<![CDATA[Hedgehogs.net: Ken Yeadon's connections' blogs]]> http://www.hedgehogs.net/pg/blog/keny/friends/?view=rss http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11620683/turkey-cuts-lending-rate-50-bps-but-maintains-repo-rate Tue, 24 May 2016 13:06:36 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11620683/turkey-cuts-lending-rate-50-bps-but-maintains-repo-rate <![CDATA[Turkey cuts lending rate 50 bps but maintains repo rate]]>     Turkey's central bank cut the upper band of its interest rate corridor for the third consecutive month in "a measured step toward simplification" of its rate structure but again left its benchmark repo rate steady at 7.50 percent as the "improvement in the underlying core inflation trend remains limited, necessitating the maintenance of a tight liquidity stance.
    The Central Bank of the Republic of Turkey (CBRT) cut the overnight marginal funding rate by another 50 basis points to 9.50 percent and the lending rate at its late liquidity window by 50 basis points to 11.0 percent.
    Since March the overnight funding rate has been cut by 125 basis points in response to what the CBRT described as a "marked decline" in inflation due to lower unprocessed food prices. The benchmark repo rate has been steady at 7.50 percent since February 2015.
    The central bank reiterated its recent guidance that "future monetary policy decisions will be conditional on the inflation outlook" and in light of inflation expectations, prices and other factors, a tight monetary policy stance will be maintained.
    Turkey's headline inflation rate eased to 6.57 percent in April from 7.46 percent in March while core inflation eased to 9.3 percent, down from 9.5 percent as both numbers remain well above the bank's target of 5.0 percent.
    In its latest inflation report, the CBRT maintained its outlook for inflation to reach 7.5 percent by the end of this year and 6 percent by the end of 2017, reaching 5 percent in 2018.
    In contrast to its statement in April, when the central bank said global volatility had declined, the central bank today said "global volatility has increased to some extent," and the tight monetary policy stance, cautious macroeconomic policies helped increase the economy's resilience to shocks.


    The Central Bank of the Republic of Turkey released the following statement:
   
Participating Committee Members
Murat Çetinkaya (Governor), Ahmet Faruk Aysan, Erkan Kilimci, Necati Şahin, Abdullah Yavaş, Mehmet Yörükoğlu. 

The Monetary Policy Committee (the Committee) has decided to set the short term interest rates as follows:
a) Overnight Interest Rates: Marginal Funding Rate has been reduced from 10 percent to 9.50 percent, and borrowing rate has been kept at 7.25 percent,
b) One-week repo rate has been kept at 7.5 percent,
c) Late Liquidity Window Interest Rates (between 4:00 p.m. – 5:00 p.m.): Borrowing rate has been kept at 0 percent, and lending rate has been reduced from 11.50 percent to 11 percent.
Annual loan growth continues at reasonable rates in response to the tight monetary policy stance and macroprudential measures. The favorable developments in the terms of trade and the moderate course of consumer loans contribute to the improvement in the current account balance. While domestic demand continues to have a positive impact on growth, demand from the European Union economies continues to support exports. Accordingly economic activity displays a moderate and stable course of growth. The Committee assesses that the implementation of the structural reforms would contribute to the potential growth significantly.
Recently, the global volatility has increased to some extent. The Committee assesses that the tight monetary policy stance, the cautious macroprudential policies and the effective use of the policy instruments laid out in the road map published in August 2015 increase the resilience of the economy against shocks. In this respect, the Committee decided to take a measured step towards simplification.
Recently, inflation has displayed a marked decline, mainly due to unprocessed food prices. However, improvement in the underlying core inflation trend remains limited, necessitating the maintenance of a tight liquidity stance.
Future monetary policy decisions will be conditional on the inflation outlook. Taking into account inflation expectations, pricing behavior and the course of other factors affecting inflation, the tight monetary policy stance will be maintained.
It should be emphasized that any new data or information may lead the Committee to revise its stance.
The summary of the Monetary Policy Committee Meeting will be released within five working days."

