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Pay Attention to How Oil Reacts the Day After OPEC News (Video)

September 29, 2016 by EconMatters   Comments (0)

By EconMatters

We discuss the oil market, and the recent OPEC news regarding potential production cuts in November, and its effects on the market. A likely test of the $48 level seems in the cards this week.

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General Market Commentary 9-27-2016 (Video)

September 28, 2016 by EconMatters   Comments (0)

By EconMatters

We talk about various markets from Bonds and Gold to Natural Gas and Oil in this video. Something seems to be going on underneath the radar in crude oil, maybe we are starting to experience some tighter markets right here. API had draws across the board tonight in the Oil Market.

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Sri Lanka holds rate, money expansion seen slowing

September 28, 2016 by CentralBankNews   Comments (0)

    Sri Lanka's central bank left its key rates steady, saying "adequate measures are currently in place to contain monetary expansion at levels supportive of maintaining the macroeconomic balance while facilitating economic activity."
    The Central Bank of Sri Lanka said growth in broad money continued to remain high at an annual rate of 17.8 percent in July, up from 17 percent in the previous month, with growth in monetary aggregates mainly driven by credit flows to the private sector and the government.
    Growth of credit to the private sector by commercial banks rose to an annual 28.5 percent in July form 28.2 percent in June but market interest rates, which have risen in response to the central bank's tightening measures, are expected to slow credit expansion in months ahead.
    Last month the central bank's governor said he expected the growth in private sector credit to decelerate to 18 percent by the end of this year due to a tighter monetary policy.
     The central bank has raised its two key rates, the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR), by a total of 100 basis points this year following rate hikes in February and July.
    SLFR now stands at 7.0 percent and the SDRF at 8.50 percent.
    Sri Lanka's inflation rate eased to 4.0 percent in August from 5.5 percent in July after it rose to 6.0 percent in June, the highest rate since October 2013, due to an increase in Value-Added-Tax to 15 percent from 11 percent to curb a rising budget deficit.
    Sri Lanka's Gross Domestic Product expanded by an annual 2.6 percent in the second quarter, down from 5.2 percent in the first quarter and 7.0 percent in the second quarter of 2015.

    The Central Bank of Sri Lanka issued the following statement:

"According to the Department of Census and Statistics (DCS), the Sri Lankan economy is provisionally estimated to have grown by 2.6 per cent, year-on-year, during the second quarter of 2016 compared to the growth of 7.0 per cent recorded in the same period of 2015. Meanwhile, growth in the first quarter 2016 was revised to 5.2 per cent.

In the second quarter of 2016, Services related activities grew by 4.9 per cent while Industry related activities recorded a moderate expansion of 2.2 per cent. Agriculture related activities, which were affected by adverse weather conditions, recorded a contraction of 5.6 per cent in the second quarter of the year. A combination of improvements in the Purchasing Managers’ Index (PMI) and business confidence as well as favourable base effects in the fourth quarter of 2016 are expected to contribute to a rebounding of growth in the second half of the year.

On the external front, the deficit in the trade account expanded marginally by 0.7 per cent, year-on-year, during the first seven months of 2016 as the decline in export earnings was greater than the contraction in the expenditure on imports. Strengthening the external position, earnings from tourism increased by an estimated 16.0 per cent during the first eight months of the year, while workers’ remittances increased by 4.5 per cent during January-July 2016. In addition to the confidence gained from the Extended Fund Facility of the International Monetary Fund (IMF-EFF), increased investment inflows on account of government securities as well as other financial flows to the government helped to stabilise the domestic foreign exchange market. Reflecting these developments, gross official reserves were estimated to have improved to US dollars 6.6 billion by end August 2016, while the Sri Lankan rupee has recorded a marginal depreciation thus far during 2016.
Reflecting the normalisation of domestic supply conditions as well as the suspension of the implementation of certain changes to government tax policy, inflation declined further in August 2016, on a year-on-year basis. Core inflation also moderated on a year-on-year basis, reflecting the impact of the latter effect.

