<![CDATA[Hedgehogs.net: Ken Yeadon's connections' blogs]]> http://www.hedgehogs.net/pg/blog/keny/friends/?view=rss http://www.hedgehogs.net/pg/blog/asiablues/read/11674107/california-housing-market-setting-up-for-a-crash-video Sun, 26 Mar 2017 19:33:45 +0100 http://www.hedgehogs.net/pg/blog/asiablues/read/11674107/california-housing-market-setting-up-for-a-crash-video <![CDATA[California Housing Market Setting Up For A Crash (Video)]]> By EconMatters

We discuss the fact that the cost of living in California is unsustainable and rising, an average middle class home is going for $600,000 in some areas of California, and this isn`t the highest areas in California, and House Flippers cannot lose right now regardless of how much they spend on renovations and going over budget, throw in corporations moving out of the state, and this is all setting up for a massive real estate collapse in the high cost of living state. California citizens are spending too much as a percentage of their annual salary on mortgages, all their other costs are higher as well, as a result there is very little margin of error for any downturn in the state`s economy.

This sets the market up for a sharp crash scenario which has cascading repercussions throughout California`s fiscally irresponsible government spending credit profile. California`s true financial health right now is being masked because their economy has performed above trend due to the recent technology boom of the last 8 years, if we look underneath the surface, things look pretty bad for many California municipalities being able to fund their massive spending programs which result in annual budget deficits. In short California is on the verge of a financial crisis, they just don`t know it right now, and the real estate market in California is going to correct substantially over the next five years.

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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11674102/this-week-in-monetary-policy-kenya-ghana-kyrgyzstan-hungary-thailand-albania-czech-rep-fiji-south-africa-mexico-moldova-bulgaria-trinidad-tobago-and-dominican-rep Sun, 26 Mar 2017 15:07:45 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11674102/this-week-in-monetary-policy-kenya-ghana-kyrgyzstan-hungary-thailand-albania-czech-rep-fiji-south-africa-mexico-moldova-bulgaria-trinidad-tobago-and-dominican-rep <![CDATA[This week in monetary policy: Kenya, Ghana, Kyrgyzstan, Hungary, Thailand, Albania, Czech Rep., Fiji, South Africa, Mexico, Moldova, Bulgaria, Trinidad & Tobago and Dominican Rep.]]>
    This week (March 26 through April 1) central banks from 14 countries or jurisdictions are scheduled to decide on monetary policy: Kenya, Ghana, Kyrgyz Republic, Hungary, Thailand, Albania, Czech Republic, Fiji, South Africa, Mexico, Moldova, Bulgaria, Trinidad and Tobago, and Dominican Republic.
    Following table includes the name of the country, the date of the next policy decision, the current policy rate, the result of the last policy decision, the change in the policy rate year to date, the rate one year ago, and the country’s MSCI classification.
    The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.

MAR 26 - APR 1, 2017:
COUNTRY                 DATE                RATE           LATEST                 YTD               1 YR AGO       MSCI
KENYA 27-Mar 10.00% 0 0 11.50%          FM
GHANA 27-Mar 25.50% 0 0 26.00%
KYRGYZSTAN 27-Mar 5.00% 0 0 8.00%
HUNGARY 28-Mar 0.90% 0 0 1.20%          EM
THAILAND 29-Mar 1.50% 0 0 1.50%          EM
ALBANIA 29-Mar 1.25% 0 0 1.75%
CZECH REP. 30-Mar 0.05% 0 0 0.05%          EM
FIJI 30-Mar 0.50% 0 0 0.50%
SOUTH AFRICA 30-Mar 7.00% 0 0 7.00%          EM
MEXICO 30-Mar 6.25% 50 50 3.75%          EM
MOLDOVA 31-Mar 9.00% 0 0 17.00%
BULGARIA 31-Mar 0.00% 0 0 0.00%          FM
TRINIDAD & TOBAGO 31-Mar 4.75% 0 0 4.75%
DOMINICAN REP. 31-Mar 5.50% 0 0 5.00%

http://www.hedgehogs.net/pg/blog/asiablues/read/11673722/every-investment-strategy-has-a-tradeoff-video Sat, 25 Mar 2017 18:03:47 +0000 http://www.hedgehogs.net/pg/blog/asiablues/read/11673722/every-investment-strategy-has-a-tradeoff-video <![CDATA[Every Investment Strategy Has A Tradeoff (Video)]]> By EconMatters

We discuss Technical Analysis, Viewer Questions, Warren Buffet, and delve into some of the natural Tradeoffs that all investors make these days in financial markets in this video. Every strategy has an Achilles` heel that you should be aware of as a Trader.

