|SEP 25 - OCT 1, 2016:|
|COUNTRY||DATE||RATE||LATEST||YTD||1 YR AGO||MSCI|
|TRINIDAD & TOBAGO||30-Sep||4.75%||0||0||4.50%|
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Pakistan's central bank left its policy rate at 5.75 percent, saying an expected increase in domestic demand would largely determine inflation in the remaining months of fiscal 2017, which began July 1, with oil prices remaining the major risk factor
The State Bank of Pakistan (SBP), which cut its rate by 25 basis points in May, added that the country's economy had "fared well" due to a supportive economic environment, with record-high foreign exchange reserves supporting a stable exchange rate.
However, the SBB added that the current account was at risk of widening further due to declining exports and rising imports.
Pakistan's inflation rate declined to 3.56 percent in August from 4.12 percent in July, but up from 1.8 percent in August last year. In the first two months of the current fiscal year inflation was double the rate seen 12 months ago.
In fiscal 2016, which ended June 30, Pakistan's average consumer price inflation rate declined to a 47-year low of 2.9 percent while Gross Domestic Growth touched an 8-year high of 4.7 percent.
The economy is expected to expand further this year on improving industrial activity, with lower prices of inputs, low interest rates and better energy supplies seen boosting manufacturing.
The State Bank of Pakistan issued the following statement:
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Egypt's central bank left its key policy rates unchanged, attributing the rise in inflation and future upside inflation risks to "transitory cost-push factors" while the demand side poses a risk to the outlook for inflation.
The Central Bank of Egypt (CBE), which has raised its rate by 250 basis points this year, left the benchmark overnight deposit rate at 11.75 percent, the overnight lending rate at 12.75 percent, and the rates on its main operation and the discount rate at 12.25 percent.
Egypt's headline inflation rate accelerated to 15.47 percent in August - its highest level since December 2008 - from 14.0 percent in the previous two months as Egypt's government implements reforms, including a cut to energy subsidies and the imposition of value-added-tax (VAT), that will help trim the budget deficit but push up prices.
In addition, the prices of fresh vegetables rose and there was a seasonal rise in the cost of meat in connection with Eid-Al-Adha while the pass-through from past exchange rate movements to domestic prices was limited.
In August the International Monetary Fund (IMF) agreed in principle to grant Egypt a $12 billion, 3-year loan to support the government's reform program and help its foreign currency shortage.
The extended fund facility is subject to final approval by the IMF executive committee and on Sunday the country's deputy finance minister was quoted as saying it was making good progress that would help release the first tranche of the loan.
The funds would help bolster Egypt's international reserves of US$16.6 billion, still about half of the levels seen before the uprising in 20111 that ousted Hosni Mubarak from power. Egypt is also planning to sell between $3 billion and $5 billion in international bonds and is in talks with China for a $4 billion loan to help finance sewage and renewable energy projects.
The central bank added that the country's economy expanded by 4.3 percent in the first nine months of the 2015/16 financial year, down from 4.8 percent in the same period a year ago, with growth driven by domestic demand from consumption while investment was weak.
The Central Bank of Egypt issued the following statement:
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South Africa's central bank left its benchmark repurchase rate steady at 7.0 percent, as expected, citing an improvement in its inflation forecast and a weak outlook for the economy.
Although the South African Reserve Bank (SARB) - which has raised its rate by 200 basis points since January 2014, including 75 basis points this year - said it was still concerned about inflation but added that it "may be close to the end of the tightening cycle" if forecasts come true.
The South African Reserve Bank issued the following statement by Lesetja Kganyago, governor:
The latest inflation forecast of the Bank has improved over the first four quarters of the forecast horizon, and remains more or less unchanged for the rest of the period. Inflation is expected to peak at 6,7 per cent in the fourth quarter of this year, compared with 7,1 per cent previously, with an earlier sustained return to within the target range now forecast to occur during the second quarter of 2017. Inflation is expected to average 6,4 per cent in 2016 and 5,8 per cent in 2017, compared with 6,6 per cent and 6,0 per cent previously. The forecast for 2018 is unchanged at an average of 5,5 per cent. The downward revisions are due in part to a lower starting point, lower administered price inflation assumptions (including petrol, electricity and rates and taxes inflation), as well as a less depreciated exchange rate assumption.
The global growth outlook remains subdued, amid slowing growth in the advanced economies and a general downward revision to forecasts. Although prospects for the US economy remain relatively favourable, outcomes have not been consistently positive, as evidenced by the recent weak consumer expenditure and manufacturing sector data. Nevertheless, labour market conditions have improved and the investment slowdown appears to have bottomed.
Given the broadly benign global inflation environment, apart from in some emerging markets, monetary policies have generally remained accommodative, with further loosening or a loosening bias in a number of the advanced economies. A notable exception is the United States where the bias remains for a resumption of interest rate normalisation, but the timing remains uncertain. Following the decision of the Fed to keep rates unchanged yesterday, the market expectation is for the next move to be in December. The data-dependent nature of future decisions means that these prospects are likely to change with new data releases, imparting a degree of volatility to financial markets and to global capital flows. The US policy rate trajectory is still expected to be moderate.
The marked appreciation of the rand during the past few days appears to be driven by expectations of unchanged US monetary policy, as well as to speculation regarding possible purchases of rand related to a major M&A transaction. The rand, however, remains vulnerable to future changes in the US monetary policy stance, domestic political developments as well as to a risk of a possible ratings downgrade later in the year. Nevertheless, the upside risk to inflation from the exchange rate appears to have moderated somewhat.