In the monetary sector, broad money expansion continued to remain high at 17.8 per cent in July 2016, on a year-on-year basis, compared to 17.0 per cent recorded in the previous month. The expansion in monetary aggregates was mainly driven by credit flows to the private sector and the government from the banking system, while credit to public corporations continued to contract during the month. The growth of credit granted to the private sector by commercial banks was at 28.5 per cent, year-on-year, in July 2016, compared to 28.2 per cent in the previous month. Market interest rates, which increased in response to monetary tightening measures of the Central Bank, are expected to slow down credit expansion in the months ahead.

Considering the above developments, the Monetary Board, at its meeting held on 27 September 2016, was of the view that adequate measures are currently in place to contain monetary expansion at levels supportive of maintaining the macroeconomic balance while facilitating economic activity. 

Accordingly, the Monetary Board decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank unchanged at 7.00 per cent and 8.50 per cent, respectively."

Armenia cuts rate 50 bps, will consider further easing

September 27, 2016 by CentralBankNews   Comments (0)

    Armenia's central bank lowered its benchmark refinancing rate by a further 50 basis points to 6.75 percent and said its board would consider further easing of monetary conditions in light of continuing low inflation, a significant fall in inflation expectations and low domestic demand.
    But the Central Bank of Armenia (CBA) - which has cut its rate by 375 basis points since embarking on an easing cycle in August 2015, including cuts of 200 points this year alone - added that it doesn't see any risks of achieving its inflation target in the medium term despite the prevalence of short-term deflationary risks.
    Armenia's inflation rate fell to minus 1.9 percent in August from minus 1.3 percent in July and the CBA said it expects inflation to remain low in September.
    The CBA targets inflation in the medium term of 4.0 percent, plus/minus 1.5 points.
    Data for economic activity in the third quarter show "worsening prospects of economic growth" - following "high" activity in the first half - and the central bank has revised downward expectations for domestic demand.
    Armenia's dram currency has been firming since mid-February and was trading at 473.3 to the U.S. dollar today, up 3 percent since the start of this year.

Morocco maintains rate, sees 2016 inflation of 1.6%

September 27, 2016 by CentralBankNews   Comments (0)

    Morocco's central bank maintained its key policy rate at 2.25 percent, saying inflation is forecast to remain in line with its objective and average 1.6 percent this year and 1.2 percent in 2017 due to "the dissipation of temporary shocks on volatile food prices which would more than offset the expected increase in core inflation."
    The Bank of Morocco, which cut its rate by 25 basis points in March due to a downward revision in inflation forecasts, added that foreign exchange reserves are expected to continue to increase - though at a slower rate than expected in June due to an expected decline in foreign investment - to equal imports of around 7 months and 6 days by the end of this year and 7 months and 20 days by the end of 2017.
    Morocco's inflation rate was steady at 1.6 percent in August and July.
    In June the central bank forecast headline inflation in 2017 of 1.0 percent.
    The exchange rate of Morocco's dirham depreciated by 0.61 percent in the second quarter, mainly due to a decline in the exchange rate against the euro, the bank said, adding that the real exchange rate fell by 0.78 percent as inflation in Morocco was lower than in partner countries.
    "For the full year 2016, it is expected to rise by 1.4 percent and to decline by 0.4 percent in 2017," the central bank added.
   The dirham was trading at 9.72 to the U.S. dollar today, up 2.06 percent this year.

   The Bank of Morocco issued the following statement:

"1. On Tuesday, September 27, the Bank Board held its third quarterly meeting of the year, during which it discussed economic developments as well as the Bank’s macroeconomic projections for the next eight quarters.
2. Considering that inflation forecast is consistent with the objective of price stability and in view of recent monetary and economic developments and their medium-term expectations, the Bank Board judged that the current level of 2.25 percent for the key rate remains appropriate and decided to keep it unchanged.
 3. The Board noted that inflation, measured by the change in the consumer price index, was down from 1.9 percent in the second quarter to 1.6 percent on average in July and August, with a 0.2 percentage point increase in its core component to 0.7 percent. Based on the Bank’s forecasts, inflation would average 1.6 percent in 2016 and ease to 1.2 percent in 2017, mainly due to the dissipation of temporary shocks on volatile food prices which would more than offset the expected increase in core inflation.
 4. Internationally, second quarter data indicate continued slowdown in the euro area and the United States. In the medium term, the economy would be particularly impacted by uncertainties surrounding Brexit terms and some forthcoming elections. Growth forecast for the year 2016 was revised up from 1.6 to 1.7 percent in the euro area and from 1.8 to 1.5 percent in the United States, and that of 2017 was lowered from 1.9 to 1.8 percent and from 2.4 to 2.3 percent, respectively. Labor market conditions continued improving in the euro area, albeit at a slow pace, as unemployment rate is expected to remain around 10 percent in 2016 and 2017. In the United States, this rate stabilized at 4.9 percent in August and would remain at this level in the medium term. In the major emerging markets, second quarter data indicate further contraction of activity in Brazil, slight deceleration in India and stabilization in China, whose growth is expected to slow to 6.7 percent in 2016 and 6.3 percent in 2017, particularly as a result of the economic rebalancing policy and credit risks.
5. In commodity markets, the oil price in the first eight months of the year remained, on average, well below the level seen in the same period of 2015. In the medium term, it is expected to remain low, as its forecast was slightly revised up to $42.4 per barrel for 2016 and down to $45.4 per barrel for 2017. Prices of phosphates and derivatives also posted year-on-year declines, and their forecasts were again revised downward.
6. Under these conditions, inflation remained subdued in major advanced economies. For the full year 2016, it is expected to reach 0.2 percent in the euro area and 1.2 percent in the United States, and to speed up gradually to 1.6 percent and 2.3 percent, respectively, in 2018.
7. In terms of monetary policy decisions, the Federal Reserve decided, in September, to maintain the target range for the federal funds rate unchanged. It considered that the case for an increase in the range has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives regarding inflation and employment. The European Central Bank decided, at its September meeting, to keep the policy rate unchanged and confirmed that the monthly asset purchases of €80 billion are intended to run until the end of March 2017, or beyond, if necessary, and in any case until it sees a sustained adjustment in the path of inflation consistent with its inflation objective. Moreover, the Bank of England, after lowering its key interest rate during its last meeting, decided in September to keep it at 0.25 percent, and to continue implementing the measures announced in August, with the aim of further supporting growth and ensuring a sustainable return of inflation to the target.
8. Nationally, growth slowed down to 1.7 percent in the first quarter, with a sharp contraction in the agricultural added value and a deceleration in nonagricultural GDP. On the demand side, household consumption slowed down and net exports contribution to growth was negative, while investment showed a significant rebound. For the full year 2016, Bank Al-Maghrib has revised up growth forecasts from 1.2 to 1.4 percent. Agricultural value added is projected to contract by 9 percent and nonagricultural growth would reach 2.9 percent. In 2017, the latter is expected to accelerate to 3.2 percent and agricultural added value would rebound by 10 percent, assuming a normal crop year, thus leading to an overall growth of 4 percent.
9. In the labor market, the domestic economy lost 26,000 jobs in the second quarter compared to the same period of 2015, covering a contraction of 175,000 jobs in agriculture and increases of 70,000 jobs in the services sector, 41,000 in construction and 38,000 in industry, including handicrafts. Therefore, and taking into account as well a 0.8 point drop in the participation rate, unemployment edged down slightly by 0.1 point to 8.6 percent.
10. Regarding external accounts, the trade deficit widened by 13 percent over the first eight months of the year, reflecting a significant increase in imports, particularly capital goods which rose by 22.5 percent. Meanwhile, despite the decline in sales of phosphates and derivatives, exports grew by 1.7 percent, driven mostly by higher sales of the automotive sector and food industries. Travel receipts and expatriate remittances rose by 4.5 percent 4.8 percent, respectively. Under these circumstances and assuming an annual 8 billion dirhams inflow of grants in 2016 and 2017, current account deficit would reach 1.9 percent of GDP by the end of 2016 and would further ease to 1.2 percent of GDP in 2017. Taking also into account the expected decline in net FDI, foreign exchange reserves would continue to increase, albeit at a slower rate than anticipated in June, to stand at around 7 months and 6 days of goods and services’ imports at end-2016 and 7 months and 20 days at end-2017.
11. Turning to monetary conditions, raising the required reserve ratio from 2 to 4 percent in June caused the alignment of the interbank rate with the key rate and the adjustment of rates in different markets. The overall average lending rate decreased by 31 basis points in the second quarter, following the lowering of the key rate by 25 basis points in March. In this context, outstanding bank credit to the nonfinancial sector continued improving, growing by 3.2 percent as at end-July, due mainly to a relative recovery of lending to businesses. Taking into account these developments and the slight revision of nonagricultural growth, its forecast was slightly adjusted upward by 0.3 point to 3 percent for 2016 and was kept unchanged at 4 percent for 2017. The dirham’s nominal exchange rate depreciated at a quarterly rate of 0.61 percent in the second quarter, mostly because of the decline in the value of the national currency against the euro. Considering that inflation in Morocco was generally lower than in partner and competitor countries, the real effective exchange rate fell 0.78 percent. For the full year 2016, it is expected to rise by 1.4 percent and to decline slightly by 0.4 percent in 2017.
12. Concerning public finance, fiscal adjustment is under way. Budget execution in the first eight months of the year resulted in a 5.2 percent expansion in overall expenses, due largely to an increase in investment and goods and services’ expenditure whereas subsidy costs shrank by 22.1 percent to 7.5 billion, representing an execution rate of 48.5 percent compared to the Finance Act planning. Revenues improved by 5.8 percent, particularly reflecting higher proceeds from direct taxes, import VAT and domestic consumption taxes. Altogether, fiscal deficit almost stabilized at 30.5 billion and was financed mainly from the domestic market. It is expected to reach 3.8 percent of GDP by the end of 2016 and 3.2 percent of GDP in 2017."