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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11673558/pakistan-keeps-rate-better-demand-to-determine-inflation Sat, 25 Mar 2017 14:41:46 +0000 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11673558/pakistan-keeps-rate-better-demand-to-determine-inflation <![CDATA[Pakistan keeps rate, better demand to determine inflation]]>     Pakistan's central bank kept its monetary policy rate at 5.75 percent, as expected, saying improving domestic demand will define inflation in the coming 2018 fiscal year while expanding economic activity has translated into a significant rise in imports, pushing up the account account deficit.
     The State Bank of Pakistan (SBP), which has maintained its rate since cutting it by 25 basis points in May 2016, also said prudent monetary policy stance has kept market interest rates low and stable and interbank liquidity has been well managed so the weighted overnight repo rate has been close to the policy rate.
     Pakistan's inflation rate rose to 4.22 percent in February from 3.66 percent in January but SBP said inflation expectations remain well anchored due to the near-absence of supply side pressures while core inflation is reflecting rising real incomes from a pick up in domestic demand.
      Pakistan's current account deficit rose to US$5.5 billion during the period from July 2016 to February 2017 as imports rose while there was no sustained improvement in exports and a small decline in remittances. And while financial inflows were higher, they were not sufficient to finance the current account deficit.
    However, recent policy measures to boost exports and check non-essential imports should contain the current account deficit in coming months, the central bank said.
    Pakistan's current account deficit narrowed to 1.2 percent of Gross Domestic Product in the 2016 fiscal year, which ended June 2016, but widened to 2.2 percent in the first half of fiscal 2017.
    The overall position of Pakistan's external balance in fiscal 2018, which begins on July 1, will be determined by global oil prices, continued financial inflows and imports related to the China-Pakistan Economic Corridor (CPEC), the huge infrastructure project that links Pakistan's seaports with the far-western Chinese region of Xinjiang.
    Pakistan's GDP expanded by 4.71 percent in 2016 from 4.04 percent in 2015 while the rupee has been largely steady since early 2016 and was trading at 104.75 to the U.S. dollar compared with 104. 3 at the start of this year.

    The State Bank of Pakistan issued the following statement:

"The inflation expectations in the current fiscal year continue to remain well anchored. This has been largely due to the near-absence of any major supply side pressures. However, rising real incomes in a low interest rate environment since FY14 are indicating signs of pick up in domestic demand, which is broadly reflected in the core inflation measures. Going forward, improving consumer confidence, as depicted by IBA-SBP Consumer Confidence Survey of March 2017, indicates further increase in consumer demand. Hence, barring any major cost shocks, domestic demand will define the underlying trend of headline inflation in FY18.

The real economic activity continues to gather pace at the back of better agricultural output, increase in key Large-scale Manufacturing sectors, and a healthy uptick in the credit to private sector. This expansion is helped by a range of factors including low cost of inputs, upbeat economic sentiments, improved energy supplies, and CPEC related investments. As a result, GDP growth is expected to further improve in FY17.

Also, prudent monetary policy stance has translated well into low and stable market interest rates, which incentivized private sector to borrow from commercial banks to finance their businesses and investment activities. Accordingly, private sector credit increased by Rs 349 billion during Jul-Feb FY17 as compared to Rs 267 billion in the same period last year. Encouragingly, fixed investment category led the rise in private sector businesses loans by posting Rs 159 billion uptick during this period, compared to Rs 102 billion last year. Similarly, consumer financing continued the uptrend in the first eight months of the current fiscal year. Improved interbank liquidity conditions also spurred the growth in private sector credit. This was led by both net government retirement to commercial banks and a decent increase in bank deposits compared to the withdrawals seen last year. Furthermore, interbank liquidity was managed well with calibrated open market operations that kept the weighted average overnight repo rate close to the policy rate.

The expansion in economic activity has also translated into significant increase in imports, which along with lack of any sustained improvement in exports and a small decline in remittances has pushed the current account deficit to US$ 5.5 billion during Jul-Feb FY17. While net financial flows remained higher, these were not sufficient to finance the current account deficit.

However, accounting for positive impact of the recent policy measures to augment exports and check non-essential imports, the current account deficit may be contained in the coming months. Also, continuation of the financial inflows, CPEC related imports, and any major fluctuation in the global oil price will determine the overall position of the external sector in FY18.

Keeping these factors in perspective, the Monetary Policy Committee of SBP has decided to keep the policy rate unchanged at 5.75 percent."


http://www.hedgehogs.net/pg/blog/asiablues/read/11672985/creating-the-poverty-effect-video Sat, 25 Mar 2017 00:43:44 +0000 http://www.hedgehogs.net/pg/blog/asiablues/read/11672985/creating-the-poverty-effect-video <![CDATA[Creating The Poverty Effect (Video)]]> By EconMatters

We discuss viewer questions, summarize the market environment today, and discuss future catalysts for the market selloff, and conclude with an analysis of why Central Banks have adopted Financial Markets as their latest Monetary Policy Tool in trying to create A Wealth Effect. Japan is a nation of savers, and the US is a nation of spenders. This is why Japan style economics will play out differently here in the United States.