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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11620673/israel-holds-rate-sees-higher-risks-to-growth-exports-fall Mon, 23 May 2016 19:04:34 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11620673/israel-holds-rate-sees-higher-risks-to-growth-exports-fall <![CDATA[Israel holds rate, sees higher risks to growth, exports fall]]>     Israel's central bank left its key policy rate steady at 0.10 percent, as expected, and said its policy stance will remain "accommodative for a considerable time," a guidance that has been reinforced by "the intensifying decline in exports in recent months," along with developments in global economic growth and inflation, domestic economic activity, the exchange rate and the monetary policy of major central banks.
    But the Bank of Israel (BOI) has clearly become more concerned over economic growth, noting the "worrying contraction in exports" and an increased risk to growth. Last month the BOI merely said the risks to growth "remain high."
    In April Israel's exports declined by an annual 11 percent to US$3.596 billion, the lowest since August 2009, while exports excluding diamonds and startup contracted by 12.9 percent. In addition, services exports have not grown in 1-1/2 years, the BOI said.
    Israel's Gross Domestic Product grew by an annual 1.7 percent in the first quarter of this year, down from 2.1 percent in the fourth quarter of last year, with private consumption continuing to lead growth with an increase of 4 percent.
    Israel remains mired in deflation, with consumer prices down by an annual 0.9 percent in April compared with March's fall of 0.7 percent and the BOI repeated its view from last month that risks to achieving its inflation target "remain high."
    The BOI repeated its recent phrase that it will "examine the need to use various tools to achieve its objectives of price stability," employment, growth and a stable financial system.
    Interest rate markets have remained unchanged, the BOI said, adding they don't show any change in BOI rates in the next year and private forecasters project that the policy rate will remain at its current level in coming months.
    In March the BOI, which has maintained its key rate since cutting it by 15 basis points in February last year,  said it expected inflation to turn around in the next few months and said it saw no need to follow other central banks and pursue various forms of extraordinary policy measures.
    The BOI's March forecast saw inflation averaging 0.2 percent by the fourth quarter of this year, then 0.8 percent by the first quarter of 2017 and 1.4 percent by end-2017, finally moving into the central bank's inflation target of 1-3 percent by the middle of 2017.
    Economic growth was forecast to expand 2.8 percent this year, up from 2015's 2.5 percent, and then by 3.0 percent in 2017.
    After depreciating sharply between August 2014 and March 2015, Israel's shekel has firmed but since the last BOI policy meeting on April 20, the shekel has weekend by 3 percent against the U.S. dollar. Over the preceding 12 moths, the shekel is up by 3.3 percent in terms of the nominal effective exchange rate.
   The shekel was quoted at 3.87 to the dollar today, largely unchanged since the start of the year.



    The Bank of Israel issued the following statement with its main considerations behind its decision:

"The decision to keep the interest rate for June 2016 unchanged at 0.1 percent is consistent with the Bank of Israel's monetary policy, which is intended to return the inflation rate to within the price stability target of 1–3 percent a year, and to support growth while maintaining financial stability. The intensifying decline in exports in recent months reinforces the Monetary Committee’s assessment that in view of developments in the inflation environment, in growth in Israel and in the global economy, in the exchange rate, as well as in monetary policies of major central banks, monetary policy will remain accommodative for a considerable time.
The following are the main considerations underlying the decision:
·     The inflation environment remains low, with diverse developments this month: the CPI for April increased, but by a lower rate than expected; expectations for various terms moved in different directions, though medium-term and long-term expectations continue to be anchored within the target range. 
·     The first estimate of National Accounts data indicates a worrying contraction in exports, after a prolonged virtual standstill, while private consumption, supported by the low interest rate and wage increases in the economy, continues to drive growth. In contrast, the picture conveyed by labor market data continues to be positive, and is reflected in a low level of unemployment, a high level of employment, wage increases, and a high job vacancy rate.
·     In global economic activity, weakness remains focused on emerging markets, and in the first quarter on the US and UK as well. The slowdown in the growth of world trade continues. The recovery in Europe remains fragile. Major central banks continued monetary accommodation, but did not enhance it, and the markets’ expected timing of an increase in the US federal funds rate was brought forward, after having been deferred in previous months.
·     From the monetary policy discussion on March 27, 2016, through April 19, 2016, the shekel weakened by 3 percent against the US dollar and by 1.6 percent in terms of the nominal effective exchange rate. Over the past 12 months there has been an appreciation of 3.3 percent in terms of the nominal effective exchange rate, and the exchange rate level continues to weigh on growth of exports and the tradable sector.
·     The rate of increase in home prices moderated slightly in recent months but remains high. The volume of new mortgages taken out also remains elevated, despite an increase in mortgage interest rates in recent months.
The Monetary Committee is of the opinion that the risks to achieving the inflation target remain high, and that the risks to growth have increased. The Bank of Israel will continue to monitor developments in the Israeli and global economies and in financial markets. The Bank will use the tools available to it and will examine the need to use various tools to achieve its objectives of price stability, the encouragement of employment and growth, and support for the stability of the financial system, and in this regard will continue to keep a close watch on developments in the asset markets, including the housing market.
The minutes of the monetary discussions prior to the interest rate decision for June 2016 will be published on June 6, 2016. 
The decision regarding the interest rate for July 2016 will be published at 16:00 on Monday, June 27, 2016."