Rwanda holds rate, sees inflation at 6% end-2016

September 27, 2016 by CentralBankNews   Comments (0)

    Rwanda's central bank left its key repo rate at 6.5 percent, saying this was "in order to support the continued financing of the economy while mitigating inflationary and exchange rate pressures."
    The National Bank of Rwanda, which has maintained its rate since cutting it by 50 basis points in June 2014, said inflation was projected to be around 6 percent in December as prices of fresh products are expected to ease following the start of the rainy season.
   Rwanda's inflation rate eased to 6.4 percent in August from 6.9 percent in July - above the central bank's 5.0 percent target - following a rise in food prices and a higher pass-through of exchange rates to domestic prices.
    Due to an increase in the exchange rate pass-through, imported inflation rose to 5.5 percent in August and 5.5 percent in July from 3.9 percent in June, the bank said.
    In June the International Monetary Fund (IMF) forecast that Rwanda's consumer price inflation rate would average 2.5 percent this year, up from 1.8 percent in 2015, and rise to 4.6 percent in 4.6 percent.
    Inflation end-2016 was seen by the IMF at 4.5 percent and 4.7 percent end-2017.
    The exchange rate of the Rwandan franc has been steadily depreciating since 2008 and was trading at 805 to the U.S. dollar today, down 7.45 percent this year.
    Last year the franc lost 7.6 percent against the dollar after a depreciation of 3.6 percent in 2014.
    Rwanda is suffering a shortage of foreign exchange due to low commodity prices and in June it won an 18-month US$204 million standby facility from the IMF to boost its reserves.
    The fall in commodity prices has also lead to an 2.2 percent increase in Rwanda's trade deficit in the first eight months of this year, a move that along with additional foreign exchange demand from some big projects under the public-private partnership (PPP) framework, "has put pressure on the FRW exchange rate," the central bank said.

