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Kazakhstan cuts rate 25 bps but signals easing pause

June 4, 2018 by CentralBankNews   Comments (0)

      Kazakhstan's central bank lowered its base rate by another 25 basis points to 9.0 percent, as it signaled in April, but said monetary conditions were now at a neutral level and the risks that will limit the rate of decline in inflation this year and next year would restrain further rate cuts this year.
      It is the fourth consecutive rate cut by the National Bank of Kazakhstan (NBK) and the rate has now been cut by a total of 125 basis points this year. Since May 2016, when the central bank embarked on an easing cycle, the base rate has been lowered by 800 points.
      Today's rate cut was in response to the continued decline in inflation and inflation expectations as well as favorable trends in world oil markets, NBK Governor Daniyar Akishev told a televised press conference.
      Kazakhstan's inflation rate eased to 6.2 percent in May from 6.5 percent in April, within the central bank's target range of 5-7 percent, and against the backdrop of a weakening of the tenge's exchange rate and a decline in inflation expectations 12-months ahead to 6.0 percent.
      Akishev said the latest estimates show that inflation will remain within the target corridor this year and in 2019 and reach the medium-term inflation target of 4.0 percent by end-2020.
      The main factor that will limit the decrease in inflation is the expected rise in world food prices, imported inflation from trading partners and growth in consumer and investment demand.
      The normalization of U.S. monetary policy is also posing a risk of an outflow of capital from emerging markets, Akishev added.
      The tenge was hit in early April by a fall in Russia's ruble on new U.S. sanctions but has stabilized since then. Russia is Kazakhstan's largest trading partner.
      The tenge was trading at 330.9 to the dollar today, up 0.6 percent this year.
      The central bank said its international reserves amounted to US$90.4 billion, up 1.4 percent.



This week in monetary policy: Kazakhstan, Australia, Moldova, India, Poland, Serbia, Turkey and Peru

June 4, 2018 by CentralBankNews   Comments (0)

     This week - June 3 through June 9 - central banks from 8 countries or jurisdictions are scheduled to decide on monetary policy: Kazakhstan, Australia, Moldova, India, Poland, Serbia, Turkey and Peru.
    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.

JUNE 3 - JUN 9, 2018:
COUNTRY                    DATE                      RATE                 LATEST                     YTD               1 YR AGO       MSCI
KAZAKHSTAN 4-Jun 9.25% -25 -100 10.50%          FM
AUSTRALIA 5-Jun 1.50% 0 0 1.50%          DM
MOLDOVA 5-Jun 6.50% 0 0 8.00%
INDIA 6-Jun 6.00% 0 0 6.25%          EM
POLAND 6-Jun 1.50% 0 0 1.50%          EM
SERBIA 7-Jun 3.00% 0 -50 4.00%          FM
TURKEY 7-Jun 16.50% 850 850 8.00%          EM
PERU 7-Jun 2.75% 0 -50 4.00%          EM

Donald Trump Will Be Impeached

June 3, 2018 by EconMatters   Comments (0)

By EconMatters

We have seen this pattern repeat itself throughout the history of politics where the initial incidence or transgression isn`t what caused the most damage but the process of trying to cover up the incident that brings the real trouble for politicians. We have already reached that threshold level in the Trump Administration's attempts to cover up whatever happened during the campaign and just after the election prior to moving into the Oval Office.

Just with the tidbits that have been leaked from the Mueller Investigation, and Trump having to verify multiple times that he and his team have lied to the media, congress, Mueller and the American people as new details emerge from the investigation. A circumstantial case can be made today for a consistent, strategic obstruction of justice campaign on behalf of Donald Trump and his team in the white house to cover up some of the politically compromising things that occurred during the campaigning process. Furthermore, we don't even know if there are more damaging issues yet to come from the Mueller Investigation.

Again, Trump and his team would have been much better off just taking the initial political hits from his meetings with the Russians, politically spun these to lessen the damage and move on, but the cover up, the trying to not have the political damage in the first place is what always gets these figures in the end. It is rather obvious that Trump is in trouble with his cover up approach, and this is where he has really crossed the line for a sitting president.

The only thing we don't have is a “Watergate Break-in Moment” but the rest is all there for a continual pattern of behavior obstruction of justice campaign conducted on behalf of Donald Trump and his Team. These latest pardons on behalf of Donald Trump only build the case along these lines of a President who is acting above the law, trying to circumvent the normal judicial process. When a President starts abusing the Pardon Authority along the lines of sending messages to those individuals who may have violated the law in an ongoing investigation where he could possibly be implicated with their cooperation in the Mueller Investigation this sets a bad precedent, is a conflict of interest, and furthers the case for a President acting above the law, obstructing an ongoing investigation, and builds the momentum for impeachment.

At some point, even Republicans will realize that you cannot have the President of The United States acting this way in office, it undermines the credibility of the entire system if a sitting President acts as if he is above the rule of law. In fact, there may have to be constitutional changes to more clearly provide various checks and balances to limit the powers and authority of the president of the United States. Donald Trump is pushing boundaries and presidential norms of behavior to such a degree that he is often teetering on the precarious edge of becoming a rogue, out of control president. Again much easier to just impeach the president, then rewrite the constitution going forward.

