Kazakhstan's central bank lowered its base rate by another 100 basis points to 11.00 percent but said "the potential of further easing of monetary policy is limited" as the new level reflects the long-run balance between price stability and financial stability.
The National Bank of Kazakhstan has now cut its rate by 600 basis point since starting an easing cycle in May 2016 and today's cut follows last month's guidance that it would ease its policy today provided that the decline in inflation continues and confidence in the tenge currency remains.
"The decrease in inflationary expectations, the stability and the predictability of the situation on the domestic FX and money markets, the recovery of business activity, and also the favorable external economic conditions caused the easing of monetary conditions," the central bank said.
Kazakhstan's inflation rate decelerated to 7.9 percent in January from 8.5 percent in December, falling into the central bank's target range of 6-8 percent for the first time since September 2015.
The drop in inflation was in line with the central bank's forecast and higher commodity prices are not expected to have a significant impact on future inflation as they will be offset by moderate price trends in other consumer goods and services.
The latest surveys of inflation expectations also shows a declining trend to the lowest level since mid-2016, with expectations within the target range and at 6.6 percent for January, below actual inflation.
"In the absence of adverse shocks, inflation will persistently remain within the target band throughout the entire year of 2017, and also during the first half of 2018," the central bank said.
Last month the central bank forecast that inflation would end 2017 between 7.3 and 7.7 percent but it did not repeat this forecast today. The central bank's director of research and statistics has forecast 2018 inflation of 5-7 percent, 4-6 percent for 2020 and below 4 percent in 2020.
The exchange rate of Kazakhstan's tenge, which fell sharply in August 2015 following the central bank's move to a floating exchange rate regime, has been firming in recent months and was trading at 318.79 to the U.S. dollar today, up 4.6 percent this year.
The central bank's move to a floating exchange rate regime last year came in response to capital outflows and the conversion of many tenge bank deposits to foreign currency. Oil accounts for about 60 percent of Kazakhstan's exports and over 10 percent of its Gross Domestic Product.
The central bank said devaluation expectations, and the cost of hedging exchange rate risks, had continued to decrease and the share of foreign currency deposits have declined to 53 percent by the end of January.
Economic activity in Kazakhstan is also continuing, the bank said, saying Gross Domestic Product is estimated to grow above 2 percent this year.
In the first three quarters of 2016 Kazakhstan's GDP grew by an annual rate of 0.4 percent.
The National Bank of Kazakhstan issued the following statement:
"The National Bank of Kazakhstan has decided to reduce the base rate to 11% with a corridor of +/- 1%. In January 2017 the annual inflation rate has reached the target band of 6-8%. The decrease in inflationary expectations, the stability and the predictability of the situation on the domestic FX and money markets, the recovery of the business activity, and also the favorable external economic conditions caused the easing of the monetary conditions. The new level of the base rate reflects the long-run balance between the price stability and the financial stability; therefore, the potential of the further easing of the monetary policy is limited.
The decision on the base rate was made with the account of the following factors.
The annual inflation rate has slowed down in January 2017 to 7.9%, which completely matches the forecasts of the National Bank. The acceleration of the price growth in the specific commodity markets and in the paid services will not have a significant impact on the dynamics of the overall level of inflation and will be offset by the moderate price tendency in the markets of other consumer goods and services.
According to the survey taken in January on the inflationary expectations of the population, the observed tendency of improved expectations of respondents regarding the future level of inflation indicates the mitigation of their pro-inflation behavior. Quantitative assessment of the inflationary expectations shows that the expectations of the population are formed within the target band and fixed on the levels (6.6% in January) that are lower than the actual inflation Furthermore, the share of the respondents, who expect the high level of inflation, has decreased to the lowest value since the middle of the last year.
So, in case of the absence of the adverse shocks, the inflation will persistently remain within the target band throughout the entire year of 2017, and also during the first half of 2018.
Devaluation expectations not only of the population, but also of the professional market participants, have been decreasing, which is reflected in the survey outcome and the hedging cost of exchange rate risks.
