Friday, September 16, 2011
Central Bank
The past week in monetary policy saw 13 central banks review interest rate levels and monetary policy settings. Those that changed rates were: Belarus +300bps to 30.00%, Kenya +75bps to 7.00%, and India +25bps to 8.25%. Russia and Denmark also adjusted the bands of their deposit and lending rates, while holding their main rates steady. The Banks that held rates unchanged were: Mauritius 5.50%, Mozambique 16.00%, Russia 8.25%, New Zealand 2.50%, Switzerland 0-0.25%, Georgia 7.50%, Latvia 3.50%, Denmark 1.55%, Sri Lanka 7.00%, and Chile 5.25%. Also making headlines in central banking was the announcement from the ECB of joint US dollar liquidity operations as a move to augment European banking system liquidity.
Unsurprisingly, many central banks commented on the impact of global developments on their policy outlook; with the signs of slowing growth in the US and Europe and continued financial market volatility weighing on decisions. However many emerging markets are still experiencing relatively buoyant economic conditions, as indicated in central bank statements in the past week. A selection of key quotes from central bank monetary policy media releases are listed below:
Reserve Bank of India (increased 25bps to 8.25%): "The monetary tightening effected so far by the Reserve Bank has helped in containing inflation and anchoring inflationary expectations, though both remain at levels beyond the Reserve Bank's comfort zone... a premature change in the policy stance could harden inflationary expectations, thereby diluting the impact of past policy actions. It is, therefore, imperative to persist with the current anti-inflationary stance. Going forward, the stance will be influenced by signs of downward movement in the inflation trajectory, to which the moderation in demand is expected to contribute, and the implications of global developments."
Central Bank of Kenya (increased 25bps to 7.00%): "The Committee observed that inflation, exchange rate and money market volatility continued to pose a challenge to the economy. Specifically, the debt crisis in Europe continues to have a significant impact on the economy through the exchange rate volatility. Events in the USA and Europe are expected to continue affecting the exchange rate, inflation and the economic recovery."
National Bank of Belarus (increased 300bps to 30.00%): "The consistent increase in the cost of borrowed money in the economy is intended to provide a further deterrent effect on customers' demand for credit resources of banks for the period of release on a single course. At the same time, increasing the refinancing rate will be an additional factor in stimulating processes of savings in Belarusian rubles and reduce pressure on the exchange rate"
Reserve Bank of New Zealand (held OCR at 2.50%): "If recent global developments have only a mild impact on the New Zealand economy, it is likely that the OCR will need to increase. For now, given the recent intensification in global economic and financial risks, it is prudent to continue to hold the OCR at 2.5 percent."
Swiss National Bank (held rate at 0-0.25%): "The Swiss National Bank will enforce the minimum exchange rate of CHF 1.20 per euro set on 6 September with the utmost determination. It is prepared to buy foreign currency in unlimited quantities. It continues to aim for a three-month Libor at zero and will maintain total sight deposits at the SNB at significantly above CHF 200 billion."
Banco Central de Chile (held rate at 5.25%): "Domestically, output and demand figures show signs of moderation, in line with projections in the Monetary Policy Report. Labor market conditions are still tight and faster growth in nominal wages is observed. CPI inflation indicators have hovered around 3% y‐o‐y, while core inflation measures remain contained. Inflation expectations are close to the target."
Central Bank of Russia (held refi rate at 8.25%): "The decision was supported by the assessment of inflation risks and risks to the sustainability of economic growth, including those associated with the uncertainty of the outlook for global economic activity, as well as of current money market conditions and the dynamics of the factors affecting banking sector liquidity. Implemented decision aimed at narrowing the gap between interest rates on the Bank of Russia liquidity provision and absorption operations should contribute to restrain money market interest rates volatility regarding the risks of the shortage of the rouble liquidity in the banking sector."
Danmarks Nationalbank (held rate at 1.55%): "The interest rate reduction follows Danmarks Nationalbank's purchase of foreign exchange in the market. The short euro market rates have fallen and the spread to the equivalent Danish rates has tended to strengthen the Danish krone."
Looking at the central bank calendar, next week there are a number of European central banks meeting (Hungary, Turkey, Iceland, Czech Republic, Norway), no doubt they will make due reference to the developments in the Euro sovereign debt crisis. Of course, the other key event on the radar is the US FOMC meeting on the 20th - Bernanke announced at Jackson Hole the meeting would be extended to 2 days to allow the FOMC to consider implementing QE3 or QE2.1.
HUF - Hungary (Magyar Nemzeti Bank) - expected to hold at 6.00% on the 20th of Sep
TRY - Turkey (Central Bank of Turkey) - expected to hold at 5.75% on the 20th of Sep
USD - USA (US Federal Reserve) - expected to hold at 0-0.25% on the 20th of Sep
ISK - Iceland (Central Bank of Iceland) - expected to hold at 4.50% on the 21st of Sep
CZK - Czech Republic (Czech National Bank) - expected to hold at 0.75% on the 21st of Sep
NOK - Norway (Norges Bank) - expected to hold at 2.25% on the 21st of Sep
ZAR - South Africa (South African Reserve Bank) - expected to hold at 5.50% on the 22nd of Sep
Saturday, September 10, 2011
Central Bank
The past week in central banking saw interest rate announcements from 17 central banks around the world. Just 4 of those central banks announced changes to interest rates: Armenia cut by -50bps to 8.00%, Tunisia cut by -50bps to 3.50%, and Serbia cut by -50bps to 11.25%, while Uganda increased by +200bps to 16.00%. Meanwhile those that held interest rates unchanged were: Australia 4.75%, Sweden 2.00%, Canada 1.00%, Japan 0-0.1%, ECOWAS 4.25%, Poland 4.50%, South Korea 3.25%, Indonesia 6.75%, Philippines 4.50%, Malaysia 3.00%, Peru 4.25%, United Kingdom 0.50%, and the European Union 1.50%. The other big news in central banking was the Swiss National Bank's move to set the EURCHF exchange rate floor of a minimum 1.20. Also making headlines was key ECB official, Jürgen Stark, announcing his resignation.
Many central banks found themselves holding and waiting as uncertainty and financial market volatility levels remained heightened. Indeed virtually all central banks noted the weakening growth outlook in developed markets as a key risk area. Most cited the weakening higher frequency data and leading indicators in the US as signaling a slowdown in activity. Arguably some banks may have continued tightening monetary policy if external conditions were more benign.
Some of the key quotes from the monetary policy press releases are listed below:
Bank of Uganda (increased +200bps to 16.00%): "BoU is raising interest rates in order to curb the growth in bank credit, which has expanded rapidly over the last 12 months, to encourage higher levels of saving and to provide more support to the exchange rate." and further added that "If the inflation outlook deteriorates in the next few months, the BoU will implement further increases in the CBR."
Central Bank of Tunisia (decreased -50bps to 3.50%): "To boost economic activity and the implementation of investment plans by limiting the financial burden on businesses, the Council decided to reduce, again, the rate of the BCT half a percentage point to bring it back to 3.5 percent,".
National Bank of Serbia (decreased -50bps to 11.75%): "The decision on further relaxation of monetary policy was adopted to ensure that inflation returns to the target, without major volatility. The Executive Board expects that inflation will continue to decline until the end of the year and that it will enter the target tolerance band in the first half of the next year. Future path of the key policy rate will depend on the materialisation of risks, primarily in the international environment, and those relating to fiscal policy at home."
Bank of Canada (held rate at 1.00%): "In light of slowing global economic momentum and heightened financial uncertainty, the need to withdraw monetary policy stimulus has diminished. The Bank will continue to monitor carefully economic and financial developments in the Canadian and global economies, together with the evolution of risks, and set monetary policy consistent with achieving the 2 per cent inflation target over the medium term."
Bank of Japan (held rate at 0-0.10%): "The Bank commits itself to continuing the virtually zero interest rate policy until it judges that price stability is in sight on the basis of the "understanding of medium- to long-term price stability." In order for Japan's economy to overcome deflation and return to a sustainable growth path with price stability, the Bank will continue to consistently make contributions as the central bank by pursuing powerful monetary easing through the comprehensive monetary easing measures..., ensuring financial market stability, and providing support to strengthen the foundations for economic growth."
Bank Indonesia (held rate at 6.75%): "The decision was taken by considering the importance of maintaining macroeconomic stability amid the heighten uncertainty in the global financial system triggered by the US and Euro area debt. Although the impacts of uncertainty in the global economy on domestic economy are so far limited, Bank Indonesia continues to monitor the developments and assess their impacts on Indonesian economic performance going forward."
Bank Negara Malaysia (held rate at 3.00%): "In the MPC's assessment, while inflation remains a concern, the increased uncertainties on the global and domestic economic growth prospects and their potential consequences could have a moderating impact on inflation."
European Central Bank (held rate at 1.50%): "Looking ahead, we expect the euro area economy to grow moderately, subject to particularly high uncertainty and intensified downside risks. At the same time, short-term interest rates are low. While our monetary policy stance remains accommodative, some financing conditions have tightened. It remains essential for monetary policy to focus on its mandate of maintaining price stability over the medium term, thereby ensuring that recent price developments do not give rise to broad-based inflationary pressures."
Central Reserve Bank of Peru (held rate at 4.25%): "decision takes into account the slowdown observed in economic activity and the intensification of international financial risks. Should these trends continue, the Central Bank will change its monetary policy stance." The Bank further noted: "Some current and advanced indicators of activity show a lower pace of growth than in the first semester. Furthermore, indicators of global activity show a lower growth and increased uncertainty continues to be observed in international financial markets."
Central Bank of West African States (held rate at 4.25%): "During this session, the Committee considered the economic, financial and monetary recent West African Monetary Union, including the risks to price stability and economic growth prospects in the EU. In this regard, the Committee noted a trend toward slower pace of price growth."
