculation had intensified in recent days that the ECB would cut rates following news that the inflation rate for the 17 nations sharing the single currency fell to 1.2 percent in April, the lowest since February 2010, and well below the ECB’s target of inflation that is below but close to 2 percent.
    Economic recession, growing unemployment and recent comments by ECB council members also fueled speculation of a rate cut. Last month Germany’s Jens Weidmann, head of the Bundesbank, said the ECB would only cut rates if the economic situation worsened and then both Draghi and Klaas Knot of the Netherlands central bank said the economic situation was not improving.
    Last month at the ECB’s press conference, Draghi said the bank was keeping a close eye on economic data for its impact on monetary policy and was ready to act. He also said the ECB was looking at various instruments and tools to stimulate economic activity.

    The unemployment rate in the euro zone rose to 12.1 percent in Mach from 12.0 percent, the highest level since Eurostat, the European Union’s statistics office, started collecting the data in 1995.
    The euro zone’s Gross Domestic Product shrank by 0.6 percent in the fourth quarter of 2012, its fifth quarterly contraction in a row, for an annual decline of 0.9 percent, up from 0.6 percent in the third quarter. Economist forecast a further contraction in the first quarter of this year.
    Global policy makers have also put pressure on the ECB to stimulate the economy with the International Monetary Fund’s managing director, Christine Lagarde, last month saying the ECB still has room to manoeuvre and could cut rates.

Global Central Bank Monetary Policy Week in Review – Apr 20, 2013

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Monetary Policy Week in Review – Apr 20, 2013: One central bank raises rate, 1 cuts as inflation remains sticky – Central Bank News.

Last week six central banks took policy decisions with two major banks in emerging markets (Turkey and Brazil) changing their rates in opposite direction while the other four central banks (Canada, Sweden, Mozambique and Sri Lanka) kept rates steady as inflation remains sticky despite weak global growth.
    Brazil’s 25 basis point rate hike – well-flagged and overdue – was significant because it illustrates that inflationary pressures are building in some emerging markets, specifically Asian countries, and central bankers will defend their inflation-fighting credentials.
    Brazil’s move was in contrast to decisions by Canada and Sweden to further push back the time frame for rate rises, showing how the euro area’s severe crises is hampering economic recovery throughout advanced economies while growth in many emerging markets is accelerating.
    While inflation remains an issue in many emerging countries, disinflation – or deflation in the case of Japan – haunts many advanced economies as long unemployment lines holds down wage pressure along with excess industrial capacity.
    Sweden’s Riksbank specifically cited the need to keep policy rates low for longer than forecast because inflation will take longer to return to target than expected. For 2013 inflation is forecast to average a mere 0.1 percent.
    Weaker-than-expected growth is also holding back inflation in Canada, with the Bank of Canada now first expecting inflation to return to target by mid-2015, at least six months later than it expected in January.
   Turkey, which bounced back swiftly from the global financial crises but then was hit by slow growth last year, cut its rate by a larger-than-expected 50 basis points despite inflation above the central bank’s target.
    The latest central bank decisions came as policy makers gathered in Washington D.C. for the annual meeting of the International Monetary Fund.
    While the IMF trimmed its 2013 global growth forecast, it also said the global economy was taking on the characteristics of a three-speed recovery. Growth in emerging and developing markets is still strong, the U.S. is getting back on its feet, but the euro area is continuing to contract with adverse feedback loops between weak banks, weak sovereigns and low economic activity reinforcing each other.
    Through the first 16 weeks of this year, 77 percent of the 147 policy decisions taken by the 90 central banks followed by Central Bank News have lead to unchanged rates, the same ratio as after 15 weeks.
    Globally, 19 percent of policy decisions this year have lead to rate cuts – largely by central banks in emerging economies – unchanged from last week and slightly down from 20 percent the week before then.
MOZAMBIQUE 9.50% 9.50% 13.50%
SRI LANKA FM 7.50% 7.50% 7.75%
TURKEY EM 5.00% 5.50% 5.75%
BRAZIL EM 7.50% 7.25% 9.00%
SWEDEN DM 1.00% 1.00% 1.50%
CANADA DM 1.00% 1.00% 1.00%
Next week (week 17) features nine central bank policy decisions, including Hungary, Namibia, New Zealand, Philippines, Fiji, Japan (including the economic outlook), Mexico, Colombia, and Trinidad and Tobago.
COUNTRY MSCI              DATE               RATE        1 YEAR AGO
HUNGARY EM 23-Apr 5.00% 7.00%
NAMIBIA 24-Apr 5.50% 6.00%
NEW ZEALAND DM 24-Apr 2.50% 2.50%
PHILIPPINES EM 25-Apr 3.50% 4.00%
FIJI 25-Apr 0.50% 0.50%
JAPAN DM 26-Apr 0.00% 0.10%
TRINIDAD & TOBAGO 26-Apr 2.75% 3.00%
MEXICO EM 26-Apr 4.00% 4.50%
COLOMBIA EM 26-Apr 3.25% 5.25%