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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11620666/kenya-cuts-rate-100-bps-as-inflation-seen-in-target-range Mon, 23 May 2016 18:03:43 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11620666/kenya-cuts-rate-100-bps-as-inflation-seen-in-target-range <![CDATA[Kenya cuts rate 100 bps as inflation seen in target range]]>     Kenya's central bank cut its Central Bank Rate (CBR) by 100 basis points to 10.50 percent, saying inflation is expected to decline and remain within the target range in the short term, which means "there was policy space for an easing of monetary policy while continuing to anchor inflation expectations."
    The Central Bank of Kenya (CBK), which raised its policy rate by 300 basis points in 2015 in response to a fall in the shilling's exchange rate and a rise in inflation, added that inflation data showed there were "no significant demand pressures in the economy" and the foreign exchange market had remained stable, supported by a narrower current account deficit.
    Earlier this month Patrick Njoroge was quoted as saying the central bank had room to start easing its policy as inflation was falling back within the target range of 2.5 percent to 7.5 percent.
   Kenya's consumer price inflation rate eased to 5.27 percent in April from 6.45 percent in March, with the 3-month annualized non-food-nonfuel inflation rate down to 4.6 percent in April from 6.8 percent in March.
    Since November last year, the shilling's exchange rate has remained relatively stable, with the central bank attributing this to a narrowing of the current account deficit on improved earnings from tea and horticulture exports, strong diaspora remittances and a lower bill for oil imports.
   The shilling was quoted at 100.9 to the U.S. dollar today, up 1.4 percent since the start of the year.
    Kenya's current account deficit was estimated at 6.8 percent of Gross Domestic Product in 2015, down 3 percentage points from 2014, and is expected to narrow further this year, the CBK said.
    Foreign exchange reserves at the central bank amounted to US$7.688 billion, up from $7.377 billion at the end of March.
    In March the International Monetary Fund approved a $1.5 billion precautionary arrangement and the CBK said this arrangement, together with its reserves, "will continue to provide adequate buffers against short-term shocks."


    The Central Bank of Kenya issued the following statement:

The Monetary Policy Committee (MPC) met on May 23, 2016, to review recent economic developments, and the outlook for the domestic and global economies. The Committee noted the following:
 Month-on-month overall inflation fell to 5.3 percent in April 2016, from 6.5 percent in March, and was within the Government’s target range. This decline was largely due to reduction in the prices of food items and fuel.
 Month-on-month non-food-nonfuel (NFNF) inflation also declined to 5.8 percent in April from 6.0 percent in March. The CPI category alcoholic beverages, tobacco and narcotics contributed 1.1 percentage points to NFNF inflation in April, reflecting the revised excise tax introduced in December 2015. Significantly, the 3-month annualised NFNF inflation fell from 6.8 percent in March to 4.6 percent in April, indicating that there were no significant demand pressures in the economy.
 The foreign exchange market has remained stable, supported by a narrower current account deficit due to lower oil imports, improved earnings from tea and horticulture exports, and strong diaspora remittances. The current account deficit was estimated at 6.8 percent of GDP in 2015, a reduction of 3 percentage points from 2014, and is expected to narrow further in 2016.
 ï‚· Foreign exchange reserves of the Central Bank of Kenya (CBK) currently stand at USD7,688.3 million (equivalent to 5.0 months of import cover) up from USD7,377.2 million (equivalent to 4.7 months of import cover) at the end of March 2016. These reserves, together with the Precautionary Arrangements with the International Monetary Fund (IMF) will continue to provide adequate buffers against short-term shocks.
 The coordination between monetary and fiscal policies continues to support macroeconomic stability. The National Government budget deficit is expected to narrow in FY2015/16 thereby easing pressure on interest rates.
 The banking sector is resilient and has begun to stabilise following the successful and quick reopening of Chase Bank, which has enhanced confidence in the sector. Furthermore, the CBK’s enforcement of existing regulations particularly with respect to the classification of loans, has strengthened and increased transparency of the banking sector.
 The ratio of gross non-performing loans to gross loans was 8.2 percent in April 2016, partly reflecting better reporting standards. The CBK will continue to monitor credit and liquidity risks, which remain concerns.
 The performance of the economy remains strong, posting a growth of 5.6 percent in 2015, from 5.3 percent in 2014. The MPC Market Perception Survey conducted in May 2016, shows that the private sector remains optimistic supported by macroeconomic stability, stronger agriculture performance, public infrastructure investment, and tourism recovery.