But there are more threats to Trump's survival than just the fallout from the Mueller Investigation, you just cannot have the President of the United States tweeting and getting caught up in all these petty, small minded beefs on social media. You are the President of the United States, not some high school teenager with nothing better to do with their time. If Donald Trump was in any other position in America, A corporate CEO, a Mid-Level Manager, an employee, you name the position, ironically, it is he who would be fired unceremoniously. You cannot act this way period, it is highly unprofessional, and wholly unacceptable behavior for the President of The United States. It is an embarrassing representation of America on the world stage to have the President of the United States Tweet and act like a 12 year old while in office, it makes us look ridiculous as a country in the world`s eyes. The President of the United States should not be conducting foreign policy via twitter, this should be self-explanatory for any president. This alone is grounds for impeachment, the fact that Donald Trump doesn`t or cannot control his behavioral impulses on twitter says a lot about his mental competency, or being publicly fit to serve as president of the United States.

Donald Trump is all over the place with his schizophrenic policy initiatives, public statements, cabinet management, and overall behavior while in office that one really has to question his basic competency as a leader, let alone his mental stability as the President of the United States of America. Really, this is the best of the best that America can find to represent its interests on the world stage? Frankly, the fact that Donald Trump could be elected, or thought competent to serve as President by a majority of voters says a lot about the entire two party system, the electoral process, and the critical thinking and reasoning abilities of Americans. Maybe it represents a desperation play by American voters who feel disenfranchised and exploited by globalism, monopoly corporations and the failures of socialized crony capitalism plus other unnamed factors too robust for this current discourse. However, whatever the causes, when Donald Trump is the end result, you know something has gone terribly wrong in the system. Moreover, just to have him viable as a presidential candidate in the first place speaks volumes about the dire underlying conditions of this country. When you start electing reality television stars to the presidency, you shouldn't be surprised when they behave and lead the nation like reality television stars!

Trump has been very lucky to be benefiting from an economy at the late stages of the business cycle, and his tax cuts which are providing a short term gain, are helping to push the last stages of this business cycle a little further. However, these same tax cuts have dire consequences down the line, are unsustainable going forward, and will be revoked maybe as soon as two years from now.

And when the economy starts to turn, and or the republicans lose a lot of power in the midterm elections this November Trump`s schizophrenic behavior and actions will not be so easily overlooked. I have been amazed with just how much bullshit shenanigans Donald Trump has gotten away with so far in office with the latest being the violation of the quiet period before the employment report. But political missteps will start sticking hard to Donald Trump as people start looking for somebody to blame for the inevitable downturn in the economy. Remember, all this Central Bank short term Monetary Shenanigans, and the out of control global debt spending of the last 10 years means a very bad global recession is coming, and coming much sooner than people realize. The Trade War escalations is really a fight over money, and the reason this is such an issue is everybody underneath the debt and central bank camouflaging is at the core desperately broke and in debt. Trade wars are going to get much worse in the global recession that is coming over the next two years.

Under the changing political landscape as republicans lose political power, the economy turns into recession, not just in the United States, but globally Donald Trump becomes not only the focus of blame, the natural fall guy for the world's problems, but the psychological outlet for the world`s frustrations.

His removal from office will solve very little of what is wrong with the political system, what led to his election in the first place, and what ails the United States and the world as a whole. Such bigger macro factors like too many people on the planet for too little resources, quality jobs, and basic standard of living resulting in the inevitable inequality that has only been magnified by incompetent Central Banks and governments around the world.

Thus, I find it highly likely that Donald Trump is impeached before his term in office expires in just over two years. Depending upon if the midterms are a bloodbath for republicans, or the US Economy starts sliding real fast this speeds up the impeachment process. Literally Donald Trump could very well be impeached within a year. This is part of the reason Donald Trump is trying all these politically risky actions from the most recent pardons to the Giuliani media campaign to the summit with North Korea, and the schizophrenic Trade War actions. These serve as great diversions from the Mueller Investigation story. Donald Trump may even be in more trouble than we realize with the Mueller Investigation. He sure is acting like a guy who is about to be impeached within the next year!

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The Most Overcrowded Bubble Market Trade

June 1, 2018 by EconMatters   Comments (0)

By EconMatters

This is the bubble of all bubble trades going on in financial markets and it is probably just about as good as it is going to get right now with a rate hike coming in two weeks. The Federal Reserve has been pretty dovish as the prior month`s economic data was pretty bad including a weak employment report. All the Fed speak was pretty dovish trying to back out of the June rate hike, but with the latest strong employment report, this locks the Fed into the June hike, and maybe 4 hikes for the year. The Bulls are so full of it, they cheer the bad employment report, as this means more dovish Fed, now they get a strong employment report, and they cheer a strong economy. Make up your mind: Is bad news good or bad for the economy and vice versa for good news?

