Global Central banks

Global Central Bank Monetary Policy Weekly Review – for weekended 11th May 2013

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Monetary Policy Week in Review – May 11, 2013: 8 banks cut rates by 550 bps as BOJ easing ripples through world – Central Bank News.

Last week 16 central banks took policy decisions with a record eight banks cutting rates by a total of 550 basis points as the Bank of Japan’s (BOJ) monetary easing looks to become a watershed event in global monetary policy by opening a new front in the currency wars.
Only weeks after the Group of 20 finance ministers and central bank governors agreed that they  “will refrain from competitive devaluation,” Australia and Korea – two of the G20 members – surprised markets by cutting interest rates.
Observers questioned the motives behind the two rate cuts as the global economic outlook had not drastically deteriorated.
It is already clear that the ripples from the BOJ’s easing is upsetting global balances, with a range of competitors reacting to the 17 percent plunge in the value of the yen to the U.S. dollar so far this year.
The only substantial change in the policy statements from the Reserve Bank of Australia(RBA) and the Bank of Korea (BOK) from April to May was the reference to foreign exchange while their observations about growth were largely unchanged.
The other six central banks that cut rates this week did not refer to exchange rates but said a lack of inflationary pressure had given them space to boost growth.
But the RBA said the exchange rate of the Australian dollar had been “little changed at a historically high level” while the BOK said Korea’s output gap would continue for a considerable time due to slow global growth, “the influence of the Japanese yen weakening” and geopolitical risks.
To be sure, the global economy has entered a soft patch. But that is exactly the point of international agreements. When times get tough, policy makers are supposed to consider the international ramifications of their actions and look to the common good.
The official reaction of the international community, both the G20 and the Group of Seven, to the BOJ’s new and more aggressive quantitative easing is that it benefits everyone because it strengthens global growth by supporting Japan’s domestic demand and stopping deflation.
Meanwhile, individual countries are adjusting their policies to the impact of the lower yen and the inflow of excess funds to their markets from the BOJ’s easing. Data showed that Japanese investors were net buyers of foreign bonds in recent weeks.
The Reserve Bank of New Zealand (RBNZ) intervened in foreign exchange markets for the first time since 2007 to weaken its dollar. The move was hardly a surprise after the RBNZ last month pinned some of the blame for the currency’s appreciation on Japan’s “substantial quantitative easing programme, ” which is making life hard for its exporters.
Thailand has been debating how to tackle the rise in its baht currency and capital inflows with the Bank of Thailand (BoT) on Monday meeting with government and private sector representatives to discuss a response.
The Thai finance minister has been vocal in his criticism of the BOT, saying it should take the strength of the currency into account when deciding on policy and not just inflation. So far the Thai central bank has resisted pressure and kept rates unchanged, arguing the inflows are due to investors’ confidence in the Thai economy and rate cuts would not make much of a difference.

Apart from Australia and Korea, the central banks of Kenya, BelarusPolandGeorgiaSri Lanka and Vietnam also cut rates this week. Seven banks held rates steady: MalawiNorway, the United KingdomMalaysia, PeruEgypt and Mozambique.
Gambia was the only central bank to raise rates this week. Four percent of all rate decisions this year have favored rate hikes, a largely stable ratio. It was Gambia’s first rate rise this year, reversing two rate cuts in 2012, with the bank citing accelerating inflation, partly due to currency depreciation.

 Since the BOJ announced its “new phase of monetary easing” on April 4, central banks’ policy rates have tumbled by a cumulative 1,235 basis points, accounting for 58 percent of the total decline in rates so far this year.
Although the decline in policy rates accelerated this week, the total fall this year only amounts to 2,126 basis points, still a far cry from cuts totaling 6,475 in 2012 and 7,517 in 2011. However, the fall in rates does not reflect the true extent of global monetary easing as it doesn’t take into account quantitative easing measures.
Through the first 19 weeks of this year, 24 percent of 186 policy decisions taken by the 90 central banks followed by Central Bank News have lead to rate cuts, a sharp increase from 20 percent after the first 18 weeks.
It was the highest number of rate cuts in one week so far this year, pushing down the average Global Monetary Policy Rate (GMPR) to 5.66 percent from 5.70 percent at the end of April and 6.2 percent at the end of 2012.
The majority of this year’s policy decisions still favor unchanged rates, but the trend is declining. At the end of this week, 72 percent of all decisions this year were to keep rates steady, down from 77 percent after the first 14 weeks of this year and 75 percent after the first 16 weeks.