 The outlook for global economy has deteriorated in recent months due to weaker growth prospects in advanced and emerging market economies. Uncertainties in the global financial markets have increased due to risks posed by, among other factors, slower growth in China, the timing of the U.S. Fed’s next increase in interest rates, and the outcome of the referendum on U.K. membership of the European Union (Brexit). However, the growth outlook for Kenya’s main trading partners in the region remains strong, suggesting better prospects for exports performance.

The Committee noted that overall inflation is expected to decline and remain within the Government target range in the short-term. Therefore, it concluded that there was policy space for an easing of monetary policy while continuing to anchor inflation expectations. The MPC therefore decided to lower the CBR by 100 basis points to 10.5 percent. The CBK will continue to monitor developments in the economy, and will use instruments at its disposal to maintain overall price and financial sector stability."

    www.CentralBankNews.info



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http://www.hedgehogs.net/pg/blog/asiablues/read/11620660/what-really-worries-the-fed-and-treasury-about-japan-monetary-policy-video Mon, 23 May 2016 16:13:48 +0100 http://www.hedgehogs.net/pg/blog/asiablues/read/11620660/what-really-worries-the-fed-and-treasury-about-japan-monetary-policy-video <![CDATA[What Really Worries the Fed and Treasury About Japan Monetary Policy (Video)]]> By EconMatters


The US sure is concerned about further BOJ intervention, the real question is why now? What is really going on behind the scenes? We delve into some of the possibilities that we think are at play here behind the scenes at the Federal Reserve and the U.S. Treasury.







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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11620369/pakistan-cuts-rate-25-bps-low-inflation-in-16-higher-17 Mon, 23 May 2016 05:06:13 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11620369/pakistan-cuts-rate-25-bps-low-inflation-in-16-higher-17 <![CDATA[Pakistan cuts rate 25 bps, low inflation in '16, higher '17]]>     Pakistan's central bank cut its policy rate by 25 basis points to 5.75 percent, saying inflation is expected to remain low in the current fiscal 2016 year and below the target of 6 percent despite a rising trend in the last seven months.
    The State Bank of Pakistan (SBP), which last year cut its rate by 300 basis points, added in a statement from May 21 that inflation in fiscal 2017, which begins July 1, would reach a "higher plateau" as demand was picking up, higher global oil prices will be passed on to consumer prices and higher taxes, electricity and gas tariffs, if realized, would put upward pressure on inflation.
    Pakistan's inflation rate rose to 4.17 percent in April from 3.94 percent in March and 1.61 percent in January with core inflation also following a rising trend, "indicating a buildup of underlying inflationary tendencies."
    Core inflation eased to 4.4 percent in April from 4.7 percent in March but was up from a recent low of 3.4 percent in October last year.
    In April the SBP forecast average inflation in FY16 of 3-4 percent.
    Economic growth in Pakistan in the current fiscal year is set to exceed the FY15 growth of 4.2 percent but below the target of 5.5 percent, the SBP said, adding the current account deficit was likely to shrink to the previous year's level of around 1 percent of Gross Domestic Product and foreign exchange reserves were projected to continue to rise.