We will narrow this most crowded trade of trades to seven stocks for the sake of simplicity, the trade probably includes about 15 to 20 in total, these are all technology stocks, supported at the core by large blue chip technology stocks in the Nasdaq, Dow and S&P 500 Indexes. This FANG PLUS 5 Trade which we will label for simplicity is heavily reliant on borrowed money which at some point will have to be paid back as many of these positive carry trades and carry trades unwind due to risk aversion, currency market turbulence, or currency policy changes from the status quo. There just isn't that much money created out of thin air when investors have been all in for a decade, it has to come from borrowed money. And one can look squarely at the emergency low monetary base rates of the European Union, United Kingdom, Switzerland and Japan for the starting points of this borrowed money program. This is why the VIX spiking at the end of January, and the initial China Trade War escalation, and the next major selloff is such a problem for this borrowed money and specifically this overcrowded Technology Bubble Trade.

It isn't a coincidence as the Euro weakens these technology stocks are putting in a great run, this isn`t the only carry trade funding market as there are several going on right now with such divergent Central Bank Policies occurring right now with major Trading Partners, but it is one of the dominant funding sources. A little Swiss Francs, A little Japanese Yen, some British Pounds etc and you are ready to rock and roll you some technology carry trades. These Central Bank Policies and the Resultant Market Shenanigans which have manifested themselves in the most crowded trade since the DOT COM CRASH is just crazy in that it has gone on this long and built to such degree that there is no way to even slowly prick the bubble, it all collapses in on itself, and continues to crash in multi leg down subsequent crashes like aftershocks of a Mega Earthquake.

These aren`t obscure technology companies, everyone owns these large cap technology companies in their portfolios, the collateral damage to financial markets, and global financial markets of the resultant carry unwind in this FANG PLUS 5 Trade takes down the entire global financial system. Think about that one for a moment, the Market has become so rigged, that traders figured that it would be much easier to rig the market by just concentrating on a handful of chosen high performers, that these stocks have basically become the market. This is how overcrowded this trade is, at no time in the history of financial markets have 10 stocks basically become the market, and have the entire Global Financial System on their shoulders. Yes 10 stocks versus the entire S&P 500, well how do you think that unwinds in a healthy, natural process? It doesn't, it crashes like nothing has ever crashed before!

Thank You Central Banks for causing such excessive risk taking. Lucky for them Donald Trump is the perfect fall guy, and he sure is doing his part to get impeached and run up even more debt on an already unsustainable trend. But make no mistake this crash is caused by central banks, and they need to be held accountable for putting the financial system in such a risky, precarious place which I will call a ‘tenuous liquidity cliff’ that is on the verge of breaking, sending everything and everyone free falling. This is the Mega Earthquake, the 10 Sigma Event, the Red Swan Risk Event built up to such a degree through crazy absurd cheap money policies and record debt levels that once the train gets started down the track there is no stopping the deflationary death spiral. As bad things lead to even more bad things, excessively rich stocks at exorbitantly high prices means losses lead to more losses, margin calls lead to bigger losses, carry unwinds of a decade unravel in 3 months, firms go out of business, instruments close down shop, trading curbs are hit at the open each day for weeks, and central banks are powerless to stop the carnage and the blame game begins while the global financial system collapses. We saw a hint of this in late January, and that broke one VIX instrument, sent it out of commission, just extrapolate by a factor of 35, and you see how extreme things are right now, and everyone is asleep at the complacency wheel. Think about when over 35 instruments just break, and go out of business with all these newfangled bullshit ETF offerings of the last decade; literally over 50 products will break entirely in this coming financial market crash.

Take a look at these charts I post in this article and tell me this unwinds in a healthy fashion, and is a good sign for financial markets, and financial market stability? The clock is ticking on this time bomb! Way to go Central Banks. This is just about as good as it gets, the end is near, and the world couldn`t be more clueless. There truly is no hope for humanity!

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Gambia cuts rate 150 bps to boost credit growth

May 31, 2018 by CentralBankNews   Comments (0)

      Gambia's central. bank lowered its policy rate by 150 basis points to 13.50 percent to "reinforce private sector credit growth particularly to small and medium size enterprises."
       It is the first rate cut by the Central Bank of The Gambia (CBG) since June 2017 and the policy rate has now been cut by a total of 950 basis points since it began an easing cycle in May 2017/
       The CBG also said it was introducing an overnight interest corridor as of Aug. 30 to help limit the volatility of short-term interest rates around its policy rate.
       "Lower volatility increases the effectiveness of the monetary policy rate and strengthens the interest channel of the monetary transmission mechanism," the central bank said, adding it would introduce standing lending and deposit facilities as part of it corridor framework.
       Gambia's inflation rate eased to 6.6 percent in April from 8.7 percent in April 2017 but was up from 6.7 percent in March 2018 due to a slight rise in non-food inflation, the central bank said.
       But the CBG expects this increase in inflation to be temporary and the outlook is for inflation to decelerate further toward its 5 percent target based on continued stability of the exchange rate and prudent monetary and fiscal policies.
       Risks to this outlook include higher global commodity prices, particularly energy and food, while  Gambia's debt to Gross Domestic Product ratio of 130 percent "poses a major risk to the economy."
       Gambia's economic recovery is gathering strength, the central bank said, adding real GDP is projected to grow by 5.4 percent this year, up from 3.5 percent in 2017, predicated on a rebound in agriculture and continued improvement in trade, tourism and construction.
       The exchange rate of Gambia's dalasi has remained stable and rose by 1.2 percent against the U.S. dollar from December last year to May 2018, the CBG said.