Serbia Central Bank News

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Serbia holds rate for 2nd month, sees inflation on target – Central Bank News.

Serbia’s central bank held its benchmark interest rate unchanged at 11.75 percent for the second month in a row, saying its current restrictive stance would help ensure that inflation continues to decline and returns to the central bank’s target range in the second half of the year.
    The National Bank of Serbia paused last month after eight interest rate hikes since last June, but warned that the restrictiveness of its policy stance would be affected by consistent fiscal consolidation, financial market developments and the growth prospects of foreign trading partners. 
    Serbia’s inflation rate eased to 12.4 percent in February, down from 12.8 percent in January, but up from December’s 12.4 percent, and well above the central bank’s target range of 4.0 percent, plus/minus 1.5 percentage points.
    Although the economy continued to shrink in the fourth quarter of 2012, the national bank said exports were rising, supporting a “nascent economic recovery.”
    Serbia’s Gross Domestic Product shrunk by 0.3 percent in the fourth quarter from the third, the second quarterly contraction in a row, for an annual fall of 2.0 percent, the fourth quarter in a row where the economy has been contracting on an annual basis.

    Serbia’s inflation rate started accelerating in April last year after hitting a 30-year low of 2.7 percent and peaked at 12.9 percent in October due to higher agricultural prices and administered prices.
    The central bank estimates that Serbia’s economy contracted by 1.7 in 2012 and forecast an expansion of 2.5 percent in 2013.

    In March the central bank also said it expects inflation to return to its target but it did not say when.

Global Central Bank Monetary Policy Review for week ended – Apr 6, 2013

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Global Central Bank Monetary Policy Review :

Last week 7 Countries Central Bank met #Australia #Russia #Thailand #Uganda #Japan #UnitedKingdom #Euro zone 

This week Central Banker from 8 Countries meet : #SriLanka #Poland #SouthKorea #Indonesia #Serbia #Peru #Chile #Singapore hold their Monetary Policy meet

Monetary Policy Week in Review – Apr 6, 2013: BOJ shows central bankers are still willing to take bold, creative steps – Central Bank News.

Monetary Policy Week in Review – Apr 6, 2013: BOJ shows central bankers are still willing to take bold, creative steps

    Three new chapters in the history of monetary policy were opened this week, showing that central bankers remain fearless, creative and willing to take bold steps to revive economic growth.
The main example was the Bank of Japan’s embrace of large-scale asset purchases as a way to banish deflation.
However, the Central Bank of Hungary’s effort to directly aid small businesses was also indicative of a willingness to think outside the box just as the Central Bank of Barbados showed a lack of dogmatic thinking by questioning its ability to control inflation through interest rates.
It also became clear this week that the European Central Bank (ECB) is likely to join the growing list of banks that are employing new and creative policies to solve the issue of how to channel funds to private businesses when the banking system is ailing.
At the core of these new policies is the lasting damage from the Global Financial Crises. The banking system, the traditional conduit between central banks and private businesses, is traumatized, saddled with debt and too little capital, reticent to lend to new business ventures.
ECB President Mario Draghi said this week he was considering various instruments and tools to stimulate growth, including those used by central banks abroad, and was ready to act.
Though the multinational structure of the ECB makes it less agile than other central banks, Draghi’s statement last July that the ECB was “ready to do whatever it takes to preserve the euro” showed the same boldness and fearlessness that the BOJ’s new governor displayed this week.