    The State Bank of Pakistan issued the following statement:


"Towards the end of FY16, macroeconomic conditions continue to improve. Headline CPI inflation, despite its continuous increase on Year-on-Year (YoY) basis, would remain below its FY16 annual average target of 6 percent. Real GDP growth is set to exceed its FY15 outcome of 4.2 percent, while remaining below its target of 5.5 percent. Current account deficit is likely to shrink to the previous year’s level of around 1 percent of GDP and the expected surplus in balance of payments would be marginally less than the FY15 level. Foreign exchange reserves are still projected to maintain upward trajectory.

As expected, headline CPI inflation sustained its rising trend for the seventh consecutive month and on YoY basis rose to 4.2 percent in April 2016 from the low of 1.3 percent in September 2015. In addition to the seasonal impact of perishable food items and services, this increase owes to further waning of the base effect and second round impact of decline in oil prices. Similarly, core inflation measures have broadly followed a rising trend in this fiscal year indicating buildup of underlying inflationary tendencies. Despite these trends and developments, the inflation outlook for FY16 is low.

However, going into FY17 inflation is likely to attain a higher plateau.
Major sources that would determine this path are as follows. First, relatively faster pickup in demand compared to its gradually improving supply dynamics could lead inflation on a higher side. Second, rising global oil price along with modest recovery in non-energy commodity prices will pass on to the domestic consumer prices. Third, some risks, such as imposition of new taxation measures and increase in electricity and gas tariffs, if realized would put upward pressure on CPI inflation.


Expansion in industrial activities and services sector would salvage some of the lost momentum to GDP growth due to the losses from cotton and rice crops. Recovery in Large-scale Manufacturing, which grew by 4.7 percent during Jul-Mar FY16 compared to 2.8 percent in Jul-Mar FY15, is expected to continue further on account of improving energy and security conditions. At the same time, buoyant growth in construction and improved demand for consumer durables has persistently indicated revival in domestic demand in the current fiscal year. This is also reflected in uptake in credit to private sector which increased by Rs314.7 billion during Jul-Mar FY16 compared to Rs206.0 billion during the same period of FY15. Thus, GDP growth in FY16 is expected to provide the needed sustainability in growth trajectory and the basis for further improvement in FY17.


On the external front, stability in the balance of payments and upward trajectory in foreign exchange reserves mainly owes to a combination of favorable developments both in the current and financial accounts. Steady workers’ remittances and low oil prices have helped contain the current account deficits at manageable levels, while multilateral and bilateral inflows have largely contributed to the surpluses in the financial account.

In the current fiscal year as well, favorable trends in these factors are expected to yield an overall surplus in the balance of payments with SBP’s foreign exchange reserves estimated to increase to over 4 months of import coverage; up from around 3 months at end-FY15. Going forward, foreign direct investment is projected to increase as the work on projects under China Pakistan Economic Corridor gains momentum. On the other hand, owing to some anticipated uptick in commodity prices along with improvements in domestic energy supplies exports receipts are likely to recover marginally. However, with weaknesses in private capital inflows persisting for some time now, uncertainty may arise if there is an adverse change in oil price or workers’ remittances.

Monetary Policy Committee, after detailed deliberations, has decided to reduce the policy rate by 25 basis points from 6.0 percent to 5.75 percent."

    www.CentralBankNews.info



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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11619954/this-week-in-monetary-policy-israel-kenya-turkey-hungary-nigeria-paraguay-canada-ukraine-moldova-fiji-colombia-and-trinidad-tobago Sun, 22 May 2016 18:47:31 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11619954/this-week-in-monetary-policy-israel-kenya-turkey-hungary-nigeria-paraguay-canada-ukraine-moldova-fiji-colombia-and-trinidad-tobago <![CDATA[This week in monetary policy: Israel, Kenya, Turkey, Hungary, Nigeria, Paraguay, Canada, Ukraine, Moldova, Fiji, Colombia and Trinidad & Tobago]]>
    This week (May 23 through May 28) central banks from 12 countries or jurisdictions are scheduled to decide on monetary policy: Israel, Kenya, Turkey, Hungary, Nigeria, Paraguay, Canada, Ukraine, Moldova, Fiji, Colombia, and Trinidad and Tobago.
    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.