     The Central Bank of the Gambia issued the following statement:

  1. "The Monetary Policy Committee (MPC) of the Central Bank of The Gambia met on Wednesday May 30, 2018 to assess the performance, risks and outlook of the domestic and the global economy. The Committee decided on the key policy rate and the following are highlights of the deliberations on key economic indicators that informed the Committee’s decision.
Global Economic Outlook
  1. Since the last MPC, the global economy continues to strengthen supported by increased trade flows and higher investment, accommodative monetary policy, and recovery in commodity prices. Strong economic growth in emerging market and developing economies and robust recovery in advanced economies are expected to continue in 2018. In sub-Saharan Africa, economic growth is expected to improve further against the backdrop of more supportive external environment, including stronger global growth, higher commodity prices, and improved market access. However, there are risks to the global economic outlook including, prospect for increased trade protectionism, rising volatility in asset markets, and geo-political tensions.
  1. The International Monetary Fund (IMF) forecast the global economy to grow by 3.9 percent in2018 compared to 3.8 percent in 2017.Global inflation is projected to increase to 3.5 percent in 2018 from 3.2 percent in 2017 predicated on continued recovery in commodity prices and stronger global demand. 
Domestic Economic Outlook
Real Sector
  1. At the domestic front, economic recovery is gathering strength, supported by improved implementation of macroeconomic policies and business confidence. Real GDP is projected to grow by 5.4 percent in 2018 compared to 3.5 percent in 2017 predicated on rebound in agriculture, and continued improvement in trade, tourism, and construction. 
External Sector
  1. Preliminary Balance of payments estimates for the first quarter of 2018 indicates an improved position compared to the corresponding period a year ago, thanks largely to the increase in current transfers. 
  1. The current account deficit narrowed to US$7.01 million (0.7 percent of GDP) in the first quarter of 2018 from US$29.45 million (2.7 percent of GDP) a year ago, reflecting marked increase in current transfers  (mainly remittances) by 62.2 percent to US$60.71 million. However, the goods account balance worsened from a deficit of US$54.61 million (5.2 percent of GDP)in the first quarter of 2017 to a deficit of US$67.46 million (6.1 percent of GDP) in the first quarter of 2018, following sharp decline in exports and significant increase in imports. 
  1. The capital and financial account balance declined to a surplus of US$7.53 million in the first quarter of 2018 from a surplus of US$27.36 million in the same period a year ago.  Against the backdrop of strong international support and  improved  domestic foreign   exchange market conditions, gross international reserves is projected at 4 months of next year’s  imports of goods and services. 
Exchange rate developments
  1. In the year to end-March, 2018, volume of transactions in the domestic foreign exchange market totaled US$1.7 billion, higher than US$1.3 billion the same period last year, reflecting improved market conditions and confidence. Purchases of foreign currency, indicating supply, increased markedly by 31.1 percent to US$863.7 million during the period under review. Similarly, sales of foreign currency, indicating demand, increased significantly by 31.2 percent to 652.0 million. 
  1. The exchange rate of the dalasi remains stable.  From December 2017 to May 2018, the dalasi appreciated against all major international currencies traded in the domestic foreign exchange market.  The Dalasi appreciated against the US Dollar by 1.2 percent, Pound Sterling by 1.0 percent, Euro by 2.4 percent and CFA franc by 1.3 percent.  
Domestic Debt
  1. The Gambia’s domestic debt is stabilizing. Stock of domestic debt decreased from D29.3 billion or 62.2 percent of GDP in April 2017 to D28.8 billion or 55.8 percent of GDP in April 2018.  Stock of Treasury and Sukuk Al Salaam bills contracted significantly by 13.5 percent to D16.1 billion during the period under review.
  1. Yields on all Treasury bills and Sukuk Al Salaam bills declined, reflecting reduced borrowing by government.  The 91-day, 182-day and 364-day yields fell from 9.37 percent, 11.29 percent and 12.88 percent in April 2017 to 5.87 percent, 5.99 percent and 9.23 percent respectively in April 2018. 
Banking Sector
  1. According to financial soundness indicators, the banking sector remains well capitalized, highly liquid and profitable. The risk weighted capital adequacy ratio stood at 31 percent as at end-March 2018, significantly higher than the statutory requirement of 10 percent. Liquidity ratio of the banking industry stood at 94.7 percent, also significantly higher than the requirement of 30 percent. Non-performing loans ratio dropped from 9.7 percent at end-March 2017 to 7.2 percent as at end-March 2018.Total assets of the industry expanded from D33.5 billion as at end-March 2017 to D39.8 billion as at end-March 2018.
Monetary developments
  1. Money supply grew by 28.0 percent in March 2018, driven largely by the increase in net foreign assets (NFA) of the banking system from D1.5 billion in March 2017 to D8.0 billion in March 2018.Net domestic assets (NDA) of the banking system rose by 1.0 percent to D22.4 billion.  Reserve money, the Bank’s operating target, grew by 24.2 percent in March 2018 relative to 18.1 percent a year ago. 
  1. Private sector credit growth is recovering strongly following slowdown in government borrowing. Private sector credit grew by 6.2 percent in March 2018, the highest since 2014. On the other hand, the banking system’s net claims on government contracted by 5.8 percent. 
  1. Consumer price inflation as measured by the National Consumer Price Index (NCPI) declined from 8.7 percent in April 2017 to 6.6 percent in April 2018. Compared to March 2018, inflation edged up slightly by 0.1 percentage point driven by marginal increase in non-food inflation due mainly to temporal factors. However, Food inflation remains unchanged at 6.4 percent. 
Inflation Outlook
  1. The Committee observed that economic and business environment continue to improve, and recovery is gaining momentum, thanks to sound macroeconomic policies, strong international support and improved confidence. 
  1. With reduced government borrowing and decline in interest rates, private sector credit has started to recover.
  1. The Committee observed that prices edged up slightly in the run-up to the month of Ramadan. The Committee judges this to be a temporary development and that the outlook remains a further deceleration in inflation towards the Bank’s medium term target of 5 percent, premised on continued stability of exchange rate on the back of prudent monetary and fiscal policies.
  1. According to the forward looking business sentiment survey, all respondents indicated higher economic activity in the first quarter of 2018.
  1. However, the Committee noted that there are risks to inflation outlook including rising global commodity prices, particularly energy and food.  Furthermore, debt to GDP ratio of 130 percent poses major risk to the economy.
  1. Taken the above factors into consideration, the Committee decided to reduce the Policy rate by 1.5 percentage points to 13.5 percent.  This decision is to reinforce private sector credit growth particularly to small and medium size enterprises.  The committee will continue to closely monitor domestic and international economic developments and stands ready to act accordingly should economic conditions change.
Information Note
Introduction of interest rate corridor
The Monetary Policy Committee (MPC) of CBG would like to announce the introduction of an overnight interest rate corridor effective August 30, 2018.The main purpose of the corridor is to limit the short term interest rate volatility around the key monetary policy interest rate. Excessive interest rate volatility is undesirable for the smooth implementation of monetary policy. Lower volatility increases the effectiveness of the monetary policy rate and strengthens the interest rate channel of the monetary transmission mechanism.  In the interest rate corridor framework, standing lending and deposit facilities will be introduced. 
Date for the next MPC
The next Monetary Policy Committee (MPC) meeting is scheduled for August 29, 2018. The meeting will be followed by the announcement of the policy decision on August 30, 2018."