The BOJ surprised on two fronts: The massive size of its asset purchases and the radical shift in its policy framework.
Over the next two years, the BOJ aims to purchase some 130 trillion yen of assets (US$1.33 trillion) including government bonds, exchange-traded-funds (ETFs) and real estate investment trusts (REITs), expanding its balance sheet to 290 trillion yen ($2.97 trillion) from 158 trillion at the end of 2012.
On a monthly basis, the BOJ plans to buy some 7 trillion yen ($72 billion) of mainly longer-term Japanese government bonds, which means it will be buying some 70 percent of new debt issued.
To put that into perspective, the U.S. Federal Reserve has bought some $2.5 trillion in mortgage and Treasuries over the last five years and is currently purchasing assets worth $85 billion a month. The Fed’s balance sheet is currently $3.2 trillion.
However, the U.S. economy is three times the size of the Japanese economy.
The other novel aspect of the BOJ’s “new phase of monetary easing both in terms of quantity and quality” was the change in its operational target.
Instead of focusing on the overnight call rate, it will now focus on the monetary base, a measure that includes coins and notes in circulation and banks’ reserves at the BOJ.
The call rate has been largely symbolic since December 2008 when it was cut to 0.10 percent. In October 2010 it was then trimmed to between zero and 0.10 percent and now the BOJ is drawing the ultimate consequence of an impaired interest rate channel and scrapping it altogether.
It remains to be seen whether other central banks, notably the Bank of England, which has held rates at effectively zero for five years, will draw inspiration from the BOJ.
The BOE, which left rates and asset purchase targets unchanged this week, is currently considering introducing economic thresholds as part of its framework and may go even further once its new governor, Mark Carney, takes over in June.

 Last week seven central banks took policy decisions with six banks (AustraliaRussia,ThailandUganda, the United Kingdom and the euro area) keeping rates on hold.
Although Japan is no longer targeting the uncollateralized overnight call rate but rater the monetary base, it is being counted as having cut rates to zero from the previous 0-0.10 percent in order to capture its decision to ease its policy stance.
Through the first 14 weeks of the year, 77 percent of the 133 policy decisions taken by the 90 central banks followed by Central Bank News lead to unchanged rates, the same ratio as after the first 13 weeks.
Globally, 20 percent of policy decisions this year have lead to rate cuts – largely by central banks in emerging economies and now Japan as the first central bank in developed markets – up from 19.0 percent last week.
Of the 26 rate cuts worldwide so far this year, 38 percent have come from central banks in emerging markets, down from 42 percent last week.


AUSTRALIA DM 3.00% 3.00% 4.25%
RUSSIA EM 8.25% 8.25% 8.00%
THAILAND EM 2.75% 2.75% 3.00%
UGANDA 12.00% 12.00% 21.00%
JAPAN DM 0.00% 0.10% 0.10%
UNITED KINGDOM DM 0.50% 0.50% 0.50%
EURO AREA DM 0.75% 0.75% 1.00%

    NEXT WEEK (week 15) features six central bank policy decisions, including Sri Lanka’s tentatively scheduled meeting, Barbados’ first quarter review, and meetings by Poland, South Korea, Indonesia, Serbia, Peru, Chile and Singapore.

COUNTRY MSCI          MEETING              RATE        1 YEAR AGO
SRI LANKA FM 9-Apr 7.50% 7.75%
POLAND EM 10-Apr 3.25% 4.50%
SOUTH KOREA EM 11-Apr 2.75% 3.25%
INDONESIA EM 11-Apr 5.75% 5.75%
SERBIA FM 11-Apr 11.75% 9.50%
PERU EM 11-Apr 4.25% 4.25%
CHILE EM 11-Apr 5.00% 5.00%


ECB holds rate, but keeping very close eye on data – Central Bank News

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ECB holds rate, but keeping very close eye on data – Central Bank News.

