<![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/11717872/paraguay-maintains-rate-as-inflation-within-target-range Wed, 25 Apr 2018 04:19:43 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11717872/paraguay-maintains-rate-as-inflation-within-target-range <![CDATA[Paraguay maintains rate as inflation within target range]]>        Paraguay's central bank left its monetary policy rate at 5.25 percent, saying the most prudent strategy is to continue with the current monetary policy settings as inflation remains consistent with the objective and expectations remain anchored to this goal.
       The Central Bank of Paraguay (BCP), which has maintained its rate since cutting it by 25 basis points in August 2017, added the decision by its markets operation committee (CEOMA) was unanimous.
       Today's decision by BCP comes as the runner-up in Sunday's presidential election, Efrain Alegre, demanded a recount, saying he had evidence of fraudulent voting.
       The official elections tribunal said Mario Abdo had won 46.44 percent to Alegre's 42.74 percent. Abdo is the son of the late private secretary of dictator Alfredo Stroessner, who ruled Paraguay for 35 years until 1989.
       Voters were picking the successor to President Horacio Cartes who introduced the country to international capital markets in 2013. Since then Paraguay has tapped bond markets five times, most recently in March when it raised $530 million in 30-year bonds at a yield of 5.6 percent.
       Paraguay's inflation rate was steady at 4.1 percent in February and March, within the central bank's target of 4.0 percent, plus/minus 2 percentage points.
       Paraguay's economy expanded by an annual rate of 3.0 percent in the third quarter of 2017, up from 1.1 percent in the second quarter.
       The exchange rate of the guarani, which fell sharply from September 2014 to January 2016, has been appreciating slightly this year, quoted at 5,564.9 to the U.S. dollar today, up 0.6 percent.

      www.CentralBankNews.info


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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11717794/offshore-emes-us-boost-q4-17-global-banking-bis Mon, 23 Apr 2018 17:56:09 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11717794/offshore-emes-us-boost-q4-17-global-banking-bis <![CDATA[Offshore, EMEs, US boost Q4 '17 global banking - BIS]]>      The upturn in international banking activity that began in the third quarter of 2017 gained momentum in the fourth quarter with lending to borrowers in offshore banking centers surging by $124 billion followed by a $55 billion rise to emerging market economies (EMEs) and a $45 billion increase in credit to borrowers from the United States, according to the Bank for International Settlements (BIS).
      Total cross-border lending by global banks rose by $123 billion from end-September to end-December 2017 for annual growth of 2 percent and total outstanding claims have now reached $29 trillion, said Swiss-based BIS.
       In the last few years, offshore banking centers have been one of the fastest growing areas of cross-border banking, with Hong Kong and Singapore recording the largest increases in the fourth quarter of last year with lending of $63 billion and $41 billion, respectively.
       And in 2017 outstanding claims on offshore centers by global banks topped the previous peak of $4.3 trillion in March 2008, during the Global Financial Crises, with total claims now at $4.6 trillion end-2017, said BIS, known as the central bankers' bank.
      Most of these claims were denominated in U.S. dollars, $2.8 trillion, followed by $0.7 trillion in yen-lending and $0.3 trillion in euros. Lending activity between offices in the same banking group rose by $134 billion.
      Cross-border lending to emerging markets rose for the fourth consecutive quarter, with the $55 billion rise in the fourth quarter boosting annual growth to 9 percent, driven by lending to Africa, the Middle East and emerging Asia.
       After edging up in the first three quarters of last year, credit to borrowers from Russia again fell in the fourth quarter by $8 billion to end the year at $99 billion, sharply down from $189 billion in early 2013.
        Lending to borrowers in Latin America also continued to shrink, down by $12 billion in the fourth quarter, bringing the annual fall in 2017 to 3 percent, similar to the decline seen in 2016.
       Credit to Brazil and Mexico saw the largest quarterly declines while claims on Chile and Argentina rose, BIS said.
       Japanese banks have expanded their global presence since 2009 - they surpassed French banks in 2011, U.S. banks in 2013 and UK banks in 2015 - and now have the largest international balance sheets, with total foreign claims of $4 trillion at the end of 2017.
     