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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11672778/russia-cuts-rate-25-bps-inflation-target-seen-achieved Fri, 24 Mar 2017 14:20:01 +0000 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11672778/russia-cuts-rate-25-bps-inflation-target-seen-achieved <![CDATA[Russia cuts rate 25 bps, inflation target seen achieved]]>     Russia's central bank cut its key policy rate by 25 basis points to 9.75 percent, surprising some but not all economists, and expressed confidence inflation will continue to decelerate so it achieves its objective of reducing inflation to 4.0 percent by the end of this year.
    The Bank of Russia, which in its previous policy decision in February dampened hopes of rate cuts, added further rate cuts in the second and third quarters of this year were possible and forecast that inflation will remain around its 4.0 percent target in 2018 and 2019.
     It is the Bank of Russia's first rate cut this year after rates were cut by 100 points last year as the central bank continues to slowly lower rates that hit 17.0 percent in December 2014.
     A fall in inflation for the eight consecutive month in February to 4.6 percent, along with a further drop in inflation expectations, paved the way for today's rate cut, the central bank said, adding inflation eased further by March 20 to 4.3 percent.
     "In these circumstances, given the moderately tight monetary policy, the 4% inflation will be achieved by the end of 2017 and will be maintained at this level further," the Bank of Russia said.
    The faster-than-expected decline in Russia's inflation rate comes against a backdrop of a bumper harvest that pushed down vegetable and fruit prices, slowing food inflation, while the ruble has risen on higher-than-expected oil prices.
    In addition there has been a drop in the sovereign risk premium, helping attract investments in Russian assets by global investors.
    After tumbling from low oil prices and conflict in the Ukraine in 2015, the ruble has risen since January 2016, underpinned by the central bank's tight policy and rising oil prices.
    The ruble rose further in response to today's rate cut and was trading at 57.2 to the U.S. dollar, up 7.2 percent since the start of this year.
     Although the central bank held out the prospect of further rate cuts, it cautioned there are still risks that it may miss its inflation objective if inflation expectations remain high and households go on a spending spree or if financial and commodity markets turn volatile, changing the expectation for the exchange rate and inflation.
     Along with declining inflation, Russia's economy is also improving, with the pace above the central bank's expectations as there has been a rebound in investment activity, boosting production.
    "Polling data reflects an improvement in business and household sentiment, conducive favourable economic dynamics," the central bank said, adding a rise in real wages is underpinning growing consumer activity without posing upward pressure on inflation as the supply of goods and services is also rising.
     Russia's economy shrank by only 0.2 percent last year following a contraction of 2.8 percent in 2015 and economists are looking for growth 1.2 percent this year. 
     In December the Bank of Russia forecast growth this year of 0.5 to 1.0 percent, rising to 1.5 to 2.0 percent in 2018 and 2019, if its baseline scenario of oil prices around $40 comes true. Higher oil prices will boost growth this year to over 1.0 percent, rising to 2.0-2.5 percent in 2018 and 2019.

    The Bank of Russia issued the following statement: 

