Tunisia's central bank raised its key interest rate by 50 basis points to 4.75 percent at an extraordinary board meeting to help ease rising inflationary pressures following a sharp fall in the dinar's exchange rate and said it was closely following those pressures so it could "undertake the appropriate actions on time."
It was the first change in rates by the Central Bank of Tunisia (CBT) since October 2015, when the rate was lowered by 50 basis points. The bank's board met on April 25.
The central bank also raised the minimum savings rate that banks can offer by 50 points to 4.0 percent to boost the incentive to save and thus liquidity in the financial system. Tunisia's banks are in need of liquidity given a weak level of savings in the country, the central bank said.
The rate hike comes a week after Tunisia's finance minister said the central bank would reduce interventions in the foreign exchange market so the value of the dinar gradually declines in an effort to boost exports and lower imports, and thus reduce the trade deficit.
But last week's sharp fall in the dinar appears to have surprised the central bank, which said economic data "in no way justify the fluctuations recorded on the exchange market," and talks between the IMF and the government "were globally positive and encouraging."
The central bank added it did not have an exchange rate target in mind, nor was it floating the dinar but would carry out "well-calibrated interventions" to smooth our sharp fluctuations in the exchange rate while seeking to "contain the trade deficit slippage," ensure financing of imports and preserve foreign currency reserves.
The International Monetary Fund (IMF) last week released some US$319 million as part of an overall fund facility for Tunisia of some $638.5 million that is aimed at boosting economic growth and jobs at a time of high fiscal and external deficits.
The government and IMF are also working to increase social spending and strengthening the country's social safety net to "protect the vulnerable in these challenging times," the IMF said.
The IMF also said on April 17 that tighter monetary policy would help counteract inflationary pressures, give further flexibility to the exchange rate and narrow the trade deficit.
On April 18 the finance minister told local radio that the central bank would reduce its interventions in the foreign exchange market while still preventing a sharp slide in the dinar and avoiding what he described as Egypt's "brutal devaluation" of its pound last year of over 30 percent.
On April 20 and 21 the dinar fell by almost 9 percent to 2.52 to the U.S. dollar but it has rebounded this week and was trading at 2.46 today, down 6.5 percent since the start of this year.
Tunisia's inflation rate rose to 4.8 percent in March from 4.6 percent in the two previous months while Gross Domestic Product in the fourth quarter of last year rose by an annual 1.1. percent, down from 1.2 percent in the third quarter.
It its statement, the IMF said growth was expected to double this year to 2.3 percent "but will remain too low to significantly reduce unemployment, especially in the interior regions and among the youth."
The official unemployment rate was 15.5 percent in the last quarter of 2016.
The Central Bank of Tunisia issued the following statement:
"The Executive Board of the Central Bank of Tunisia held on 25 April 2017 an exceptional meeting to examine the recent trends on the exchange market which recorded, over the last week, increasing pressure in line with operators’ increasing demand for foreign currency, yielding thus a sharp depreciation of the dinar, notably against the dollar and the euro.
Turkey's central bank left its benchmark one-week repurchase rate steady at 8.0 percent but raised its late liquidity lending rate by a further 25 basis points to 12.0 percent and held out the prospect of further rate hikes to prevent a deterioration in the inflation outlook.
While the Central Bank of the Republic of Turkey (CBRT) has maintained its key rate since hiking it by 50 basis points in November last year, it has been tightening its policy stance by other means, such as raising other policy rates, the rate it pays on local lenders' U.S dollar reserves and required reserve ratios in a bid to boost the value of the lira and thus slow down inflation.
But inflation jumped to 11.29 percent in March, the highest since October 2008, and the second consecutive month of double-digit inflation, well in excess of the bank's target of about 5 percent.
The CBRT's cautious rate hike today comes a week after Turkish President Tayyip Erdogan, an ardent critic of high interest rates, won a referendum that grants him wider powers.
The CBRT said food prices had led to a rapid rise in inflation and while the recent rise in risk appetite by investors may contain some of the pressure on costs, the current level of inflation risks leading to even further cost rises.
Data showed prices of clothing and foot wear rose by 1.99 percent in March from February, followed by a 1.93 percent rise in the cost of food and non-alcoholic beverages.
Looking ahead, the central bank said it's tight monetary policy stance would continue until there is a "significant improvement in the inflation outlook" and "additional monetary tightening will be possible if needed."
After falling sharply in the last two months of 2016, Turkey's lira has staged a slight rebound since hitting a historic low of 3.87 to the U.S. dollar in late January, helped by the central bank's various tightening measures.
