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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.
 LAST WEEK’S (WEEK 16) MONETARY POLICY DECISIONS:
COUNTRY MSCI     NEW RATE         OLD RATE        1 YEAR AGO
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%

 

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%



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