A key constraint to the growth outlook remains the sluggish state of domestic gross fixed capital formation, which contributed negatively to GDP growth during the first two quarters of this year. In the second quarter of 2016, domestic fixed investment contracted in both the private and public sectors (including government and public corporations). Private sector fixed investment has recorded negative or zero growth for six consecutive quarters, reflecting low levels of business confidence. The RMB/BER business confidence index remains below the neutral level, despite an improvement in the third quarter.
Credit extension to households continues to contract in real terms, likely driven by both the supply and demand side considerations. However, there has been a moderate increase in mortgage credit extension. As before, growth in credit extension to the corporate sector has been more resilient, but below its recent peaks.
The Monetary Policy Committee has noted improvements in the expected inflation trajectory during the course of the year. Apart from the tighter stance of monetary policy, this has also been driven by lower starting points, as inflation surprised at times on the downside, and changed assumptions underlying the forecast. The expected peak in headline inflation is notably lower, and an earlier return to within the target range is also expected. Most of the changes have been for the current and coming year, whereas the changes in the forecast for 2018 have been marginal. Changes to the core inflation forecast have been less pronounced, but it is no longer expected to breach the upper end of the target range. Despite these improvements, the longer-term inflation trajectory remains uncomfortably close to the upper end of the target range, with high wage settlement rates and inflation expectations contributing to this persistence.
The MPC is of the view that should current forecasts transpire, we may be close to the end of the tightening cycle. The committee is aware that a number of the favourable factors that have contributed to the improved outlook can change very quickly resulting in a reassessment of this view. The bar for monetary accommodation, by contrast, remains high, as the MPC would need to see a more significant and sustained decline of the inflation trajectory to within the inflation target range."
Turkey's central bank once again lowered its overnight funding rate and late lending rates by 25 basis points while it retained its benchmark one-week repo rate as it took another "measured and cautious step toward simplification" of its monetary policy framework.
The Central Bank of the Republic of Turkey (CRT) also re-affirmed its guidance that future monetary policy decisions will depend on the outlook for inflation, and that a "cautious" policy stance will be maintained in light of inflation expectations, pricing behavior and "other factors" - viewed as a reference to the lira's exchange rate.
As expected, the CBRT cut the overnight funding rate to 8.25 percent from 8.50 percent and has now cut it by 250 basis points since March. The borrowing rate remained at 7.25 percent. The late liquidity lending rate was also cut by 25 points to 9.75 percent and the borrowing rate stayed at zero.
The benchmark one-week repo rate was left at 7.50 percent, unchanged since February 2015.
Turkey's inflation headline inflation rate eased to 8.05 percent in August from 8.79 percent in July and the central bank said slower demand and falling food prices should push down inflation.
However, a recent change in fuel taxes and other costs will limit any improvement in inflation and "thus necessitate the maintenance of a cautious monetary policy stance," the CBRT said.
In its quarterly inflation report from July, the CBRT expects inflation to stabilize around its 5.0 percent target as of 2018 after easing to an average of 7.5 percent this year and 6.0 percent in 2017.
Inflation is seen fluctuating between 6.6 percent and 8.4 percent in the rest of this year.
The latest economic data showed a declaration in economic activity, with lower tourism revenues having a negative impact although demand from Europe still supports exports.
"With the supportive measures and incentives provided recently, domestic demand is expected to recover starting from the final quarter," the CBRT said.
The number of tourists arriving in Turkey in July fell by 36.7 percent to 3.47 million from a year ago due to the failed coup attempt, terrorist attacks and tensions between Russia and Turkey.
Norway's central bank left its key policy rate at 0.50 percent, as expected, but raised its forecast for inflation and the policy rate due to a stronger-than-expected effect of inflation from a weaker krone, which may then translate into higher wages next year.
Norges Bank (NB), which cut its rate by 25 basis points in March, said inflation had been "unexpectedly high" in recent months while there are also signs that economic growth was picking up at a slightly faster pace than projected in June while house price inflation has accelerated above expectations.
“Our current assessment of the outlook suggests that the key policy rate will most likely remain at today’s level in the period ahead,” NB Governor Oeystein Olsen said, adding that the bank's forecast still implies a slightly higher probability of a rate cut in the year ahead.
In its latest monetary policy report, the central bank raised its inflation forecast for 2016 to 3.6 percent from 3.3 percent forecast in June, the 2017 forecast to 2.6 percent from 2.2 percent, the 2018 forecast to 2.1 percent from 1.9 percent and the 2019 forecast to 1.8 percent from 1.7 percent.
Norway's inflation rate eased to 4.0 percent in August from 4.4 percent in July, mainly due to lower airfares.
NB raised its forecast for the key policy rate to average 0.6 percent this year, up from 0.5 percent, and the 2017 forecast to 0.4 percent from 0.3 percent. For 2018 the central bank also forecasts a key policy rate of 0.4 percent, rising to 0.7 percent in 2019.
The forecast for economic growth this year was raised to 0.9 percent from 0.8 percent, rising to 1.8 percent in 2017, up from 1.6 percent. For 2018 Gross Domestic Product was seen rising by an unchanged 2.1 percent while the forecast for 2019 was trimmed to 2.1 percent from 2.3 percent.
Norway's GDP grew by an annual rate of 2.5 percent in the second quarter of this year, up from 0.6 percent in the first quarter.
Norges Bank issued the following statement: