Fiji's central bank left its Overnight Policy Rate (OPR) at 0.50 percent and said its "monetary policy will remain accommodative and focus on supporting the domestic economic recovery while the Bank will continue to monitor all macroeconomic developments and align monetary policy accordingly."
The Reserve Bank of Fiji, which has maintained its rate since October 2011, added that the bank's twin objectives remain intact and the impact of this year's natural disasters on inflation was expected to taper with the year-end inflation forecast still at "around 3.5 percent."
Fiji's inflation rate rose to a 2016-high of 5.5 percent in July from 5.3 percent in June, mainly driven by shortages of items following the tropical cyclones and flooding, higher duties on alcohol and tobacco, and an increase in fuel prices.
Fiji was hit by Tropical Cyclone Winston in February, the worst cyclone ever recorded in the Southern Hemisphere, leaving 42 people dead. The government estimated damage of 1 billion Fijian dollars, or US$460 million. Fiji was also hit by flooding in April.
The Reserve Bank added that Fiji's foreign reserves amounted to $1.920.7 billion as of Aug. 24, enough to cover 5.3 months of imports, down from $1.978 billion as of July 28.
Fiji's economy - which grew by an annual 4.2 percent in 2015, down from 5.3 percent in 2014 - continues to be driven by strong consumption and investment, according to Barry Whiteside, governor and chairman of the central bank's board.
But Whiteside cautioned that subdued global growth could dampen remittances and tourism earnings though the bank is still forecasting an increase from last year's record levels.
The Reserve Bank of Fiji issued the following statement:
Moldova's central bank maintained its base rate at 10.0 percent, saying the effect of past rate cuts were still moving through the economy's various transmission channels while the most recent data revealed the downward dynamics of inflation though it remains above the bank's target.
The National Bank of Moldova (NBM) has cut its rate by 950 basis points this year, most recently by 300 points in July, as it unwinds rate hikes totaling 1,600 points between December 2014 and August 2015 in response to a plunge in the leu's exchange rate and accelerating inflation.
But since April this year the exchange rate of the leu has stabilized and inflation has been decelerating from a recent high of 13.6 percent in December 2015.
In July Moldova's inflation fell to a 2016-low of 7.0 percent from 7.4 percent in June but still remains above the central bank's target range of 5.0 percent, plus/minus 1.5 percentage points.
In its latest inflation report published on Aug. 3, the NBM forecast that inflation will remain on a downward trend until the end of this year before stabilizing around its target as the negative output gap continues to restrain price pressures for the entire forecast period and only starts to reach positive values by the end of the forecast horizon.
On average, inflation should be 6.7 percent this year, reaching a level of 3.5 percent in the fourth quarter of this year, and then decline further to 4.4 percent in 2017.
The leu was trading at 19.7 to the U.S. dollar today, unchanged from the start of this year, but down 21 percent since the start of 2015 and down 34 percent since the start of 2014.
Economic activity in Moldova continues to remain below its potential level with exports in June down by an annual 12.9 percent and imports down by 7.7 percent. Industrial output fell by 2.1 percent but retail trade turnover managed to rise by 4.2 percent at the same time that trade in services fell by 7.0 percent, the NBM said.
Paraguay's central bank left its monetary policy interest rate at 5.50 percent, saying it did not consider it necessary to make any rate adjustments as the current and expected trajectory of inflation was now in line with its inflation target over the policy horizon.
The Central Bank of Paraguay has cut its rate twice this year - most recently in July following a cut in May - by a total of 50 basis points following a 25 point rate hike in January and cuts totaling 100 points in 2015.
The central bank said economic data continue to show dynamism but it will carefully monitor external and internal economic data and use its monetary policy instruments in a flexible manner to ensure that inflation converges to its midpoint target of 4.5 percent.
The target is within a 2 percentage point range.
The central bank added that the decision to maintain the rate was decided unanimously by CEOMA, the bank's Open Market Operations Committee.
Paraguay's inflation rate dropped to 2.9 percent in July from 4.7 percent in June and in May the International Monetary Fund forecast that inflation is expected to average 4.5 percent this year and remain at that level in 2017.
The exchange rate of Paraguay's guarani started depreciating in September 2014 and lost 20 percent against the U.S. dollar in 2015 before hitting a low of 5,967 to the dollar in late January.
But since the central bank's rate hike on Jan. 20, the guarani has steadily firmed and was trading at 5,511.5 today, up 4.9percent since the start of this year.
Last month the central bank forecast that Paraguay's economy would expand by 3.5 percent this year, up from a previous forecast of 3.0 percent and 2015's 3.0 percent, due to faster growth in livestock, meat and construction output.
Paraguay is the world's fourth-biggest soybean exporter and this year's harvest is expected to be very good.
Iceland's central bank cut its key policy rate, the seven-day deposit rate, by 50 basis points to 5.25 percent but said uncertainty from a liberalization of the country's capital account argued for caution in setting interest rates and any further lowering or even raising rates "will depend on economic developments and on the success of the capital account liberalization process."
It was the first change in rates by the Central Bank of Iceland (CBI) since a 25-basis-point increase in November 2015 and the first rate hike since November 2012.
The rate cut follows a much-improved outlook for inflation and the central bank's guidance in June that it would probably have to tighten its policy stance in light of growing inflation pressures.
But the CBI said there "are indications that monetary policy has been more successful than was expected earlier in the year," and now it "appears that it will be possible to keep inflation at target over the medium term with a lower interest rate than was previously considered necessary."
In its latest monetary bulletin, the central bank lowered the forecast for consumer price inflation, excluding the effect of indirect taxes, this year to an average of 1.7 percent from 2.1 percent forecast in the May bulletin, below the CBI's 2.50 percent target.
For 2017 inflation, inflation is now seen at 3.2 percent, down from 4.1 percent and for 2018 at 3.6 percent from 3.8 percent.
Iceland's inflation rate fell to 1.1 percent in July, the lowest rate since early 2015, with an rise in the krona's exchange rate, low global inflation and tight monetary policy offsetting the impact of wage increase on consumer prices.
Iceland is in the final stage of dismantling remnants of capital controls that were put in place following the global financial crises in 2008 that led to the collapse of its banking system and a halving of the value of the Icelandic krona.
Earlier this week the central bank concluded that capital can be expected to flow out of Iceland next year due to firms' foreign investments and individuals' interest in diversifying their portfolios, but the risk of substantial outflows is mitigated by the wide interest rate differential, Iceland's stronger economy, low inflation and trade-related capital inflows in connection with the higher krona.
Annual overseas investment by Iceland's pension sector was forecast by the central bank to amount to a relatively low level of between 60 billion and 80 billion krona from 2017 and onwards, with less pent-up need for overseas investments following several exemptions since last summer that is allowing 80 billion krona to flow out by the end of September.
After plunging from November 2007 to November 2008 to a rate of around 143 to the U.S. dollar, the krona has been trading in a much narrower range and has been firming since March 2015.
Today the Icelandic krona was trading at 116.8 to the dollar, up 11.1 percent since the start of this year, despite what the CBI described as "substantial foreign currency purchases."
"If the exchange rate remains unchanged, the outlook is for inflation to remain below target until early 2017," the CBI said, adding that inflation will then start to rise as import prices stop falling and the impact of the currency appreciation subsides. However, if the krona continues to rise, inflation will be lower than forecast.
In its monetary bulletin, the central bank also upgraded its outlook for economic growth, with output this year seen rising by 4.9 percent, up from 4.5 percent forecast in May and 4.0 percent in 2015 as private consumption rises by 6.7 percent, up from a previous forecast of 6.0 percent.
For 2017 the central bank forecasts economic growth of 4.1 percent, slightly up from the May forecast of 4.0 percent and 2.6 percent in 2018, down from 3.0 percent.
The Central Bank of Iceland issue the following statement:
Hungary's central bank left its base rate at 0.90 percent, as widely expected, and repeated its guidance that it will maintain the rate at the current level and maintain loose monetary conditions "for an extended period" as there continues to be unused capacity in the economy and inflation should remain moderate.
The National Bank of Hungary (NBH), which ended its latest easing cycle in May after cutting the rate three times by a total of 45 basis points, added that "a watchful approach to monetary policy is still warranted due to uncertainty in the global financial environment," with domestic, real interest rates in negative territory and declining further as inflation rises.
The central bank also confirmed that it is still planning to decide next month on the required year-end level of the three-month deposit stock and operational details of that facility.
The MNB is planning to change the use of its main policy tool, the three-month deposit facility, to encourage banks to offer cheaper loans and to buy government debt by lowering the amount from 1,600 billion forints that banks can deposit, and conduct monthly, rather than weekly, tenders.
Hungary's consumer price inflation rate declined to minus 0.3 percent in July from minus 0.2 percent in June, the third consecutive month of deflation, while core inflation rose to 1.3 percent form 1.2 percent as inflation expectations remain at historically low levels.
But wage growth remains strong, the central bank said, and this is likely to raise core inflation slowly through rising household consumption. In the first half of this year, gross wages were up by an annual 6.0 percent, with wages in June up by an annual 5.7 percent.
But the MNB first expects inflation to approach its 3.0 percent target in the first half of 2018.
In line with its expectations, Hungary's economy picked up speed in the second quarter after slowing in the first quarter as retail sales continued to expand and labour demand remains strong.
Hungary's Gross Domestic Product grew by an annual rate of 2.6 percent in the second quarter, up from 0.9 percent in the first quarter and the central bank expects growth of around 3 percent to be maintained, helped by an extension of its various stimulus measures and the government's efforts to promote housing construction and a faster drawdown of European Union funding.
Hungary's forint has been firming against the euro since June and is up 1.6 percent since the start of this year, trading at 309.7 to the euro today.
The National Bank of Hungary issued the following statement:
|Central bank interest rate||Previous interest rate (per cent)||Change (basis points)||New interest rate (per cent)|
|Central bank base rate||0.90||No change||0.90|
|Overnight collateralised lending rate||1.15||No change||1.15|
|Overnight deposit rate||-0.05||No change||-0.05|
Turkey's central bank left its benchmark one-week repo rate at 7.50 percent but continued simplifying its monetary policy framework by once again cutting the overnight marginal funding rate and the late liquidity lending rate by a further 25 basis points.
The Central Bank of the Republic of Turkey (CBRT) confirmed its guidance from recent months, saying future monetary policy decisions will be conditional on the outlook for inflation and a tight policy stance will be maintained in light of inflation expectations, pricing behavior and other factors - a reference to the exchange rate - that affect inflation.
The central bank cut the overnight marginal funding rate to 8.50 percent from 8.75 percent and has now cut its by a total of 225 points since March. The borrowing rate was maintained at 7.25 percent.
The late liquidity lending rate was also cut to 10.0 percent from 10.25 percent while the borrowing rate was left at zero percent.
The once-week repo rate has been maintained at 7.50 percent since February 2015 as the CBRT remains cautious over inflation which rose in July to 8.79 percent from 7.64 percent in June due to a sharp rise in unprocessed food prices. Core inflation rose to 8.8 percent from 8.7 percent in June.
Although the central bank said it expects food prices to correct downward, the trend in core inflation is only seen improving gradually so the "developments in the inflation outlook necessitate the maintenance of a tight liquidity stance."
In its quarterly inflation report from last month, the central bank 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 exchange rate of Turkey's lira has rebounded following a deep plunge in response to the failed military coup attempt in July, with the lira trading at 2.93 to the U.S. dollar today, largely unchanged from 2.92 at the start of the year.
The Central Bank of the Republic of Turkey issued the following statement:
We think the U.S. Dollar is undervalued going into this week on a short term basis, and should move back above 95 going into Jackson Hole`s annual monetary policy symposium Thursday and Friday. We also think that the market is behind the curve for a 25 basis point rate hike this year.
|AUG 21 - AUG 27, 2016:|
|COUNTRY||DATE||RATE||LATEST||YTD||1 YR AGO||MSCI|