The deposit market data show the ongoing process of de-dollarization of the bank deposits and the continuing tendency of depositors’ preferences towards national currency. According to the preliminary data, the share of the foreign currency deposits has decreased to 53% by the end of January 2017.
The signs of the economic recovery are getting more defined. Short-term economic indicator, which reflects the development of economy’s main sectors, is in the recovery zone and has reached 103.8% in January 2017. In 2017 the real GDP growth is estimated to be above the level of 2%.
In spite of the positive signals of the business activity recovery and the stability of the domestic money and FX markets, the possibility of the external and internal shocks occurrence, which have the potential risks for the further economic development and, primarily, for the inflation processes, still exists. Among those the following risks should be noted: external risks associated with high dependence on the quotations in the world commodity and financial markets, the speed of the economic recovery of the countries – trade partners; and also the revision of budget expenditures upwards. Next decisions on the base rate will depend on the further dynamics of the fundamental factors of the domestic demand and the stability of the financial sector.
The next decision on the base rate will be announced on April 10, 2017 at 17:00 Astana time."
We discuss giving more wasteful government defense contracts to private corporations, and lower taxes and the damage done to the growing and out of control National Debt in this video. Corporations are already paying a much lower effective tax rate, they need to be paying more taxes in my opinion. Especially given the mergers and acquisitions that the government has let go over the last 30 years which creates massive system and sector monopolies and oligopolies that lead to non competitive industries, and is ultimately bad for competitive market environments and consumers.
First of all, the President of the United States should not be cozying up to any CEOs or Corporations this just leads to massive conflicts of Interests, shoot several Corporations have made me sign massive Anti-Bribery Documentation Agreements to avoid this very type of conflict of interest. This is just bizarre theatre under the guise of Job Creation. But we need to downsize all Military Spending given our unsustainable National Debt profile, the interest portion of servicing this National Debt is very troubling for the future economic health of the United States.
Sure Donald Trump might get a short-term, and I mean very short-term jump in GDP with deficit spending programs, but any increase in Military Spending with an already out of control government expenditure of the overall budget on this category is just pure stupid fiscal policy. And to lower Corporate Taxes at the same time as raising Defense Spending and government spending overall is just more "short-termism" government policy that has dire consequences down the line in just two years time for our federal deficit, national debt, interest on the debt and economic prosperity.
Donald Trump we don`t need the Boeing or Lockheed Jet program, we need to cut defense spending given what waste and inefficiencies there are already are in this budget expenditure. The overkill factor alone regarding what the United States spends on the Military versus all of our nearest competitors combined is mind-numbing economic stupidity at its finest. No wonder we cannot balance our budget, pay our bills, and have an unsustainable 20 Trillion Dollars in National Debt. The Rate of Change on the National Debt is just beyond alarming, going from 8 Trillion to 20 Trillion in ten years. Let me restate this: Going from 8 Trillion to 20 Trillion in ten years.
Deficit Spending and Increasing Military Spending is great if somebody else is footing the bill, this money ultimately comes from you and me in the form of higher taxes. Sure you can lower Corporate Taxes, but this is only temporary, because everyone`s taxes including Corporations will just be raised higher in the future (Another 2 years) because of unsound financial policy and our Blow Out National Debt, and Higher Debt Servicing Costs. This is not Rocket Science, this is basic 6th grade Math here. This isn`t a political statement, a Democratic or Republican issue, this is a Taxpayer and American Financial Advisor issue.
You don`t get something for nothing, and given the Rate of Change of our National Debt this country cannot afford Corporate Tax cuts period, A Massive Infrastructure Spending Program, or A Costly Deregulation Program that all over the next four years lead to increased government spending, increasing our National Debt, and ultimately bankrupting the United States.