Kyrgyzstan holds rate, says economy improving

September 27, 2016 by CentralBankNews   Comments (0)

     The central bank of the Kyrgyz Republic maintained its policy rate at 6.0 percent to help neutralize the deflationary environment and thus bring inflation back to within its target.
    The National Bank of the Kyrgyz Republic (NBKR), which has cut its rate by 400 basis points this year, added that economic activity is reviving, with the economy expanding by 0.4 percent in the January-August period compared with a contraction of 1.2 percent in the January-July period.
    However, manufacturing is continuing to decline, mainly due to lower output from the Kumtor gold mine, and there is still weak demand for domestic products.
     Excluding output from Kumtor, data the central bank bases its monetary policy on,  the economy grew by 2.1 percent in the first eight months, the NBKR said in a statement from Sept. 26.
    Consumer price inflation declined to 0.5 percent in August from 1.2 percent in July but by Sept. 16, the overall price level fell by an annual 0.4 percent, the central bank said, adding that reduced domestic demand continues to limit the growth of consumer prices.
    The NBKR targets inflation of 5-7 percent.
    The central bank said the domestic foreign exchange market had remained stable - its policy aims to smooth any sharp fluctuations - and since the start of the year the som had risen 9.4 percent as of Sept. 23.
    Today the som was trading at 68.3 to the U.S. dollar, up 11.1 percent from 75.9 at the start of the year.

I Prefer Donald Trump over Hillary Clinton (Video)

September 27, 2016 by EconMatters   Comments (0)

By EconMatters

Donald Trump might just be outside the career politician mode enough to address some of the structural issues facing this country over the next four years that sadly Hillary Clinton will just continue perpetuating with the status quo. I expect out of control spending and continued fiscal mismanagement during Hillary Clinton`s Presidency.

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EconMatters Expects Global Recession by 2018 (Video)

September 26, 2016 by EconMatters   Comments (0)

By EconMatters

We think bad decisions being made to avoid "worse off scenarios" come home to roost from an overall productivity and business efficiency standpoint. The loser of this Presidential Election is going to be grateful in the end that they didn`t endure these four years. Budget hawks are going to be in season over the tenure of the next President, no more free lunches like President`s Bush and Obama enjoyed during their time in office from a budget accountability standpoint.

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This week in monetary policy: Israel, Kyrgyzstan, Morocco, Sri Lanka, Angola, Taiwan, Czech Rep., Moldova, Mexico, Romania, Bulgaria, Colombia, Trinidad & Tobago and Dominican Rep.

September 25, 2016 by CentralBankNews   Comments (0)

    This week (September 25 through October 1) central banks from 14 countries or jurisdictions are scheduled to decide on monetary policy: Israel, Kyrgyz Republic, Morocco, Sri Lanka, Angola, Taiwan, Czech Republic, Moldova, Mexico, Romania, Bulgaria, Colombia, Trinidad and Tobago, and the Dominican Republic.
    Following table includes the name of the country, the date of the next policy decision, the current policy rate, the result of the last policy decision, the change in the policy rate year to date, the rate one year ago, and the country’s MSCI classification.
    The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.

SEP 25 - OCT 1, 2016:
COUNTRY       DATE           RATE      LATEST        YTD     1 YR AGO    MSCI
ISRAEL 26-Sep 0.10% 0 0 0.10%       DM
KYRGYZSTAN 26-Sep 6.00% 0 -400 10.00%
MOROCCO 27-Sep 2.25% 0 -25 2.50%       FM
SRI LANKA 28-Sep 7.00% 0 100 6.00%       FM
ANGOLA 28-Sep 16.00% 200 500 10.50%
TAIWAN 29-Sep 1.38% -12.5 -25 1.75%       EM
CZECH REPUBLIC 29-Sep 0.05% 0 0 0.05%       EM
MOLDOVA 29-Sep 10.00% -300 -950 19.50%
MEXICO 29-Sep 4.25% 0 100 3.00%       EM
ROMANIA 30-Sep 1.75% 0 0 1.75%       FM
BULGARIA 30-Sep 0.00% 0 -1 0.01%       FM
COLOMBIA 30-Sep 7.75% 0 200 4.75%       EM
TRINIDAD & TOBAGO 30-Sep 4.75% 0 0 4.50%
DOMINICAN REP. 30-Sep 5.00% 0 0 5.00%