WEEK 21
MAY 23 - MAY 28, 2016:
COUNTRY       DATE           RATE      LATEST        YTD     1 YR AGO    MSCI
ISRAEL 23-May 0.10% 0 0 0.10%       DM
KENYA 23-May 11.50% 0 0 8.50%       FM
TURKEY 24-May 7.50% -25 0 7.50%       EM
HUNGARY 24-May 1.05% -15 -30 1.65%       EM
NIGERIA 24-May 12.00% 100 100 13.00%       FM
PARAGUAY 24-May 6.00% 0 25 6.25%
CANADA 25-May 0.50% 0 0 0.75%       DM
UKRAINE 26-May 19.00% -300 -300 30.00%       FM
MOLDOVA 26-May 15.00% -200 -450 14.50%
FIJI 26-May 0.50% 0 0 0.50%
COLOMBIA 27-May 7.00% 50 125 4.50%       EM
TRINIDAD & TOBAGO 27-May 4.75% 0 100 3.75%



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http://www.hedgehogs.net/pg/blog/asiablues/read/11619947/negative-interest-rates-means-passive-capital-must-incur-huge-losses-in-a-crash-scenario-video Sun, 22 May 2016 18:33:52 +0100 http://www.hedgehogs.net/pg/blog/asiablues/read/11619947/negative-interest-rates-means-passive-capital-must-incur-huge-losses-in-a-crash-scenario-video <![CDATA[Negative Interest Rates Means Passive Capital Must Incur Huge Losses in a Crash Scenario (Video)]]> By EconMatters




We delve into the implications of negative interest rates, and what they are really saying about the soundness of the financial system. In short we have too many rich people doing nothing productive with their wealth.

I am the opposite of a redistributionist, and the unintended consequences would be off the charts, but it would be interesting to see what Elon Musk could do with all this unproductive capital earning negative real rates around the globe being that he is always trying to push the envelope of the possible from a creativity standpoint.

Give me a "Bad-Ass" who fails in pushing the envelope over a "Passive Capital Hoarder" any day of the week.







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http://www.hedgehogs.net/pg/blog/asiablues/read/11618541/the-fed-is-a-huge-driver-in-kyle-bass-china-currency-short-video Sat, 21 May 2016 12:53:48 +0100 http://www.hedgehogs.net/pg/blog/asiablues/read/11618541/the-fed-is-a-huge-driver-in-kyle-bass-china-currency-short-video <![CDATA[The Fed is a Huge Driver in Kyle Bass China Currency Short (Video)]]> By EconMatters


Kyle Bass focuses much of his commentary on what`s going on in China, and in actuality the Fed has been the biggest driver of price in this trade so far the past year.








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11618541
http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11618524/sri-lanka-holds-rate-inflation-seen-in-midsingle-digits Fri, 20 May 2016 14:04:42 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11618524/sri-lanka-holds-rate-inflation-seen-in-midsingle-digits <![CDATA[Sri Lanka holds rate, inflation seen in mid-single digits]]>     Sri Lanka's central bank left its key policy rates unchanged, saying the recent rise in taxes and supply-side disruptions from adverse weather could exert some upward pressure on inflation in the immediate future but inflation is still expected to remain in mid-single digit levels as they are supported by appropriate policies.
    The Central Bank of Sri Lanka last raised its key rates, the Standing Deposit Facility Rate (SDRF) and the Standing Lending Facility Rate (SLFR), by 50 basis points in February to 6.50 percent and 8.0 percent, respectively.
    Sri Lanka's headline inflation rate rose to 3.1 percent in April from 2.0 percent in March while core inflation was unchanged at 4.5 percent.
    This month Sri Lanka's government raised the Value Added Tax (VAT) rate to 15 percent from 11 percent and removed certain exemptions to raise revenue amidst a rising budget deficit.
    Last month the International Monetary Fund (IMF) agreed to provide $1.5 billion to Sri Lanka that is expected to result in other loans for total inflow of $2.2 billion. As part of the IMF conditions, the government is expected to reform its budget and improve the performance of state-run enterprises.
    The aim is to narrow the fiscal deficit to 3.5 percent of Gross Domestic Product by 2020 from 7.4 percent in 2015, up from 5.7 percent in 2014 and above the government's target of 4.4 percent.
    The central bank said foreigners had showed renewed interest in government securities in the last month and together with the IMF's Extended Fund Facility, along with structural reforms, this should enhance Sri Lanka's resilience to external shocks and improve investor confidence.
    Sri Lanka's rupee has been depreciating steadily in recent years and was trading at 146.7 to the U.S. dollar today, down 1.8 percent this year and down 10.6 percent since the start of 2015.