KENYA FM 8.50% 9.50% 18.00%
AUSTRALIA DM 2.75% 3.00% 3.75%
BELARUS 25.00% 27.00% 34.00%
GAMBIA 14.00% 12.00% 13.00%
MALAWI 25.00% 25.00% 16.00%
NORWAY DM 1.50% 1.50% 1.50%
POLAND EM 3.00% 3.25% 4.75%
GEORGIA 4.25% 4.50% 6.00%
SOUTH KOREA EM 2.50% 2.75% 3.25%
UNITED KINGDOM DM 0.50% 0.50% 0.50%
MALAYSIA EM 3.00% 3.00% 3.00%
PERU EM 4.25% 4.25% 4.25%
EGYPT EM 9.75% 9.75% 9.25%
SRI LANKA FM 7.00% 7.50% 7.75%
VIETNAM FM 7.00% 8.00% 12.00%
MOZAMBIQUE 9.50% 9.50% 13.50%

 NEXT WEEK  (Week 20) features five central bank policy decisions, including Serbia, Indonesia, Iceland, Latvia and Turkey.
On Monday Thailand’s finance minister meets with the Bank of Thailand’s monetary policy committee, government officials and the private sector to discuss the rise in the Thai baht. Markets are speculating the meeting will result in a rate cut. The next scheduled policy meeting by Bank of Thailand is on May 29.

COUNTRY MSCI              DATE               RATE        1 YEAR AGO
SERBIA FM 13-May 11.75% 9.50%
THAILAND EM 13-May 2.75% 3.00%
INDONESIA EM 14-May 5.75% 5.75%
ICELAND 15-May 6.00% 5.50%
LATVIA 16-May 2.50% 3.50%
TURKEY EM 16-May 5.00% 5.75%

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%


Turkey Central Bank News update

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Turkey cuts key rates 50 bps, inflation seen contained – Central Bank News.

Turkey’s central bank cut its main short-term interest rates by 50 basis points, saying that weak global demand and the outlook for commodity prices should “contain the upward pressures on inflation.”
    The Central Bank of the Republic of Turkey (CBRT) cut its policy rate, the one-week repo rate, to 5.0 percent from 5.50 percent along with the top and bottom rates on its daily interest rate corridor.
   The overnight borrowing rate in the corridor was cut by 50 basis points to 4.0 percent and the overnight lending rate to 7.0 percent.
    The rate on borrowing facilities for primary dealers was also cut by 50 basis points to 6.5 percent.
    The CBRT has been steadily narrowing its interest rate corridor since last September, including a 100 basis point cut in the ceiling rate last month. However, it only cut its main policy rate in December, seeking to balance the need to stimulate declining economic activity without boosting credit growth too much and encouraging the inflow of capital that looks to take advantage of the high yield.
    The CBRT said capital inflows had re-accelerated and credit growth was above the bank’s reference rate so “in order to balance the risks to financial stability, the proper policy would be to keep interest rates low while increasing foreign currency reserves via macroprudential measures.”
    In addition to cutting short-term rates, the bank will further raise its reserve options coefficients, a tool that helps the central bank control banks’ foreign exchange reserves and thus liquidity.

     Turkey’s inflation rate rose to 7.29 percent in March, slightly up from 7.03 percent in February. The CBRT targets annual inflation of 5.0 percent this year, the same as in 2012 when inflation averaged 6.2 percent.
    The central bank said demand was developing in line with expectations, with domestic demand healthy, but exports were lower. The current account deficit had increased in light of a revival in domestic demand but it expects to contain a further widening of the deficit.
    Turkey’s Gross Domestic Product stagnated in the fourth quarter from the third quarter for annual growth of 1.4 percent, down from a 1.6 percent annual rate in the third quarter.

    The Turkish economy is estimated to have expanded by 2.5 percent in 2012, down from 8.5 percent in 2011. The CBRT forecasts 2013 growth of 4 percent or higher.
    In the first four months of this year, the CRBR has cut the overnight lending rate by 200 basis points and the overnight borrowing rate by 100 basis points. The short-term rates have been declining during the last decade from 2002 when the borrowing rate was 57 percent and the lending rate 62 percent.
    In 2012 the CBRT started cutting the overnight lending rate from 12.50 percent while keeping the borrowing rate steady at 5.0 percent.
    Earlier this month, the central bank’s governor, Erdem Basci, held out the hope for “a measured rate cut, ” and a few day’s later Prime Minister Recep Erdogan said interest rates around 6 percent were too high in light of a decline in inflation to around 6 percent from 63 percent in 2002.