Fiji maintains rate and accommodative policy stance

May 31, 2018 by CentralBankNews   Comments (0)

      Fiji's central bank kept its benchmark Overnight Policy Rate (OPR) at 0.50 percent and said its monetary policy stance would remain accommodative in light of the stable outlook for its twin objectives of inflation and foreign reserves.
      The Reserve Bank of Fiji (RBF), which has maintained its rate since October 2011, noted inflation rose to 4.0 percent in April, the highest in 12 months, from 2.6 percent in March but this was mainly due to supply-side shocks in the aftermath of natural disasters last month and relatively higher prices for kava and vegetables.
      This impact is expected to subside in coming months as the supply of most agricultural items normalizes, RBF said.
      On May 11 the central bank forecast upward pressure on prices in coming months but inflation would then stabilize around 3.0 percent by year-end and then average around 2.5 percent in 2019 and 2020.
       Fiji was hit by Tropical Cyclone Winston in February 2016, the worst ever cyclone in the Southern Hemisphere, and then by Cyclones Josie and Keni in April this year, which caused severe flooding and killed four people.
      But RBF Governor Ariff Ali said consumption remains upbeat and the economy is expected to register its ninth consecutive year of growth in 2018. Economic growth in 2017 has been estimated at 4.2 percent.
      Earlier this month the central bank lowered its 2018 growth forecast to 3.2 percent from 3.6 percent due to the devastating impact on agriculture from the cyclones in early April.
      But for 2019 the growth outlook was revised upwards to 3.4 percent from 3.2 percent while the 2020 outlook was unchanged at 3.2 percent.
      There has been a robust recovery in gold and timber production along with positive results in tourism and electricity production, while the global economic upswing continues to strengthen, underpinned by the recovery in emerging market economies, higher trade and investment.
      "However, geopolitical tensions between the United States and Iran and the general increase in commodity prices could pose risks" to the outlook, Ali added.
      Fiji's foreign reserves rose to US2.163 billion as of May 31, up from $2.157 billion on March 29, sufficient to cover five months of imports and services, and are expected to remain at comfortable levels by year-end.
      In 2017 Fiji's foreign reserves rose by $351.6 million to $2.272.8 billion end-year.