    The Central Bank of Sri Lanka issued the following statement:



"The year-on-year growth of broad money (M2b) indicated some deceleration, recording 18.9 per cent in March 2016, compared to 19.8 per cent in February 2016. The expansion in domestic credit remained the key driver of broad money growth, within which credit extended to the private sector by commercial banks recorded a year-on-year growth of 27.7 per cent in March 2016, compared to 26.5 per cent in the previous month. With regard to sectoral distribution of credit, Industry and Services sectors attracted the highest levels of credit disbursements, while personal loans and advances also recorded a substantial increase. Meanwhile, with the low level of excess rupee liquidity in the domestic money market amid recent monetary tightening measures, an upward movement in short term money market rates and other market interest rates was observed. Reflecting the gradual transmission of increased short term interest rates to broader market interest rates, the expansion of monetary and credit aggregates is expected to moderate from the second quarter of the year.

Headline inflation, as measured by the Colombo Consumers’ Price Index (CCPI, 2006/07=100), was 3.1 per cent, year-on-year, in April 2016 compared to 2.0 per cent in the previous month. Annual average headline inflation based on CCPI edged up to 1.3 per cent from 1.1 per cent in March 2016. However, the CCPI based core inflation remained unchanged at 4.5 per cent in April 2016, on a year-on-year basis, compared to the previous month. Meanwhile, the National Consumer Price Index (NCPI, 2013=100) based headline inflation increased to 2.2 per cent, year-on-year, in March 2016 compared to 1.7 per cent in the previous month, while on an annual average basis, it stood at 2.4 per cent. The recent increase in the Value Added Tax (VAT) rate and the removal of certain exemptions applicable on VAT and the Nation Building Tax (NBT) are expected to have a one-off impact on inflation, while the supply side disruptions due to prevailing adverse weather conditions could exert some upward pressure on inflation in the immediate future. In spite of these temporary disruptions, inflation is expected to remain in mid- single digit levels supported by appropriate demand management policies.

On the external front, the trade deficit registered a contraction of 2.2 per cent on a cumulative basis in the first three months of 2016. Meanwhile, earnings from tourism are estimated to have increased by 20.0 per cent in the first four months of the year while workers’ remittances recorded an increase of 8.1 per cent during the first quarter. Gross official reserves are estimated to have declined marginally to US dollars 6.1 billion by end April 2016 from US dollars 6.2 billion in the previous month while the Sri Lanka rupee has recorded a marginal depreciation thus far during 2016. Meanwhile, a renewed foreign interest in investments in Government securities has been observed since April 2016 as reflected by net foreign inflows to the Government securities market. Going forward, the Extended Fund Facility (EFF) expected from the IMF and the other multilateral and bilateral credit facilities, along with the planned structural reforms, would enhance the country’s resilience to external shocks and improve investor confidence in the economy.

Taking into consideration the developments discussed above, the Monetary Board, at its meeting held on 20 May 2016, was of the view that the current monetary policy stance of the Central Bank is appropriate. 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 6.50 per cent and 8.00 per cent, respectively. "

    www.CentralBankNews.info


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http://www.hedgehogs.net/pg/blog/asiablues/read/11618515/we-are-raising-our-oil-target-again-to-60-by-july-4th-video Fri, 20 May 2016 11:23:55 +0100 http://www.hedgehogs.net/pg/blog/asiablues/read/11618515/we-are-raising-our-oil-target-again-to-60-by-july-4th-video <![CDATA[We Are Raising Our Oil Target Again to 60 by July 4th (Video)]]> By EconMatters


The internals for the Weekly EIA Report were solid and we are raising our outlook for price accordingly when combined with the recent global supply disruptions in production.






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