I know this wasn't what the country wants to hear because citizens want to think there is a magic solution to all these problems with Voodoo economics, but remember Bush`s statement: "Read My Lips: no new taxes" lowering Corporate taxes will backfire bigtime on Republicans and the Economic future of the United States. This just means taxes will have to be raised by the next administration, probably in two years to address growing budgetary imbalances. Surely, the Republicans in Congress are not this stupid, Donald Trump`s Tax Policy is economic suicide. Most Corporations pay much lower effective tax rates, it is part of the reason we cannot pay our current budgetary bills. You cannot get something for nothing, and somebody always has to pay! You can lower Corporate Taxes, You can lower Individual Taxes, but somebody still has to pay for any budgetary gaps, and our growing National Debt. And that usually means higher future taxes to play catchup to unsound fiscal budgetary policy.
This is why Bush had to raise taxes. You Republicans should be smarter than this, to fall for this trap: You Don't Get Something For Nothing! Somebody Has To Pay! Moreover, Donald Trump sure didn`t want to pay his fair share of government taxes the last 18 years, this just means somebody else did! Guess who? It is always easy to Deficit Spend Somebody Else`s Money Donald Trump!! And keep in mind I am a-political; I am not coming at this National Debt problem with a political axe to grind: we just are a pretty unsound fiscally run country right now, and headed in the wrong direction at an alarming rate of speed.
We discuss the fact that the market could get all three of its wishes in tax cuts, an infrastructure spending plan, and deregulation and still go into a recession because the natural course of the business cycle trumps all of these on the margin policy growth drivers. I would put it at around 50% that the US Economy signals to the market that we are entering a recessionary downturn this year. The hard economic data is much softer than the market realizes given the upbeat soft market sentiment data.
Investors are often pointed in the wrong direction at crucial turning points. A normal business cycle last about 6-8 years, 10 years is pushing it. There are only so many houses and cars that need to be supplied to the market in a given time, real structural demand is what moves the economy, not meetings with CEOs promising to create more jobs. We have had quite a run since the 2008 financial crisis, with everything from clunkers for cash, bank bailouts, unlimited stimulus, zero percent interest rates, etc. which has brought a lot of demand forward with regard to many goods and services like automobiles and houses.
We could get all of Trump`s initiatives and still roll over in the business cycle, or Trump policies could actually quicken the tightening of the credit market, and send the economy into a recession faster than without policy changes. Shoot we could drop in the stock market just by valuations alone because financial markets are in a bubble. Market participants are rather complacent and oblivious to the risks associated with asset prices at these levels given that we are most likely at the late stages of the current business cycle in my opinion.
We discuss how in general it is a very bad precedent for government officials to talk about the stock market, especially to in effect tie the performance of the stock market to how effective government policy is being handled or implemented in an administration. Especially given the high valuation market lead-in, this risk/reward scenario plays out very poorly for Trump.
We discuss Politics, Markets (namely the financials) the Economy and Debt in this video. More signs everyone is loaded to the gills in debt right now, this is a reliable warning sign for the health of the economy going forward.
Egypt's central bank left its key interest rates on hold for the third time in a row, as expected, and said inflation is expected to drop after the impact of temporary effects subside, helped by its preemptive monetary policy actions, absorption of liquidity and favorable base effects.
The Central Bank of Egypt (CBE) surprised financial markets in November last year by hiking its policy rates, including the benchmark overnight deposit rate, by 300 basis points as part of a liberalization of foreign exchange markets. This took last year's rate rises to a total of 550 points.
Egypt's headline inflation rate soared to 28.1 percent in January, the highest since December 1989, from 23.3 percent in December last year as government reform measures, including higher custom tariffs, changes to hydrocarbon subsidies and higher import prices, push up consumer prices.
It is the third month in a row of accelerating inflation and compares to a rate of 19.4 percent in October, before the Egyptian pound was allowed to float on foreign exchange markets.
Core inflation, which excludes fuel and food, rose to 30.86 percent from 25.86 percent in December.
"Developments in the external environment show that there has been some firming of international commodity prices, while low global inflation and subdued global growth, albeit recovering, maintain weak pressures on domestic prices," the CBE said.