Today the lira was trading at 3.59 to the dollar, down 1.7 percent since the start of this year.
The Central Bank of the Republic of Turkey issued the following statement:
Indonesia's central bank left its benchmark 7-day reverse repo (RR) rate steady at 4.75 percent, as expected, saying economic growth in the first quarter of this year was likely to be below expectations due to slower growth in retail and automotive sales.
However, growth is expected to accelerate in the second quarter, supported by stronger investment and exports while consumption would be stable. Rising commodity prices and stronger external demand would help drive exports and investment, Bank Indonesia (BI) said.
Last month BI forecast economic growth this year of 5.0 to 5.4 percent, up from 5.02 percent in 2016 and 4.88 percent in 2015 on stronger private consumption, rising exports, higher government spending and improve private and government investment.
Economic activity in Indonesia slowed in the fourth quarter of last year as consumer spending eased along with government spending while exports and investments rose. On a quarterly basis, Gross Domestic Product shrank by 1.77 percent from the third quarter while on an annual basis GDP rose by 4.94 percent, down from 5.01 percent in the third quarter.
BI cut its 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.
Indonesia's inflation rate eased to a lower-than-expected 3.61 percent in March from 3.83 percent in February due to higher supply of food while administered prices declined due to lower airfares that helped reduce the impact of higher electricity rates.
Indonesia's rupiah has been firm this year and was trading at 13,327 to the U.S. dollar today, up 1.3 percent since the start of this year.
BI said appreciation of the rupiah was supported by macroeconomic stability and investors' positive view of the country's economic outlook coupled with easing global risks. This lead to an influx of non-resident capital to Indonesian stocks and government debt.
Bank Indonesia issued the following statement:
Ukraine's central bank cut its monetary policy rate by a further 100 basis points to 13.0 percent as it lowered its outlook for economic growth but forecast that it would reach its inflation targets over the next three years.
The National Bank of Ukraine (NBU) has now cut its rate by 1,700 basis points since starting on its easing cycle in August 2015, including cuts of 800 points in 2016.
But it is the first rate cut since October last year as the central bank sought to counter a rise in inflation due to a weakening of the hryvnia's exchange rate, higher global commodity prices and an increase in minimum wages.
But the hryvnia has been stable this year and even firmed this week despite news this week that NBU Governor Valaria Gontareva would resign on May 10.
Gontareva joined the central bank in June 2014 when the country's economy was reeling under Russia's annexation of Crimea, military conflict in eastern Ukraine, a plunging exchange rate and accelerating inflation.
But her stewardship of the central bank, which she reformed and streamlined, was critical in helping stabilize the economy by pulling down inflation from a peak of 60.9 percent in April 2015, shoring up confidence in the hryvnia and cleaning up the banking sector, which was dominated by oligarch-owned banks.
Gontareva's resignation came a week after the International Monetary Fund (IMF) released a US$1 billion loan payment to Ukraine, funds that had been delayed since March over the lack of government reforms. The release of this tranche brings total funds disbursed to Ukraine so far to about $8.4 billion as part of a $17.5 billion bailout package.
Although Ukraine's headline inflation rose to 15.1 percent in March from 14.2 percent in February, this was mainly due to a 49.5 percent jump in housing and government-regulated utility tariffs, with the rise lower than the central bank projected in January when it forecast a rise to 16.4 percent.
"The situation in the FX market has helped weaken pressure on prices," the NBU said, adding an appreciation of the hryvnia since mid-January was underpinned by solid export revenues.
Brazil's central bank cut its benchmark Selic rate by 100 basis points to 11.25 percent and said the higher pace of monetary easing was appropriate in light of forecasts that point to a policy rate of 8.5 percent by the end of 2017 with the rate remaining at that level until the end of 2018.
The Central Bank of Brazil has now cut its rate by 300 basis points since embarking on an easing cycle in October 2016 and by 250 basis points this year alone.
In October and November last year the central bank cut the rate by 25 basis points each time and then accelerated the pace of easing to 75 points in both January and February this year.
Copom, the central bank's monetary committee, was unanimous in today's decision to cut the Selic rate by one percentage point and said the future pace of monetary easing would depend on the degree of front loading of rate cuts, economic activity, inflation forecasts and expectations, and the economy's structural interest rate.
Today's one percentage point rate cut had been expected by many following a decline in March inflation to the lowest rate since 2010 at 4.57 percent, down from 4.76 percent in February.
Copom said convergence of inflation to its target of 4.5 percent was compatible with its current easing process and economic activity was stabilizing and should gradually recover this year.
