global central bank action

Monetary Policy of Global Central Banks Week in Review – March 16, 2013 week end

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Monetary Policy Week in Review – Mar 16, 2013: Eleven central banks keep rates steady, Norway delays rate rise – Central Bank News.

 Last week 11 central banks took policy decisions with every single bank keeping rates on hold though Norway, as Canada in January, delayed a planned rate rises due to lower inflationary pressure from sluggish growth that continues to plague the global economy.
    Norway’s decision illustrates how central banks are uneasy with very low policy rates as they tend to encourage risk taking and fuel asset bubbles. Yet, the central banks feel they have little choice but to keep rates low with major downside risks dominating the global economy, keeping consumers and investors on edge and thus holding back demand and inflation.
    In addition to Norway, the central banks of Mauritius, Mozambique, Kenya, Serbia, New Zealand, Korea, the Philippines, Switzerland, Latvia and Russia kept rates on hold last week.
    Through the first 11 weeks of the year, 78 percent of the 102 policy decisions taken by the 90 central banks followed by Central Bank News lead to unchanged rates, up from 76 percent after 10 weeks, strengthening this year’s trend toward steady policy rates worldwide.
    Globally, 19 percent of policy decisions so far this year have lead to rate cuts, largely by central banks in emerging economies, down from 21 percent after the first 10 weeks, a policy rates continue to decline.
    But the pace of rate cuts is slowing as many central banks shift toward a more neutral stance to gauge the impact of last year’s rate cuts.
    Of last week’s 11 policy decisions, seven were from central banks that cut rates last year, including Kenya and Mozambique, among the most aggressive cutters
    Oil-rich Norway is experiencing growing household debt and house prices, and following a rate cut in March 2012, Norges Bank started in June to prepare markets for higher rates as inflationary pressures were expected to rise.
    But last August it started to push back the time frame for a rate rise and then in October a rate rise was delayed until sometime this year. Now, a rate rise has been postponed until next spring as inflation and economic growth remains lower than expected.
    But Norwegian debt and house prices continue to rise so the central bank, like New Zealand, is preparing to introduce a counter-cyclical buffer in an attempt to rein in banks’ willingness to extend credit and also strengthen banks’ ability to withstand a crises.
    While New Zealand’s strong currency, drought and fiscal consolidation is restraining growth, reconstruction after the 2010 Canterbury earthquake along with rising house prices are creating upside risks. Seeking to strike the right balance, the Reserve Bank of New Zealand said it expects to keep rates on hold through the year.
    Russia’s central bank struck a less hawkish tone last week, dropping its previous statements that the risk of a slowdown from tight money was minor and the economy was operating at close to potential.
    Instead, the Bank of Russia noted slowing economic growth, strengthening the impression – already boosted by the nomination of Putin aide Elvira Nebiullina as new bank president – that rate cuts are on their way.
     Switzerland also took note of the lack of inflationary pressure, trimming its inflation forecast to continued deflation this year and only a slight 0.2 percent rise in consumer prices next year, maintaining downward pressure on the Swiss franc.
    The contrast between Europe and Southeast Asia remains stark.
   Although the Bank of Korea underlined the downside risks to global growth from Europe and the U.S., it is looking ahead to rising inflation while the Philippines again cut rates on its Special Deposit Account (SDA) in an effort to stem the inflow of foreign funds and curb the rise in the peso.
    Fueled by ample global liquidity and low rates in advanced economies, many emerging markets with solid economic fundamentals are adjusting their policy framework to stem the flow of hot money yet still stimulate domestic growth.
    Like Turkey last year, the governor of Bangko Sentral ngPilipinas told journalists  that he is moving to an interest rate corridor system to help manage capital flows which not only puts upward pressure on currencies but also leads to asset bubbles.
    New Zealand’s central bank governor emphasized his concern over the strong kiwi dollar, warning markets that he would cut rates if the currency rises more than justified by the economic fundamentals.
    Meanwhile, Serbia – the only central bank worldwide to have raised rates this year in addition to Denmark – lived up to expectations and held rates after eight rate hikes despite the continuing rise in inflation.
    Last month the National Bank of Serbia signaled that it was starting to soften its tightening stance due to an expected drop in inflation, and this week it made good on that promise, saying that the last four months show that inflation is easing.
 LAST WEEK’S (WEEK 11) MONETARY POLICY DECISIONS:
COUNTRY MSCI     NEW RATE           OLD RATE        1 YEAR AGO
MAURITIUS 4.90% 4.90% 4.90%
MOZAMBIQUE 9.50% 9.50% 13.75%
KENYA FM 9.50% 9.50% 18.00%
SERBIA FM 11.75% 11.75% 9.50%
NEW ZEALAND DM 2.50% 2.50% 2.50%
SOUTH KOREA EM 2.75% 2.75% 3.25%
PHILIPPINES EM 3.50% 3.50% 4.00%
SWITZERLAND DM 0.25% 0.25% 0.25%
LATVIA 2.50% 2.50% 3.50%
NORWAY DM 1.50% 1.50% 1.50%
RUSSIA EM 8.25% 8.25% 8.00%
 Next week (week 12) features eight central bank policy decisions, including India, Nigeria, the United States, South Africa, Iceland, Egypt, Chile and Trinidad & Tobago.
    The U.S. Federal Reserve changed the time for announcing policy decision to 2 p.m. Eastern Standard Time from 2:15, with the press conference at 2:30 p.m.
COUNTRY MSCI          MEETING               RATE        1 YEAR AGO
INDIA EM 19-Mar 7.75% 8.50%
NIGERIA FM 19-Mar 12.00% 12.00%
UNITED STATES DM 20-Mar 0.25% 0.25%
SOUTH AFRICA EM 20-Mar 5.00% 5.50%
ICELAND 20-Mar 6.00% 5.00%
EGYPT EM 21-Mar 9.25% 9.25%
CHILE EM 21-Mar 5.00% 5.00%
TRINIDAD & TOBAGO 22-Mar 2.75% 3.00%



    www.CentralBankNews.info

 

Global Monetary Policy Rates – February 2013 : Global Central Bank News

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Global Monetary Policy Rates – Feb. 2013: Rates decline further but pace slows as growth prospects improve – Central Bank News.

 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
KENYA FM 9.50% -150
MONGOLIA 12.50% -75
COLOMBIA EM 3.75% -50
GEORGIA 4.75% -50
HUNGARY EM 5.25% -50
JAMAICA 5.75% -50
POLAND EM 3.75% -50
AZERBAIJAN 4.75% -25
ALBANIA 3.75% -25
ANGOLA 10.00% -25
INDIA EM 7.75% -25
MACEDONIA 3.50% -25
BULGARIA FM 0.01% -2



www.CentralBankNews.info

 

 

Mozambique’s Central Bank News

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Mozambique holds rate, flooding could pressure reserves – Central Bank News.

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.

     www.CentralBankNews.info