      The Reserve Bank of Fiji issued the following statement:

"The Reserve Bank of Fiji Board has agreed to keep the Overnight Policy Rate unchanged at 0.5 percent following its monthly meeting on 31 May.
Announcing the decision, the Governor and Chairman of the Board, Mr Ariff Ali, stated thatsectoral performances in the year have been generally positive so far, attributed to robust recovery in gold and timber production coupled with positive outcomes noted for visitor arrivals andelectricity generation.” 
Governor Ali highlighted that “consumption activity remains upbeat as reflected in increased VAT collections, higher vehicle registrations, and rising commercial banks’lending.” He added that despite the natural disasters in early April, the economy is expected to register its ninth consecutive year of economic growth in 2018.
On the international front, Governor Ali stated that the global economic upswing continues to strengthen underpinned by the recoveries in emerging market economies and the increase in global trade and investment activities. However, geopolitical tensions between the United States and Iran and the general increase in commodity prices could pose risks to our macroeconomic outlook going forward.
Nevertheless, the outlook for the Reserve Bank’s twin monetary policy objectives remains intact.Annual inflation increased to 4.0 percent in April from 2.6 percent in March, attributed to supply- side shocks post-natural disasters and relatively higher prices for yaqona (kava) and vegetables. However, this is anticipated to subside in the months ahead as supply of most agricultural market items normalise. Foreign reserves were adequate at $2,163.3 million as at 31 May, sufficient to cover 5.0 months of retained imports of goods and non-factor services and are expected to remain at comfortable levels by year-end.
Governor Ali concluded that in light of the latest global and domestic economic developments and the stable outlook for inflation and foreign reserves, the monetary policy stance would remain accommodative. The Reserve Bank will continue to monitor economic developments closely and will align monetary policy as and when appropriate."


Warren Buffett: The Technology Investor

May 30, 2018 by EconMatters   Comments (0)

By EconMatters

When it comes to stock picking I question what is going through Warren Buffett`s mind lately. First it was his stake in IBM, just a dreadful company, setting records for quarterly revenue declines, and bringing up the rear in the cloud space, and desperately trying to be cutting edge with IBM Watson. If IBM Watson is your business development deliverable for the last decade you know you are an antiquated old tired technology company on the decline. Yet Warren Buffett who routinely stated he didn't understand technology companies, and this reasoning was behind him avoiding the sector for decades from an investment standpoint, last year was pumping and promoting that IBM stock in any interview he could find. Warren when the only thing holding up the stock is your doubling down and their share buybacks with the fundamentals looking just terrible quarter after quarter what were you hoping to achieve with that technology investment? Did you even look at Amazon? How did Amazon`s fundamentals compare with IBM`s fundamentals at the time of the initial investment in IBM? He finally threw in the towel after continuously talking up IBM share buybacks quarter after miserable quarter and sold his entire IBM position.

So Warren Buffett`s next foray into the technology sector is Apple where he started an initial position last year and started adding to it to the tune of acquiring a 5% stake in the technology and hardware company. This sure looks a lot like his IBM stock purchase, just a little earlier in the inevitable fundamental decline cycle, but a large blue chip technology company that pays a dividend, and buys back a lot of stock through share repurchases, but hasn't created the next growth product since Steve Job`s departure from the company.

Remember how all the analysts were talking about the 10-year anniversary of the IPhone, with this release going to be a real game changer for Apple revenue growth? Well it frankly has been a disappointment at best, and certainly not a game changer for reviving Apple's stagnant revenue growth, and declining IPhone sales. Of course, this makes sense as the smartphone market which accounts for the majority of Apple's revenue is a mature market, and smartphones have been “gimmicked up” over the last 5 years to about peak gimmick that one can squeeze out of that marketing trick. Everyone that already has a capable smartphone at this point probably doesn't need another one, and the need to upgrade for one slightly new gimmick feature doesn't justify the $1,000 price tag that takes consumers three years to pay off. This money is better spent elsewhere for consumers discretionary income with inflation rising by the quarter.

But from a more meta-investment standpoint what is Warren Buffett thinking here? He avoided the stock like the plague for over a decade of the high margins and growth phase of the IPod launch and ITunes, and then the massive IPhone and Smartphone Supercycle decade, and every Tom, Dick and Harry and their cousin Ralph jumped in on this Apple Investment Stock in the most heavily owned issue on the street, and now he wants to come in and build a stake in the company? Furthermore, and is actually bragging on tv every chance he gets how this is such a great company, and he has made such an astute investment at this point in the investment cycle of not only Apple`s huge run over the last 20 years of which he sat on the sidelines for, but the end of the QE Central Bank liquidity era, top of the top in financial markets, i.e., bubble territory by historical standards, and likely the end of this 10 year business cycle, and looming recession probably spurred on by debt, inflation, and inventory cycle norms just around the corner. And now you build a 5% stake in Apple while all the smart money like David Tepper is running for the exits in this decade long crowded trade? Apple was downgraded again today with the analyst rightly sceptical that service growth is going to magically save the day from the end of the smartphone supercycle, just like the anniversary I-Phone talk was misguided by stock pumping junkies.

Apple is done as a growth company, they will be on the decline for the next decade plus as everything they produce becomes fully commoditized and generic. Shoot their best laptops have outdated specs by at least 8 months, and are overpriced by $1,000 bucks to the best comparable laptops with the same sleek, lightweight design features, with much better tech specs inside. Just research for yourself for a high end laptop configuration, Apple will stack up very poorly to the competition. Consumers might be fooled by branding over the short term, but with inflation rising each year, and everything Apple produces being fully commoditized, they will gravitate towards the best product with the best specs and a much cheaper price versus a stupid marketing logo that can be covered up with a protective case anyway. It appears Warren Buffett will be the bagholder of bagholders in this stock, as the most overcrowded trade in the history of Wall Street and Financial Markets unwinds over the next five to ten years.