       Click to read BIS' international banking statistics at end-December 2017.

       www.CentralBankNews.info
     
         

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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11717716/this-week-in-monetary-policy-hungary-argentina-paraguay-turkey-fiji-sweden-ecb-moldova-japan-russia-colombia Sat, 21 Apr 2018 22:41:25 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11717716/this-week-in-monetary-policy-hungary-argentina-paraguay-turkey-fiji-sweden-ecb-moldova-japan-russia-colombia <![CDATA[This week in monetary policy: Hungary, Argentina, Paraguay, Turkey, Fiji, Sweden, ECB, Moldova, Japan, Russia & Colombia]]>     This week - April 22 through April 28 - central banks from 11 countries or jurisdictions are scheduled to decide on monetary policy: Hungary, Argentina, Paraguay, Turkey, Fiji, Sweden, ECB, Moldova, Japan, Russia and Colombia.
    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 17
APR 22 - APR 28, 2018:
COUNTRY            DATE              RATE          LATEST             YTD           1 YR AGO      MSCI
HUNGARY24-Apr0.90%000.90%         EM
ARGENTINA24-Apr27.25%0-15026.25%         FM
PARAGUAY24-Apr5.25%005.50%
TURKEY25-Apr8.00%008.00%         EM
FIJI26-Apr0.50%000.50%
SWEDEN26-Apr-0.50%00-0.50%         DM
EURO AREA26-Apr0.00%000.00%         DM
MOLDOVA26-Apr6.50%009.00%
JAPAN27-Apr-0.10%00-0.10%         DM
RUSSIA27-Apr7.25%-25-509.25%         EM
COLOMBIA27-Apr4.50%0-256.50%         EM

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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11717424/indonesia-maintains-rate-and-confirms-growth-forecast Thu, 19 Apr 2018 14:52:14 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11717424/indonesia-maintains-rate-and-confirms-growth-forecast <![CDATA[Indonesia maintains rate and confirms growth forecast]]>       Indonesia's central bank left its benchmark 7-day reverse repurchase rate steady at 4.25 percent, as expected, and confirmed that it still expects economic growth this year of 5.1-5.5 percent while inflation should remain within the bank's target range despite "rising external pressures."
      Bank Indonesia (BI), which lowered its key rate by 200 basis points in 2016 and 2017, also reiterated its recent view that it considers this past easing of monetary policy as sufficient to boost the momentum behind the economic recovery.
      However, BI also echoed other central banks' concern of the risks facing the global economy from increased uncertainty in financial markets from a normalization of U.S. monetary policy and "inward-oriented trade policy, geopolitical risks from the Middle East, rising oil prices, and the possibility of a trade war between the United States and China.
        Indonesia's economy, which grew 5.1 percent last year, is forecast to expand at a faster rate in the first quarter of this year than in the same 2017 quarter, buoyed by domestic demand, particularly investment, BI said.
        Investments are up in building and non-construction investment, supported by government and private infrastructure projects, and mining investment.
        BI's first quarter business survey shows higher business activity along with improved performance by non-financial corporations while private consumption is expected to rise due to higher income and accelerated social assistance.
        Exports of mined commodities and manufacturing is also positive while imports are seen rising, particularly of capital goods and raw materials.
        Indonesia's Gross Domestic Product grew by an annual rate of 5.19 percent in the fourth quarter of last year, up from 5.06 percent in the third quarter.
        Indonesia's trade balance recorded a surplus of US$1.09 billion in March, after a deficit of $0.05 billion in February, with a surplus in the first quarter of $0.28 billion, helping boost foreign reserves to $126.0 billion at the end of March, the equivalent of 7.7 months of imports and serving of official external debt.
        The current account deficit is forecast to be in a range of 2.0-2.5 percent of GDP in 2018, below the 3.0 percent limit considered safe.
        Indonesia's inflation rate rose to 3.4 percent in March from 3.18 percent in February - within the BI's target of 3.5 percent, plus/minus 1 percentage point - and is expected to remain in the range this year, BI confirmed.
        The exchange rate of Indonesia's rupiah depreciated in February and March, with BI attributing this to an improvement in U.S. economic data along with expectations of more aggressive rate hikes by the U.S. Fed and the risk of a US-China trade war.
        These factors encouraged the reversal of foreign capital and put pressure on the exchange rate of currencies worldwide, including the rupiah.
        However, the rupiah has stabilized in April, helped by BI's "stabilization measures," continued control of inflation, a rising rating on its debt, and a surplus in the trade balance that boosted the inflow of foreign portfolio capital.
        Last week Moody's joined other ratings agencies and upgraded Indonesia's rating to Baa2 from Baa3 and raised its outlook to stable, noting the country's control of budget deficits and inflation.
       The rupiah was trading around 13,790 to the U.S. dollar today, down 1.6 percent this year.
       Indonesia's parliament earlier this month confirmed Perry Warjiyo as the next governor of BI. Warjiyo, who has been deputy governor since April 2013, will take over from Agus Martowardojo when his term expires in May.