The European Central Bank (ECB) held its benchmark refinancing rate steady at 0.75 percent, as expected, but signaled that it may cut rates if the economy continues to weaken by saying it will be monitoring economic data “very closely” in coming weeks for the impact on its monetary policy stance.

    The ECB, which cut its rate by 25 basis points in 2012, said economic activity remained weak at the start of this year but it is still projecting a gradual economic recovery in the second half of 2013.
    However, it stressed the downside risks to this forecast, including weaker-than-expected domestic demand and slow or insufficient structural reforms, which would “have the potential to dampen the improvement in confidence and thereby delay the recovery,” ECB President Mario Draghi said in his prepared statement to a press conference.
    Last month ECB staff cut their growth forecast for the 17 nations that share the euro to a contraction in Gross Domestic Product of between 0.9 and 0.1 percent this year. In the fourth quarter of 2012, GDP shrank by 0.6 percent, the fifth quarterly contraction in a row, for an annual drop of 0.9 percent.
    “Against this overall background, our monetary policy stance will remain accommodative for as long as needed,” Draghi said, adding: “We are also closely monitoring money market conditions and their potential impact on our monetary policy stance and its transmission to the economy.”

    Draghi made no specific reference to recent events in Cyprus but said the fragmentation of euro area credit markets had to be reduced further so the ECB’s policy stance could be transmitted throughout the euro area.
    Despite the ECB’s low interest rates, there is a wide spread in the interest rates that businesses pay for loans in the euro area. Businesses in Southern Europe, for example in Spain and Portugal, pay much higher loan rates than those in Germany.
    Draghi called for further steps to establish a full banking union throughout the euro zone, saying in “light of recent experience” – an obvious reference to Cyprus – it is crucial that a single banking supervisor and a single resolution mechanism for troubled banks is implemented.
   Inflation in the euro zone continued to fall in March, with the annual rate down to 1.7 percent from February’s 1.8 percent, mainly due to lower energy prices.
    Draghi said inflationary expectations remain in line with the ECB’s price stability objective. The ECB targets inflation that is below, but close to 2 percent.
    Although most economists had expected the ECB to keep rates steady, a growing number were  expecting the bank to signal that it may ease policy later this year if the economy remains weak.
     The jobless rate in the 17 nation area was unchanged at 12.0 percent in February with rates in Greece and Spain above 50 percent.
    Last month the OECD said there was a strong case for the ECB to ease its policy given weak demand and inflation that is below its objective.
    “The risk of undue inflationary pressure associated with monetary easing is small, as the transmission mechanism is impaired, especially in the periphery countries where banks face high funding costs,” the OECD said in its interim economic report.

Georgia’s Central Bank News

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Georgia cuts key rate 25 bps, inflation seen below target – Central Bank News.

Georgia’s central bank cut its benchmark refinancing rate by 25 basis points to 4.50 percent, its second rate cut this year, saying it had cut its inflation projection and now forecasts inflation to remain below the bank’s target throughout this year and first approach it in the second half of 2014.
The National Bank of Georgia, which started its monetary easing cycle in July 2011, said economic activity weakened at the end of last year, and lower demand is pushing the price level downwards.
A slowdown in the growth of imports in January and February is another indication of a slowdown in domestic demand, the bank said.
Georgia’s consumer price inflation continued to drop in February as deflation maintained its grip on Georgia. Inflation was minus 2.12 percent in February, slightly up from January’s minus 1.6 percent.
Since February 2012, the inflation rate has only been positive in two months, October and July, with inflation rates of 0.56 percent and 0.1 percent, respectively.
The central bank said its forecasts for inflation had dropped since the last meeting of its monetary policy committee, which targets inflation of 6 percent.
     Georgia’s central bank cut rates by 150 basis points in 2012 and has now cut by 75 basis points this year following a 50 basis point reduction in February.
The central bank said the economy expanded by an annual 2.8 percent in the fourth quarter and credit activity remains weak due to low demand for loans, leading to a slowdown in demand.
“Low credit activity also weakens the interest rate channel of monetary transmission,” the central bank said.