I expect the next earning`s report to be quite insightful of where Apple is heading in the future, and more investors will realize that not only can Warren Buffett not stop declining fundamentals from occurring in a maturing smartphone market, but moreover, he is becoming a sign of when to exit a position in a company, especially when it comes to technology blue chip stocks. Everything that makes Apple look like an attractive investment happened in the past, and everyone piled into that investment thesis, now the commoditization phase takes hold, growth starts declining rapidly, investors run for the exits, and you get the classic “Value Trap” scenario that is all based on backward looking metrics and fundamentals. It's the future that matters from an investment standpoint, not what a company did 10 years ago!

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Kyrgyzstan cuts rate 25 bps, to maintain current policy

May 29, 2018 by CentralBankNews   Comments (0)

      Kyrgyzstan's central bank lowered its policy rate, the discount rate, by 25 basis points to 4.75 percent to help stimulate economic activity and said it intended to adhere to the current direction of monetary policy for the forthcoming period, provided there are no external shocks.
      It is the first rate cut by the National Bank of the Kyrgyz Republic (NBKR) since December 2016 and takes place against a backdrop of growing aggregate demand and moderate inflation.
      Kyrgyzstan's inflation rate eased to 2.0 percent in April from 2.7 percent in March for the lowest rate since February last year as food prices declined on a favorable situation in international food markets, the central bank said.
      Based on the current recovery of domestic demand and stable dynamics of food prices, including imports, NBKR said it expects inflation to remain moderate and within its 5-7 percent inflation target.
      The economy of the Kyrgyz Republic is continuing to benefit from growing aggregate demand based on a steady increase in remittances from abroad, rising real wages and growth among its trading partners.
      The economy expanded by an annual rate of 1.3 percent in the first quarter of this year, down from 4.5 percent in the fourth quarter of last year, and the central bank expects growth this year to remain close to its potential level.


Turkey sets repo rate as policy rate, raises it 850 bps

May 28, 2018 by CentralBankNews   Comments (0)

      Turkey's central bank lived up to past promises and simplified its monetary policy framework, setting the one-week repurchase rate as its new policy rate and raising it by 8.50 percentage points to 16.50 percent, the current level of the late liquidity lending rate.
      In a brief statement the Central Bank of the Republic of Turkey (CBRT) said the new operational framework would take effect on June 1, and the overnight borrowing and lending rate would be set 150 basis points below and above the one-week repo rate.
      Several years ago Turkey's central bank said it was planning to simplify the operational aspects of its monetary policy but this talk then quieted in 2016 following a failed coup attempt that July and then the election of Donal Trump as U.S. president, which dented Turkish asset prices.
      Since then CBRT has used five different rates to control interest market rates and the attractiveness of Turkish assets, including the lira. This included the one-week repo rate, an overnight  funding and borrowing rate, and a late liquidity borrowing and lending rate.
      While the repo rate was last raised in November 2016 to 8.0 percent, CBRT has been tightening its monetary policy by other means, such as the rate it pays on local lenders' U.S. dollar reserves and require reserve ratios, and raising the volume of foreign exchange deposits.
       Since early 2017 the central bank has been using the late liquidity lending rate as its main tool to tighten its policy stance in response to high inflation from lira depreciation.
      This year alone, the late liquidity rate - used by banks to access funds shortly before local markets' close - has been raised 375 basis points, including last week's 300 basis point hike to 16.50 percent. Since 2017 the late liquidity lending rate has been raised by 650 points.
       Last week's hike in the late liquidity rate came in response to a fresh bout of pressure on the lira from investors who are unnerved by President Tayyip Erdogan's statements that he would exert greater control over the central bank if he win's the presidential elections on June 24.
       Erdogan has long been a vocal opponent of the central bank's tight monetary policy, claiming high inflation is a result of its high interest rates, an argument that runs counter to economic theory and practice.
       The lira reacted swiftly to the central bank's simplification of its policy framework, jumping 3.0 percent to 4.56 to the U.S. dollar. But the lira still remains almost 17 percent below the level at the start of this year.
      Turkey's headline inflation rate rose to 10.85 percent in April from 10.23 percent in March while core inflation rose to 12.2 percent.
       Last month the central bank raised its 2018 inflation forecast to 8.4 percent from 7.9 percent but retained its 2019 forecast of 6.5 percent and its medium-term outlook for inflation of 5 percent.


The NBA Is Rigged

May 27, 2018 by EconMatters   Comments (0)

By EconMatters

It has long been speculated that the NBA assigns certain refs to officiate games to get outcomes they want for either prolonging a series to get more game and advertising revenue or providing refereeing advantage where necessary to make certain more marketable NBA Finals take place which brings in higher ratings, more media coverage, and thus more money. I always say when in doubt, just follow the money trail.

This goes all the way back to the famous Lakers-Kings game 6 refereeing shenanigans where the NBA makes much more money if the large media market and sexy team the Los Angeles lakers advance to the NBA finals versus the small market Sacramento Kings without the likes of Kobe Bryant and Shaquille O'Neal.