      www.CentralBankNews.info



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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11717222/canada-holds-rate-still-cautious-but-looking-to-tighten Wed, 18 Apr 2018 19:54:53 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11717222/canada-holds-rate-still-cautious-but-looking-to-tighten <![CDATA[Canada holds rate, still cautious but looking to tighten]]>       Canada's central bank left its benchmark target for the overnight rate at 1.25 percent, as expected, and confirmed it still expects to raise rates further by saying "higher interest rates will be warranted over time, although some monetary policy accommodation will still be needed to keep inflation on target."
       The Bank of Canada (BOC), which has raised its rate three times since July 2017, said its governing council had noticed "some progress" in the dynamics of inflation and wage growth but as in its previous policy statement from March it added that it would "remain cautious with respect to future policy adjustments, guided by incoming data."
       Growth in Canada was weaker than expected in the first quarter, but BOC expects growth to rebound in the second quarter, resulting in 2 percent average growth in the first half of this year.
       The reason for slower growth in the first three months was due to a slowdown in exports, mainly from transportation bottlenecks, and lower activity in the housing market from new mortgage guidelines and other measures than pulled forward transactions to 2017.
        BOC expects this weakness to be unwound as the year progresses and over the next three years, Canada's economy is seen operating slightly above its potential rate, supported not only by fiscal stimulus by the federal and provincial governments but also upward revisions to the country's output potential in its latest monetary policy report.
        Exports are expected to strengthen due to foreign demand but BOC said both exports and investments "are being held back by ongoing competitiveness challenges and uncertainty about trade policies."
        BOC forecast growth this year of 2.0 percent, down from its January forecast of 2.2 percent, and well below 2017's growth of 3.0 percent.
        Growth in 2019 is seen rising to 2.1 percent, up from 1.6 percent previously forecast, and then easing to 1.8 percent in 2020.
         On Tuesday the International Monetary Fund (IMF) lowered its forecast for Canada's growth this year to 2.1 percent from January's forecast of 2.3 percent. For 2019 the IMF sees 2.0 percent growth.
         Canada's headline inflation rate rose to 2.2 percent in February from 1.7 percent in January and BOC said inflation is now expected to be higher than it forecast in January on higher gasoline prices and wage increases.
        This year inflation is expected to average 2.3 percent, up from its previous forecast of 2.0 percent, and above the BOC's 2.0 percent target. In 2017 inflation averaged 1.6 percent.
        In 2019 inflation is then seen easing to 2.1 percent and remaining at that level in 2020.

       


       The Bank of Canada issued the following statement:



"The Bank of Canada today maintained its target for the overnight rate at 1 ¼ per cent. The Bank Rate is correspondingly 1 ½ per cent and the deposit rate is 1 per cent.
Inflation in Canada is close to 2 per cent as temporary factors that have been weighing on inflation have largely dissipated, as expected. Consistent with an economy operating with little slack, core measures of inflation have continued to edge up and are all now close to 2 per cent. The transitory impact of higher gasoline prices and recent minimum wage increases will likely cause inflation in 2018 to be modestly higher than the Bank expected in its January Monetary Policy Report (MPR)returning to the 2 per cent target for the rest of the projection horizon.
The global economy is on a modestly stronger track than forecast in January, with upward revisions to growth and potential output in a number of major advanced economies. The outlook for the U.S. economy has been further boosted by new government spending plans. However, escalating geopolitical and trade conflicts risk undermining the global expansion.
In Canada, GDP growth in the first quarter was weaker than the Bank had expected, but should rebound in the second quarter, resulting in 2 per cent average growth in the first half of 2018. The economy is projected to operate slightly above its potential over the next three years, with real GDP growth of about 2 per cent in both 2018 and 2019, and 1.8 per cent in 2020. This stronger profile for GDP incorporates new provincial and federal fiscal measures announced since January. It also reflects upward revisions to estimates of potential output growth, which suggest the Canadian economy has made some progress in building capacity.
Slower economic growth in the first quarter primarily reflects weakness in two areas. Housing markets responded to new mortgage guidelines and other policy measures by pulling forward transactions to late 2017. Exports also faltered, partly owing to transportation bottlenecks. Some of the weakness in housing and exports is expected to be unwound as 2018 progresses.
The Bank anticipates that Canadian exports will strengthen as foreign demand increases, but not sufficiently to recover the ground lost during recent quarters. Export growth is being increasingly limited by capacity constraints in some sectors. Continued gains in business investment should build additional capacity in those sectors and in the economy more generally. However, both exports and investment are being held back by ongoing competitiveness challenges and uncertainty about trade policies.
Growth in consumption remains robust, supported by strong labour income growth. Wages have continued to pick up as expected, even after factoring out recent minimum wage increases in Ontario and Alberta. The Bank will continue to assess labour market data for signs of remaining slack.
Some progress has been made on the key issues being watched closely by Governing Council, particularly the dynamics of inflation and wage growth. This progress reinforces Governing Council’s view that higher interest rates will be warranted over time, although some monetary policy accommodation will still be needed to keep inflation on target. The Bank will also continue to monitor the economy’s sensitivity to interest rate movements and the evolution of economic capacity. In this context, Governing Council will remain cautious with respect to future policy adjustments, guided by incoming data."


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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11717182/kazakhstan-cuts-rate-25-bps-and-will-continue-easing Tue, 17 Apr 2018 03:01:55 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11717182/kazakhstan-cuts-rate-25-bps-and-will-continue-easing <![CDATA[Kazakhstan cuts rate 25 bps and will continue easing]]>       Kazakhstan's central bank lowered its base rate by another 25 basis points to 9.25 percent and said  it "will continue the policy of the gradual reduction of the base rate, securing the maintenance of the neutral monetary conditions."
      It is the third rate cut in a row by the National Bank of Kazakhstan (NBK) and in line with the central bank's guidance from March that it would continue to gradually reduce its base rate toward a neutral policy stance, in which there is a balance between the pursuit of price stability and economic growth.
      The rate cut comes after the central bank last week confirmed its economic outlook and said there was a high likelihood that inflation this year would ease to below the lower boundary of its 5-7 percent target range.
      The NBK has now cut its key rate by 100 basis points this year and by a total of 775 points since embarking on an monetary easing cycle in May 2016.
       Inflation in Kazakhstan rose slightly to 6.6 percent in March from 6.5 percent in February due to a rise in the cost of some imported products based on world market prices along with an "emerging increase of the domestic demand among households," NBK said.
       However, inflationary expectations are continuing to decline, with expectations for one-year ahead down to 5.8 percent in March from 7.1 percent in December.
       The exchange rate of Kazakhstan's tenge also remains favorable, the central bank said, noting oil prices are above US$65 per barrel while inflation in its main trading partners is moderate.
       Despite the recent hit to Russia's stock market from new U.S. sanctions, the NBK said it still sees the external sector as positive and the recent volatility in the tenge's exchange rate in response to the fall in Russian assets was considered "short-term and moderate."
       "This is why the National Bank does not consider it necessary to tighten the monetary policy conditions as a response to tenge deprecation," the central bank said.
       The tenge fell by up to 3.8 percent last week on worries over Russia but was still trading at 329.2 to the U.S. dollar today, 1.1 percent higher than at the start of the year.
       In August 2015 the tenge plunged following the central bank's move to a floating exchange rate regime and has been relatively steady since May 2016 when the central bank started cutting rates.
      The NBK moved to a floating exchange rate regime in response to capital outflows and the conversion of many tenge bank deposits to foreign currency. Oil accounts for about 60 percent of Kazakhstan's exports and over 10 percent of its Gross Domestic Product. 
       Economic activity in Kazakhstan is continuing to strengthen on the back of broad-based growth in such sectors as mining of oil and iron ore, engineering, agriculture, trade and transportation.
       Despite a 4.5 percent decline in building industry in January-February, the central bank said fixed capital investments had expanded by 54.4 percent in the first two months.
       Gross Domestic Product grew by an annual rate of 4.0 percent in the fourth quarter of last year and in its inflation report from February the central bank forecast 2.9 percent growth this year and 2.8 percent in the first nine months of 2019.