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%


Mexico’s Central Bank News

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Mexico reduces rate by 50 bps in first cut since July 2009 – Central Bank News.

Mexico’s central bank cut its benchmark interest rate by a larger-than-expected 50 basis points to 4.0 percent to boost spending and growth, but stressed it was not embarking on a new cycle of easing and the rate cut would not jeopardize the path towards lower inflation.
    Banco de Mexico said its first rate cut since July 2009 was made possible by the country’s progress in anchoring inflationary expectations, reducing the persistence and volatility of inflation, the lack of second-round effects from price shocks and a significant decline in the inflation risk premium.
    But Mexico’s economy is now feeling the effects of an expected decline in U.S. growth where budget cuts are affecting prospects and there is uncertainty about Europe’s economic recovery.
    “The global economy continues to show signs of weakness,” the Bank of Mexico said, adding that rising unemployment will allow the economy to grow without stoking inflation.
   The rate cut comes after the central bank changed course in January and signaled that rate cuts may be in the offing after last year’s frequent warnings of rate hikes to control inflation. 
   Mexico’s inflation rate rose to 3.55 percent in February from 3.25 percent in January but this is still well below 2012’s average rate of 4.11 percent.
    The central bank targets annual inflation of 3.0 percent, plus/minus one percentage point.

    The central bank said the rise in February inflation is expected to be temporary with headline inflation rising to around 4 percent in coming months before settling down to a rate of about 3.0 percent in the second half of this year and in 2014.
    Core inflation, which was slightly below 3.0 percent in February, is forecast to remain close to 3.0 percent and even below for most of 2013 and 20145.
    “In sum, although inflation rates are expected to be higher in the short term, this is not expected to affect the converging path of inflation in the medium term,” the central bank said, adding that an expected reduction in government deficit in fiscal 2013 also helped paved the way for the rate cut.
    “The Board believes that this measure, which does not represent the beginning of a cycle with the goal of a lower interbank interest rate benchmark, supports an expansion of spending in the economy according to its growth potential and a convergence inflation to the permanent objective of 3 percent,” the central bank said.
    Mexico’s Gross Domestic Product grew by 0.8 percent in the fourth quarter from the third quarter for annual growth of 3.2 percent, the same rate as in the third quarter. In 2011 the economy expanded by 3.9 percent.

Sri Lanka’s Central Bank holds rate steady ……

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Sri Lanka holds rate steady, sees lower inflation in March – Central Bank News.

 Sri Lanka’s central bank held its benchmark repurchase rate steady at 7.50 percent and said inflation is expected to start declining in March and “reach a more favourable level by the end of the year.”
    The Central Bank of Sri Lanka, which raised rates by a 50 basis points in 2012, said the decline in inflation should also offset the upward pressure from an expected revision to administered prices.
    Sri Lanka’s inflation rate was steady at 9.8 percent in February from January, reflecting the remaining impact of changes to administered prices and disruptions to food supplies.
    “Inflation has been at single digits over the past 49 months and the positive outlook for inflation is expected to continue, supported by well contained demand and favourable domestic and global supply conditions,” the central bank said.
    But the central bank voiced concern that after its rate cut in December, commercial lending and deposit rates remain high. However, following recent discussions with leading banks, the central bank expects rates to be adjusted and this should “stimulate private sector economic activity towards the growth targets for 2013.”
    The central bank raised rates by 75 basis points during 2012 to rein in credit growth but then cut its rate by 25 basis points in December and removed its ceiling on loan growth as inflation was declining.
    Credit extended to the private sector continued to ease in January to an annual rate of 15.5 percent from the peak of 35.2 percent last March, “indicating that the relaxation of monetary policy in December 2012 is yet to be reflected in bank lending,” the bank said.
    Sri Lanka’s balance of payments has also continued to rise and “comfortable surplus is anticipated in 2013” even if the central bank has bought $US 486 million net this year. The exchange rate has been stable due to increased foreign exchange flows to the government bond market and from tourism and private transfers, the bank said.
     Sri Lanka’s Gross Domestic Product expanded by an annual rate of 4.8 percent in the third quarter, down from 6.4 percent in the second. The central bank expects economic growth to reach 7.5 percent this year, above the International Monetary Fund’s forecast of 6.25 percent. In 2011 Sri Lanka’s economy expanded by 8.3 percent.