Well even the casual NBA fan could see that the fix was on in the NBA last night as the NBA refs completely changed the tenor of the Houston Rockets and Golden State Warriors game last night right as the cash cow marketing machine Golden State Warriors where on the verge of being run out of the building.

The NBA is a often called a “Make or Miss League” because of the fact that if one team misses the level of talent is such that there is an immediate advantage gained by the defensive team that transitions to offense because this sets up a fast break the other direction against a defense that hasn't had time to set up its defense.

Well the lesser known truth is that the NBA has become a “Call Fouls or Don't Call Fouls League” which has the same result because if one team is allowed to foul the other team attacking or driving to the basket, or reach in and foul and cause a turnover, or body slam an opponent to the ground causing a missed shot these all set up fast break opportunities and often 4 on 5 scenarios on the other side of the court leading to easy baskets or wide open three pointers.

It was pretty obvious last night that the Houston Rockets were playing 5 on 8 from the start of the second quarter through the pivotal third quarter. The Houston Rockets made 8 out of 12 three pointers in the first quarter and were well on their way to upsetting the NBA`s Dream Team the Golden State Warriors. The Warriors were desperate they went into desperation mode, their only option at that point was to overplay the three point line, force the rockets to drive to the basket, and foul on every play, hoping that the referees would give them the benefit of the doubt. After All, they are the Dream Team, the favored media darling, the marketing cash cow for the league, there is no way the NBA referees will let them lose this series!

This was the strategy, but the Golden State Warriors didn't really have to hope the referees would oblige, just look at Game 2 of the Pelicans Series in the previous round at Oracle Arena, the fix was on in that game, and the small media market Pelicans Team would have won that game if the NBA Refs didn't step in and determine that game in favor of the Warriors.

So the Warrior players know through experience that they can camp out in the lane with Draymond Green and not get an illegal defense call, knock players to the floor, set illegal moving screens on offense, reach in from behind when they are beat causing turnovers, and hand check and hold on every drive to the basket because they are going to get the “Dream Team Treatment” in the end from the referees. The warriors are actually pretty bad on defense if you call the game legitimately, they have a bunch of offensive players who are slight in build and can't guard a ham sandwich besides the licensed thug that is Draymond Green. They have no hope for stopping drives to the bucket with a 6 foot 7 inch center the only thing standing in front of a made hoop on the defensive end of the floor. Golden State`s only defensive option to stop other teams from driving at will to the basket is to foul on every single drive! Steph Curry and Draymond Green would foul out by halftime if Warrior games were ever officiated correctly. Steph cannot keep anybody in front of him, and reach fouls/hand checks on every single drive and Draymond grabs and holds much taller guys under the basket, and comes in to body slam opposing players as they blow past Steph Curry on every drive. The Golden State Warriors have always been given preferential treatment on the defensive end of the court because of the Branding of the Team and what this means to the NBA coffers from a money perspective. They are very good offensively, and easy for the NBA to Sell to the public, so give them the benefit of the doubt on the defensive end of the court. In other words, for the sake of the NBA let them get away with employing a fouling on every drive strategy on defense, and we will just not make the call the majority of the time. They literally foul on every drive to the basket because they have no legitimate rim protection, and no other legitimate way to stop other teams from relentlessly attacking the basket except for routinely fouling on drives, thus daring the refs to make the call and upset the league office and revenue dollars of the NBA Marketing Machine.

The Golden State Warriors strategy is simple they can`t stop anybody driving legitimately, they have no center to speak of to protect the rim, so their only real option as a defensive strategy is to foul on every play, expect the referees to only call 15% of the actual fouls maybe 20% on a bad day, get away with and benefit from the other 60% where the other team is fouled but not called, and live with the miracle shots the opposing team makes on the other 20% that happen to go in through superhuman effort. All this relies on the Branding Effect that they are the Golden State Warriors, the NBA Dream Team, there is no way the NBA is going to allow the Cash Marketing Cow that is the Dream Team not advance to the NBA Finals - we are entitled to preferential refereeing when necessary! And it sure was necessary last night, good job NBA you pulled out all the stops last night - you were going to make that happen one way or another just like you did to the Sacramento Kings in the 2002 NBA Playoffs!

It was real obvious what was going on last night as the ball would be knocked out of bounds by Golden State in a very obvious manner yet they got the ball back without discussion, they would get two ticky tack fouls on one end of the court, the rockets drive to the basket get knocked to the floor by two players in a no-brainer foul, and play on, and then another ticky tack touch foul on the other end. There were three or four refereeing sequences in that game where it was very apparent the refereeing fix was on in that game, this was more than just good old home court calls, this was a rigged game with a massive agenda to do anything and everything possible to swing the momentum of that game!

Good job NBA you keep losing more credibility by the day, you allow a system where only 3 teams have a legitimate chance to compete for a championship every year, you fix games routinely through rigged officiating, either sending certain refs to various games who will guarantee a given outcome, or just blatant rigged officiating, and you now have the nerve to want in on the gambling money betted on your games - geez no conflict of interest looming there! Not going to watch a Golden State Warriors Finals - I can spot a Rigged Game or System a Mile Away!

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