       The National Bank of Kazakhstan issued the following statement:
        
  
      "The National Bank of Kazakhstan has decided to reduce the base rate to the level of 9.25% with a corridor of +/-1%. The National Bank confirms its estimates regarding the continuing deceleration trend of the inflation until the end of the current year and during the next one. The inflationary expectations have continued to decrease. In spite of the observed volatility in the Russian stock and FX markets, the medium-term influence of the fundamental factors of the external sector is estimated as positive. According to the estimates of the National Bank, if the current dynamics of the macroeconomic indicators persist, the inflation rate will remain within the target corridor of 5-7% in 2018.
       In March the annual inflation rate has amounted to 6.6%. The growth of the production costs, a certain increase of the import costs under the influence of the price growth in the world markets and the emerging increase of the domestic demand among the households remain to be the main inflationary factors. The inflationary expectations of the households continued their gradual decrease. The results of the households’ survey show that the expected inflation rate for a year ahead has decreased from 7.1% in December 2017 to 5.8% in March of the current year, reaching the historical minimum since the beginning of 2016. The indicators of the perceived inflation in March have remained on the same level as in February. The share of responders, who believe that in the past year the prices of goods had been increasing more rapidly than before, has amounted to 49% (52.1% in December 2017).
     The economic activity continues to demonstrate the positive dynamics. In January-February of 2018 the short-term economic indicator has increased by 5.2% in the annual terms. The positive growth rates in mining (crude oil and iron ore production increase) and mechanical manufacturing industries (growth in metallurgy, food production and in engineering), agriculture, trade and transportation industries persist. However, the decrease in the building industry by 4.5% is being observed. The growth rate of the fixed capital investments in January-February of 2018 has amounted to 54.4%.
     The situation in the foreign markets remains favorable for Kazakhstan. The dynamics of the external fundamental factors has not changed since the period of previous decision on the base rate. Since the beginning of the year the oil prices have been formed at the level above 65 US dollars per barrel. The inflation rates in the countries – main trade partners are evaluated as moderate. The influence of the risks coming from the countries – main trade partners, mostly, the Russian Federation, which have become a reason for the short-term volatility in the domestic FX market in the past few days, is assessed as short-term and moderate. That is why the National Bank does not consider it necessary to tighten the monetary policy conditions as a response to tenge depreciation.
     The monetary policy conditions continue to tend to neutrality in influencing the economy, keeping a balance between maintaining the price stability and promoting the attainment of the economic growth rates close to its potential level. Along with that the National Bank of Kazakhstan will continue the policy of the gradual reduction of the base rate, securing the maintenance of the neutral monetary conditions.
     The next decision on the base rate will be announced on June 4, 2018 at 17:00 Astana time. "

       www.CentralBankNews.info


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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11717177/this-week-in-monetary-policy-kazakhstan-israel-canada-and-indonesia Tue, 17 Apr 2018 03:00:46 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11717177/this-week-in-monetary-policy-kazakhstan-israel-canada-and-indonesia <![CDATA[This week in monetary policy: Kazakhstan, Israel, Canada and Indonesia]]>
     This week - April 15 through April 21 - central banks from 4 countries or jurisdictions are scheduled to decide on monetary policy: Kazakhstan, Israel, Canada and Indonesia.
    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 16
APR 15 - APR 21, 2018:
COUNTRY            DATE              RATE          LATEST             YTD           1 YR AGO      MSCI
KAZAKHSTAN16-Apr9.50%-25-7511.00%         FM
ISRAEL16-Apr0.10%000.10%         DM
CANADA18-Apr1.25%0250.50%         DM
INDONESIA19-Apr4.25%004.75%         EM