Russian Central Bank News

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Russia holds rate steady, says rise in inflation poses risks – Central Bank News.

Russia’s central bank held its benchmark refinancing rate steady at 8.25 percent, as expected, saying the rise in inflation was expected and poses risks while economic growth is continuing to slow down.
    The Bank of Russia, which raised its rate by 25 basis points in 2012 and is under pressure to cut rates to boost growth, warned that if inflation remains above target for a prolonged period it may affect expectations and thus poses risks, in particular in light of planned increases in the tariffs of monopolies.
    However, the central bank omitted last month’s phrase that the risk of a significant slowdown from tighter monetary conditions were considered minor, indicating a slightly less hawkish stance.
    Russia’s inflation continued to climb in February, hitting an 18-month high of 7.3 percent, up from January’s 7.1 percent.
    The central bank repeated that it expects inflation to exceed its 5-6 percent target in the first half of 2013 due to higher food prices and certain regulated prices.
     In 2012 prices rose 5.1 percent and the central bank targets 4-5 percent inflation in 2014.

     The Bank’s Chairman Sergey Ignatiev has lead a dogged campaign against inflation which started accelerating in mid-2012 after easing in the second half of 2011. Ignatiev is retiring in June and is being replaced by Elvira Nabiullina, economic aide to Russian President Vladimir Putin.
    “The dynamics of the key macroeconomic indicators in January 2013 point to a continuing slowdown in economic growth,” the central bank said, adding that investment in productive capacity was subdued, retail sales decelerated and industrial output decreased.
    At the same time, economic confidence remains positive and labor market conditions, along with credit expansion, is providing support to domestic demand, the bank added.
     Russia’s Gross Domestic Product rose by 0.6 percent in the third quarter from the second for annual growth of 2.9 percent, down from the second quarter’s 4.0 percent rate. In 2012 the economy expanded by 3.4 percent.
     It is the weakest growth rate since 2010 and economists expect the bank to start cutting rates after inflation begins to ease over the next few months.
    The appointment of a Putin ally as new bank president has further stoked these expectations with some economists expecting the bank to cut rates sooner rather than later.

Latvia’s Central Bank News

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Latvia holds rate steady on low inflation and no risks – Central Bank News.

Latvia’s central bank held its benchmark refinancing rate steady at 2.5 percent, saying it’s policy stance is appropriate in light of low inflation and no risks to price stability from economic growth.
   The Bank of Latvia, which cut rates by 100 basis points in 2012, also said it would retain its reserve requirement.
    In February Latvia’s inflation rate fell to 0.3 percent from 0.6 percent, and in January the bank forecast 2013 inflation of 2.0 percent. The Bank of Latvia aims for price stability but does not have an actual inflation target.
    “Since the inflation indicators are consistently low and the rate of economic growth poses no risks to price stability in the medium term, the Bank of Latvia Council is of the opinion that the current stance of monetary policy is appropriate for the economic situation,” the bank said.
    Latvia’s Gross Domestic Product expanded by 1.4 percent in the fourth quarter from the third quarter for annual growth of 5.1 percent, slightly down from the third quarter’s rate of 5.2 percent.
    The bank forecasts 2013 growth of 3.6 percent, down from 2011’s 5.5 percent.
    Earlier this month Latvia’s government applied to join the embattled euro zone with a final decision expected in July.

    Latvia pegged its currency to the single currency after joining the European Union in 2004 and stuck with the link through the past five years of financial and economic turmoil though many economists said it would have softened the economic downturn if it had devalued the currency. Latvia needed a bailout in 2009 by the International Monetary Fund and the EU.
    Neighboring Baltic state Estonia already joined the euro in 2011 and Lithuania pegged its currency to the euro in 2002 and has said it is considering joining the euro in 2015 or 2016.
    Many mortgages in Latvia are already denominated in euros