"The disinflation process is more widespread," the central bank said, adding that lower food prices amounted to a favourable supply shock and inflation expectations for 2017 were now around 4.1 percent and 4.5 percent for 2018, and slightly below that level of 2019.
The central bank's inflation forecast for 2017 and 2018 were now around 4.1 percent and 4.5 percent based on the assumption the policy rate ends 2017 at 8.5 percent and stays at that level.
The central bank targets inflation of 4.5 percent with a range of plus/minus 1.5 percentage point, a level that is likely to be lowered in June when it is being revised by the government. However, inflation has also overshot the bank's target in the last seven years.
Brazil's Gross Domestic Product contracted by an annual rate of 2.5 percent in the fourth quarter of last year, the 11th consecutive quarter of shrinking output.
But Brazil's real has been firming since January last year, following five years of depreciation, and was trading at 3.13 to the U.S. dollar today, up 4.2 percent this year.
The Central Bank of Brazil issued the following statement:
"The Copom unanimously decided to reduce the Selic rate by one percentage point, to 11.25 percent per year, without bias.
Uganda's central bank cut its Central Bank Rate (CBR) by another 50 basis points to 11.0 percent, saying there was scope to continue easing its monetary policy stance "given that core inflation is forecast to remain around the medium-term target of 5 percent and in line with efforts to support private sector credit and economic growth momentum."
The Bank of Uganda (BOU) has now cut its rate by 100 basis points this year, following a similar reduction in February, and by 600 points since embarking on an easing cycle in April 2016.
Uganda's headline inflation rate eased to 6.4 percent in March from 6.7 percent in February as core inflation declined to 4.8 percent from 5.7 percent.
"The stability of the shilling exchange rate and subdued domestic demand have contributed to the dampening of inflationary pressures," the BOU said.
On the other hand, food inflation has continued to rise to 20.7 percent in March from 18.8 percent in February due to drought that has affected food production.
But the central bank's forecast indicates that the near-term outlook for inflation has improved due to the stable shilling, with the revised forecast calling for core inflation of around 5 percent in a year.
But Uganda's economic growth has slowed in the first two quarters of the current 2016/17 financial year, which began July 1, 2016, and the BOU said its projected growth for 2016/17 of 4.5 percent "is unlikely to be achieved."
In February the BOU cut its growth forecast to 4.5 percent from July's forecast of 5 percent but saw growth in 2017/18 of 5.5 percent.
Uganda's Gross Domestic Product grew by only 0.8 percent in the fourth quarter of calendar 2016, up from a contraction of 0.1 percent in the third quarter, mainly due to the impact of adverse weather on agriculture output which fell by about 2 percent every quarter for four consecutive quarters.
Uganda's shilling, which fell sharply in the last quarter of 2016, has been more stable this year, though depreciating slightly.
The shilling was trading at 3,616.6 to the U.S. dollar today, down 0.4 percent this year.
The BOU maintained its band of plus/minus 3 percentage points around the CBR rate and the margin on the rediscount rate at 4 percentage points so the rediscount rate was cut to 15 percent and the bank rate to 16 percent, respectively.
Namibia's central bank maintained its benchmark repurchase rate at 7.0 percent, saying this rate "remains appropriate to support growth, while maintaining the one-to-one link between the Namibian Dollar and the South African rand."
The Bank of Namibia, which has kept its rate steady since raising it by 25 basis points 12 months ago, added domestic growth slowed in 2016 from 2015 and early indications show this weakness has continued in the first two months of this year due to "bleak performance in the mining sector, particularly diamond production."
Manufacturing output and wholesale and retail trade, which had been resilient in the past, also fell while private and government construction works contracted. In contrast, cargo volumes in transport and value addition in communications had risen, the central bank said.
Namibia's Gross Domestic Product shrank by 1.7 percent in the fourth quarter from the third for an annual decline of 3.1 percent after falling by 0.8 percent in the third quarter.
For the full 2016 year, GDP grew by only 0.2 percent after 6.1 percent growth in 2015.
Inflation decelerated in February to 7.8 percent from 8.2 percent in January but was up from 2016's average of 6.7 percent.
Annual growth in private sector credit slowed to an average of 8.8 percent in the first two months of this year from a peak of 13.7 percent in January 2016 while the stock of international reserves fell to 22.3 billion Namibian dollars as of March 31 from N$22.9 billion on Jan. 31.
Last month the central bank tightened its regulations for the purchase of second and further properties to lower the exposure of bans in response to a sharp rise in property prices in the capital of Windhoek and the tourist town of Swakopmund as demand outstrips supply.
According to the central bank, the real estate sector in Namibia constitutes more than half of the total value of loans and advances.