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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11717172/singapore-tightens-policy-to-curb-rising-inflation Tue, 17 Apr 2018 02:59:36 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11717172/singapore-tightens-policy-to-curb-rising-inflation <![CDATA[Singapore tightens policy to curb rising inflation]]>
        Singapore's central bank tightened its monetary policy by increasing "slightly" the appreciation slope of the Singapore dollar from zero percent in light of rising inflation due to an improving labour market as the island state's economy is likely to continue on its steady expansion path in 2018.
        The Monetary Authority of Singapore (MAS), which targets the value of the Singapore dollar against a basket of currencies as a way to control inflation, added the width of the policy band and the level of which it is centered will remain unchanged.
       "This policy stance is consistent with a modest and gradual appreciation path of the S$NEER (S$ Nominal Effective Exchange Rate) policy band that will ensure medium-term price stability," MAS said.
         MAS had kept the appreciation rate of the Singapore dollar against an undisclosed basket of currencies at zero percent since April 2016 and the last time it increased the slope of the appreciation was in April 2012. 
         But in its previous policy review from October 2017, MAS dropped the reference to maintaining the neutral stance for an "extended period, " signaling it was ready to tighten its policy.
         Singapore's economy grew by an annual rate of 4.3 percent in the first quarter of this year, according to advance estimates by the trade and industry ministry, up from 3.6 percent in the full 2017 year.
        Barring a setback in global trade, MAS expects Singapore's economy to continue expanding in coming quarters with growth slightly above the middle of its forecast range of 1.5-3.5 percent.
        However, MAS was also clearly concerned that rising trade tensions between the United States and China could impact global trade, and said its "measured adjustment" to its policy stance took into account the uncertainty presented by the ongoing trade tensions.
        Singapore's headline inflation rate rose to 0.5 percent in February from zero percent in January while MAS core inflation, which excludes private road and accommodation costs, rose to an average of 1.6 percent in January-February from 1.4 percent in the fourth quarter of last year.
        In coming quarters, MAS expects imported inflation to rise mildly due to rising global demand with oil prices rising moderately as compared with 2017.
        "Should economic conditions evolve as expected MAS Core inflation will rise gradually over the course of this year. For 2018 core inflation should come within the upper half of the 1-2% forecast range, " MAS said.

       www.CentralBankNews.info

        
         

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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11717167/peru-holds-rate-steady-sees-inflation-in-range-in-q2 Tue, 17 Apr 2018 02:58:27 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11717167/peru-holds-rate-steady-sees-inflation-in-range-in-q2 <![CDATA[Peru holds rate steady, sees inflation in range in Q2]]>        Peru's central bank left its policy rate steady at 2.75 percent, noting the fall in inflation in the last five months, declining inflation expectations and economic activity that is below potential.
       The Central Reserve Bank of Peru (BCRP), which cut its rate in March and January this year, also reiterated its recent guidance that it is paying close attention to inflation and would consider making additional changes to the policy rate if it were necessary.
       BCRP has been in an easing cycle since May 2017 and has lowered the key rate six times by a total of 150 basis points.
       Peru's inflation rate has been falling rapidly since March last year when food prices jumped in response to devastating floods that killed more than 100 people and wiped out crops and roads.
       In March inflation fell to only 0.36 percent, sharply down from 3.97 percent 12 months ago, and well below the BCRP's target range of 1-3 percent.
       The central bank said inflation is projected to return to its target range in the second quarter and then gradually converge to 2.0 percent by the end of this year. But inflation expectations 12 months ahead have continued to decline to 2.18 percent.
       The Peruvian sol has been relatively steady in the last year and was trading at 3.22 to the U.S. dollar today, up 0.9 percent this year.