The scrapping of the currency peg immediately hit Egypt's pound, but during the last month it has been firming as foreign investors purchase stocks and government bills.
A rising pound should help reduce the costs of imports and thus inflation which has soared in the wake of the pound's depreciation and government reform measures, such as reduced price subsidies.
The pound was trading at 16.1 to the U.S. dollar today, up 12.4 percent since the start of this year but still down 45 percent since last October, days before it was allowed to float from its peg of around 8.8 to the dollar on Nov. 3. Prior to full liberalization, the CBE in March 2016 devalued the pound by almost 14 percent, to 8.95 per dollar.
Egypt's economy has been suffering since the Arab Spring and popular uprising in 2011 that led to the overthrow of Hosni Mubarak and scared off foreign tourists and investors.
Economic output slowed to growth of 3.4 percent in the first quarter of the 2016/17 financial year, which began on July 1, after averaging 4.3 percent in 2014/15 and 2015/16.
Slower growth was mainly due to consumption while fixed investments were steady while higher private investment offset lower public investment.
The drag from a negative contribution of exports narrowed as exports recovered for the first positive contribution to Gross Domestic Product since the second quarter of 2014/15 while the negative contribution of imports lessened, CBE said.
In addition, unemployment continued to decline, falling to 12.4 percent in the second quarter of 2016/17 from a peak of 13.4 percent in the second quarter of 2013/14.
The Central Bank of Egypt issued the following statement:
Consistent with the inflation outlook, the targeted disinflation path, and given the balance of risks, the MPC judges that the key CBE rates are currently appropriate. The MPC reiterates its price stability mandate and will continue to closely monitor all economic and monetary developments, and will not hesitate to adjust the key CBE rates to ensure price stability over the medium-term."
Indonesia's central bank left its benchmark BI 7-day Reverse Repo rate steady at 4.75 percent, as widely expected, but warned in no uncertain terms about the risks it faces from changes to United States policy, the impact of Brexit and events in Europe.
"Several global risks demand heightened vigilance," Bank Indonesia said, adding domestic risks include the impact on inflation from the government's increase of electricity rates, special fuel prices and vehicle registrations.
Bank Indonesia (BI) cut its BI-7 day RR rate twice last year by a total of 50 basis points following four cuts in its previous benchmark rate by a total of 100 points from January through June.
Despite the risks it faces, BI said the global economy had improved on the back of gains in the U.S. and China and rising commodity prices, and this momentum is expected to continue.
But the central bank said U.S. fiscal expansion along with an earlier-than-expected monetary tightening could push up the dollar and while a relaxation of U.S. financial regulations would boost domestic financial activities, it "may elevate risks in the global financial system stability."
In addition, a protectionism in the U.S., along with Brexit and European risks, could "reduce the world trade volume and increase global uncertainty."
However, BI's baseline forecast is for Indonesia's economy to expand by 5.0 to 5.4 percent this year - up from 5.02 percent in 2016 and 4.88 percent in 2015 - on strong private consumption, higher government spending and improved private and government investments. Exports are also expected to rise along with imports due to domestic demand.
Inflation in Indonesia is also under control despite what BI described as a "slight bump" in January as higher administered prices pushed up headline inflation to an annual rate of 3.49 percent from 3.02 percent.
The central bank said it would continue to strengthen its coordination with the government to control inflation in the face of risk from administered prices, a reform to energy subsidies and the risk of rising, volatile food prices.
"With these steps, Bank Indonesia predicts inflation within the target corridor for 2017, namely 4+/-1%," BI said.
After being hit by the election of Donald Trump as U.S. president in November, the rupiah has stabilized and firmed as foreign capital has flowed back into the country on a promising domestic outlook.
The rupiah was trading at 13,303 to the U.S. dollar, up 1.5 percent this year.
Bank Indonesia issued the following statement:
We discuss the recent market move in equities, what are the causes and future ramifications given the size of the move, and address viewer e-mails as well in this trading video. A lot of Investors are holding some pricy stocks in their portfolios right now.