Looking at the central bank calendar, next week will be relatively quiet with just three major central banks scheduled to review monetary policy settings. Also on the calendar is the Bank of Japan's monetary policy meeting minutes on Monday from the 4-5th August meeting, and the ECB's monthly bulletin on Thursday.
NZD - New Zealand (RBNZ) - expected to hold at 2.50% on the 15th of Sep
CHF - Switzerland (Swiss National Bank) - expected to hold at 0-0.25% on the 16th of Sep
INR - India (Reserve Bank of India) - expected to hold at 8.00% on the 16th of Sep
Many central banks found themselves holding and waiting as uncertainty and financial market volatility levels remained heightened. Indeed virtually all central banks noted the weakening growth outlook in developed markets as a key risk area. Most cited the weakening higher frequency data and leading indicators in the US as signaling a slowdown in activity. Arguably some banks may have continued tightening monetary policy if external conditions were more benign.
Some of the key quotes from the monetary policy press releases are listed below:
Bank of Uganda (increased +200bps to 16.00%): "BoU is raising interest rates in order to curb the growth in bank credit, which has expanded rapidly over the last 12 months, to encourage higher levels of saving and to provide more support to the exchange rate." and further added that "If the inflation outlook deteriorates in the next few months, the BoU will implement further increases in the CBR."
Central Bank of Tunisia (decreased -50bps to 3.50%): "To boost economic activity and the implementation of investment plans by limiting the financial burden on businesses, the Council decided to reduce, again, the rate of the BCT half a percentage point to bring it back to 3.5 percent,".
National Bank of Serbia (decreased -50bps to 11.75%): "The decision on further relaxation of monetary policy was adopted to ensure that inflation returns to the target, without major volatility. The Executive Board expects that inflation will continue to decline until the end of the year and that it will enter the target tolerance band in the first half of the next year. Future path of the key policy rate will depend on the materialisation of risks, primarily in the international environment, and those relating to fiscal policy at home."
Bank of Canada (held rate at 1.00%): "In light of slowing global economic momentum and heightened financial uncertainty, the need to withdraw monetary policy stimulus has diminished. The Bank will continue to monitor carefully economic and financial developments in the Canadian and global economies, together with the evolution of risks, and set monetary policy consistent with achieving the 2 per cent inflation target over the medium term."
Bank of Japan (held rate at 0-0.10%): "The Bank commits itself to continuing the virtually zero interest rate policy until it judges that price stability is in sight on the basis of the "understanding of medium- to long-term price stability." In order for Japan's economy to overcome deflation and return to a sustainable growth path with price stability, the Bank will continue to consistently make contributions as the central bank by pursuing powerful monetary easing through the comprehensive monetary easing measures..., ensuring financial market stability, and providing support to strengthen the foundations for economic growth."
Bank Indonesia (held rate at 6.75%): "The decision was taken by considering the importance of maintaining macroeconomic stability amid the heighten uncertainty in the global financial system triggered by the US and Euro area debt. Although the impacts of uncertainty in the global economy on domestic economy are so far limited, Bank Indonesia continues to monitor the developments and assess their impacts on Indonesian economic performance going forward."
Bank Negara Malaysia (held rate at 3.00%): "In the MPC's assessment, while inflation remains a concern, the increased uncertainties on the global and domestic economic growth prospects and their potential consequences could have a moderating impact on inflation."
European Central Bank (held rate at 1.50%): "Looking ahead, we expect the euro area economy to grow moderately, subject to particularly high uncertainty and intensified downside risks. At the same time, short-term interest rates are low. While our monetary policy stance remains accommodative, some financing conditions have tightened. It remains essential for monetary policy to focus on its mandate of maintaining price stability over the medium term, thereby ensuring that recent price developments do not give rise to broad-based inflationary pressures."
Central Reserve Bank of Peru (held rate at 4.25%): "decision takes into account the slowdown observed in economic activity and the intensification of international financial risks. Should these trends continue, the Central Bank will change its monetary policy stance." The Bank further noted: "Some current and advanced indicators of activity show a lower pace of growth than in the first semester. Furthermore, indicators of global activity show a lower growth and increased uncertainty continues to be observed in international financial markets."
Central Bank of West African States (held rate at 4.25%): "During this session, the Committee considered the economic, financial and monetary recent West African Monetary Union, including the risks to price stability and economic growth prospects in the EU. In this regard, the Committee noted a trend toward slower pace of price growth."
Looking at the central bank calendar, next week will be relatively quiet with just three major central banks scheduled to review monetary policy settings. Also on the calendar is the Bank of Japan's monetary policy meeting minutes on Monday from the 4-5th August meeting, and the ECB's monthly bulletin on Thursday.
NZD - New Zealand (RBNZ) - expected to hold at 2.50% on the 15th of Sep
CHF - Switzerland (Swiss National Bank) - expected to hold at 0-0.25% on the 16th of Sep
INR - India (Reserve Bank of India) - expected to hold at 8.00% on the 16th of Sep
Friday, August 26, 2011
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