      The Central Reserve Bank of Peru issued the following statement:


"1. The Board of the Central Reserve Bank of Peru approved to maintain the monetary policy interest rate at 2.75 percent.
This decision takes into account the following factors:
 i. Inflation in March continued declining for five consecutive months and, as anticipated, showed a rate below the lower band of the inflation target range (1.0 percent). This is explained mainly by the reversal of the supply shocks and by a level of economic activity that is lower than the potential level of growth. The YoY inflation rate is projected to return to be within the target range in the second quarter and to gradually converge thereafter to 2.0 percent by the end of the year. Moreover, trend inflation measurements showed levels close to the midpoint of the target range;
ii. Expectations of inflation in 12 months continued decreasing and registered a rate of 2.18 percent in March 2018;
iii. Economic activity continues to grow at levels below its potential level of growth, amid a context of low inflation, and
iv. The world economy continues to show positive indicators, although uncertainty in international financial markets has increased.
2. The Board pays close attention to new data on inflation and inflation determinants to consider the convenience of making additional adjustments in the Central Bank’s monetary policy stance should it be necessary.
3. Recent indicators of inflation and activity reflect the following:
 i. Inflation in March showed a rate of 0.49 percent, as a result of which the YoY inflation rate fell from 1.18 percent in February to 0.36 percent in 2018. Inflation without food and energy recorded a rate of 0.85 percent, as a result of which the YoY rate increased from 1.97 percent in February to 1.99 percent in March, within the target range.
ii. Most indicators of business expectations deteriorated in March, although they continue to be on the optimistic side.
4. The Board of the Central Bank also approved to maintain the annual interest rates on lending and deposit operations in domestic currency (not included in auctions) between BCRP and the financial system, as specified below:
i. Overnight deposits: 1.50 percent.
ii. Direct repos and rediscount operations:
i) 3.30 percent for the first 15 operations carried out by a financial institution in the last 12 months, and
ii) the interest rate set by the Committee of Monetary and Foreign Exchange Operations for additional operations to the 15 first operations carried out in the last 12 months.
iii. Swaps: a commission equivalent to a minimum annual effective cost of 3.30 percent.

5. The Board will approve the Monetary Program for the month of May on its Meeting of May 10, 2018. "

      www.CentralBankNews.info

     
     

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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11717162/mexico-maintains-rate-still-ready-to-act-in-timely-manner Tue, 17 Apr 2018 02:57:16 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11717162/mexico-maintains-rate-still-ready-to-act-in-timely-manner <![CDATA[Mexico maintains rate, still ready to act in timely manner]]>        Mexico's central bank left its benchmark interest rate steady at 7.50 percent, as expected by some but not all economists, saying this decision reflects the recent evolution in inflation, which is largely in line with its expectations.
       But as in February, the Bank of Mexico (Banxico) confirmed it would "act in a timely and firm manner" to ensure that inflation and inflation expectations converge to its midpoint target of 3.0 percent.
       Banxico last raised its rate by 25 basis points in February but struck a more neutral tone in contrast to earlier hawkish statements as inflation has been decelerating in the last three months while the Mexican peso has been appreciating since late December.
       Since the U.S. Federal Reserve began tightening its monetary policy in December 2015, Mexico's central bank has raised its rate 12 times by a total of 450 basis points to curb the fall in the peso, which has pushed up import prices and thus inflation.
       But the peso has been rising this year and inflation in March fell to 5.04 percent - its lowest level since February 2017 - from 5.34 percent in February, with inflation expectations for the end of this year steady and medium- and long-term expectations steady around 3.50 percent.
       In February Banxico said it expected inflation to hit its target in early 2019.
       Today the peso was trading at 18.2 to the U.S. dollar, up 8.2 percent this year.
       Banxico also said the latest economic data showed that economic activity continued to improve in the first months of this year, driven by services and some recovery of industry while exports continued to show a positive trajectory.
        However, Mexico's economy is still facing risks so the balance of risks to growth remains on the downside, the central bank said.

       www.CentralBankNews.info


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