global central bank action
|COUNTRY||MSCI||NEW RATE||OLD RATE||1 YEAR AGO|
|COUNTRY||MSCI||MEETING||RATE||1 YEAR AGO|
|TRINIDAD & TOBAGO||22-Mar||2.75%||3.00%|
Global interest rates declined further in February as six central banks cut rates by a total of 150 basis points, pushing the average global monetary policy rate down to 5.86 percent from January’s 5.88 percent and December’s 5.92 percent.
The pace of rate cuts cooled from January when the 90 central banks followed by Central Bank News trimmed rates by a total of 342 basis points, as many central banks start to shift towards a more neutral stance to gauge the impact of last year’s rate cuts, U.S. budget cuts and Europe’s recession.
Only one central bank raised rates in February: Serbia, which has now raised rates by 50 basis points this year, continuing its dogged fight against inflation.
Apart from Denmark, which raised its rate in January for exchange rate reasons, Serbia is the only central bank worldwide to have tightened policy this year, illustrating how weak global demand is keeping inflation at bay and allowing central banks to cut interest rates to stimulate growth.
Declining inflation rates and subdued upward pressure was specifically cited by five of this month’s rate cutters (Georgia, Azerbaijan, Poland, Hungary and Colombia) in their policy statements.
Nevertheless, some central banks are starting to voice concern over inflationary pressures, especially Brazil, Russia and Malaysia, while China has been draining funds from the banking system to temper the rise in inflation.
While there are still major risks to the global economic recovery, the overall picture of the global economy is one of brightening prospects, with the U.S., China and emerging markets growing stronger while Europe is weakening.
The Reserve Bank of Australia (RBA) and the Bank of Israel (BOI) typify those central banks that are in a holding pattern. After last year’s sizable rate cuts, their economies are adjusting with the RBA saying the full impact of “significant easing” is yet to come while the BOI notes it’s too early to tell whether the economy has reached a turning point.
Asia remains the hub for global growth, with a pickup in China’s economic activity cited by both Indonesia and far-away Chile as helping their exports. South Korea, Thailand, Japan and Sweden also noted improving exports.
New Zealand, whose strong currency is helping curtain inflation, is also more upbeat about its economic prospects and keeping a close eye on house prices for any signs of overheating.
INTEREST RATE CUTS, YEAR-TO-DATE IN BASIS POINTS, FEBRUARY 2013:
|COUNTRY||MSCI||CURRENT RATE||YTD CHANGE|
Mozambique’s central bank held its benchmark interest rate on the standing lending facility steady at 9.5 percent, saying it was focused on ensuring economic and financial stability following widespread flooding that has impacted economic activity, inflation and the balance of payments.
The Bank of Mozambique (CPMO), which cut rates by 550 basis points in 2012 but has held rates steady since November, said the “domestic economic situation continued to be characterized by the effects of floods, especially agricultural production, with a significant impact on the behavior of inflation and the balance of payments, where the bank expects higher demand for imports of food and equipment, which could represent pressure on international reserves.”
Mozambique’s inflation rate rose to an annual 4.18 percent in February from 2.73 percent in January and the bank said it would intervene in the interbank market to ensure that the monetary base does not exceed 36.694 billion meticais by the end of March, down from a target of 37.16 billion end-February.
On the final day of February, Mozambique’s net international reserves fell by $US 94.5 to 2.39 billion due to foreign exchange sales by the central bank totaling $66 million to pay for imports, particularly liquid fuel, which cost $91 million, CPMO said.
The metical depreciated by 0.03 percent during February, and was quoted at 29.99 to the U.S. dollar at the end of last month.
Mozambique’s Gross Domestic Product rose by an annual rate of 6.8 percent in the third quarter, down from the second quarter’s 8.0 percent, but this was prior to flooding in recent months that has affected large parts of the country. Many economists have started to cut their growth forecasts.
But in its latest economic review, the central bank said that it expects inflation to accelerate slightly in 2013, to around its target of 6.5 percent, while GDP growth may accelerate to nearly 8.4 percent.
In its review of Mozambique’s economy, the International Monetary Fund in December described the country’s economic performance last year as “remarkable” with policies that have supported growth while bringing down inflation and strengthening international reserves.
It forecast economic growth of 7.5 percent in 2012 and 8.4 percent in 2013, helped by an expansion of the country’s coal industry.
It also said the gradual easing of monetary policy last year has supported private sector credit growth and preserved the low inflation environment and government’s budget was prudently executed, helping foster economic stability despite global uncertainty.