"On 24 March 2016, the Bank of Russia Board of Directors decided to reduce the key rate from 10.00 to 9.75% p.a. The Board of Directors notes that inflation slowdown overshoots the forecast, inflation expectations continue to decline and economic activity recovers. Inflation risks have slightly dropped but remain elevated. In these circumstances, given the moderately tight monetary policy, the 4% inflation target will be achieved by the end of 2017 and will be maintained at this level further.
While assessing evolving inflation dynamics and economic developments against the forecast, the Bank of Russia admits the possibility of cutting the key rate gradually in coming Q2-Q3.
In making its key rate decision, the Bank of Russia Board of Directors has proceeded from the following factors.
Inflation dynamics. Inflation declines ahead of the forecast. Over the first twenty days in March, annual consumer price growth dropped to an estimated 4.3%, from 5.0% in January 2017. February saw a continued slowdown in price growth across all key groups of goods and services, and a reduction in seasonally adjusted monthly inflation. Inflation slowdown was broadly facilitated by the ruble appreciation amid higher than expected oil prices, persistent interest in investment in Russian assets among external investors, and a drop in the sovereign risk premium. Bumper harvests of 2015-2016 resulted in high stocks of agricultural products, leading to a material slowdown in food inflation and falling vegetable and fruit prices.
Disinflationary drag from domestic demand persists. Households broadly tend to demonstrate savings behaviour patterns. There are signs of revival in consumption and wages are growing both in nominal and real terms. Consumer lending dynamics does not pose any risks for inflation. Noticeable inflation deceleration will be conducive to a further reduction in inflation expectations among households and businesses. Given the decision taken and persistent moderately tight monetary policy, the Bank of Russia forecasts that the annual consumer price growth will reduce to 4% by the end of 2017 and will remain within this target range in 2018-2019.
Monetary conditions. In order to maintain the propensity to save and anchor sustainable inflation slowdown driven by demand-side restrictions, monetary conditions should remain moderately tight. Positive real interest rates will be held at the level which will ensure demand for loans without increasing inflationary pressure and will uphold incentives for saving. A gradual decline in nominal interest rates and the easing of non-price bank lending conditions will remain. Given banks’ conservative policy stance, these trends will mostly influence high-quality borrowers. The Finance Ministry’s purchases of foreign currency in the FX market did not have any substantial impact on the ruble exchange rate dynamics as the driving factors of its appreciation remained dominant. Short-term inflation risks related to these operations did not materialise.
Economic activity. The pace of economic recovery is higher than expected. Estimates show that quarterly GDP has been going up since 2016 Q2 and the trend is set to continue. January â€” February 2017 saw an ongoing annual industrial production growth (adjusted for calendar factors) and a gradual rebound in investment activity. Fixed capital investment is expected to advance in Q1. Unemployment remains persistently low. The labour market is adapting to the new economic conditions with occasional signs of labour shortages in certain segments. Recovery is becoming more even across the regions. Polling data reflects an improvement in business and household sentiment, conducive to favourable economic dynamics. According to the Bank of Russia estimates, the observed annual rise in real wages fosters gradual growth in consumer activity without posing an additional proinflationary pressure amid increased supply of goods and services. 
The Bank of Russia takes into consideration the oil market uncertainty and keeps pursuing a conservative approach to the forecast, which assumes an oil price reduction to $40 per barrel by the end of 2017 and its further staying near this level. GDP is expected to grow by 1-1.5% in 2017 and by 1-2% in 2018-2019considering the current dynamics of recovery processes and higher economy resilience to fluctuations in external economic environment. It takes structural changes and time for positive trends to evolve and take root. 
Inflation risks. The risks that inflation will miss the 4% target by the end of 2017 have slightly abated. Nevertheless, there are still risks that inflation may fail to anchor at the target level in the medium run. These risks are implied by the inertia of inflation expectations, as well as a possible rapid decline in households’ propensity to save. Volatility in the global commodity and financial markets may weigh negatively on expectations with regard to exchange rate and inflation. The said risks may also materialise over the mid-term horizon. Moderately tight monetary policy will allow to limit their effects and maintain consumer price growth rates close to 4%.
While assessing evolving inflation dynamics and economic developments against the forecast, the Bank of Russia admits the possibility of cutting the key rate gradually in coming Q2-Q3.
The Bank of Russia Board of Directors will hold its next rate review meeting on 28 April 2017. The press release on the Bank of Russia Board decision is to be published at 13:30 Moscow time."

http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11672487/sri-lanka-raises-rates-25-bps-in-precautionary-move Fri, 24 Mar 2017 02:39:00 +0000 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11672487/sri-lanka-raises-rates-25-bps-in-precautionary-move <![CDATA[Sri Lanka raises rates 25 bps in precautionary move]]>     Sri Lanka's central bank raised its key policy rates by 25 basis points in what it said was a precautionary measure to "contain the build-up of adverse inflation expectations and the possible acceleration of demand side inflationary pressures through excessive monetary and credit expansion."
     The Central Bank of Sri Lanka (CBSR), which raised its two key rates by 100 basis points last year to slow growth in private sector credit, added its decision took into account the improvement in fiscal operation that resulted in the budget deficit last year narrowing to expected levels.
    "The board was of the view that these improvements, together with the substantial upward movements already observed in market interest rates, have reduced the required adjustment in policy interest rates," the central bank said.
    The central bank raised its Standing Deposit Facility Rate (SDFR) to 7.25 percent and the Standing Lending Facility Rate (SLFR) to 8.75 percent.
     The rate rise was not unexpected and comes only weeks after the International Monetary Fund (IMF) said the central bank should remain vigilant and be ready to tighten its policy stance if inflation or credit growth didn't ease.
    Sri Lanka's inflation rate has been ticking up in the last two months and hit 6.8 percent in February, the highest rate since June 2013, as drought affected the cost of food while non-alcoholic beverages also rose 7.7 percent and transportation prices rose 5 percent.
    The central bank said it expects inflation to revert to its desired mid-single digit levels and then stabilize unless inflation expectations accelerate.
    The central bank is slowly moving towards a flexible inflation targeting framework that calls for inflation in a range of 4-6 percent in the medium term, a range that is consistent with the inflation target bands that have been set out under its arrangement with the IMF.
    Private sector credit decelerated further to 20.9 percent in January from 21.9 percent at the end of last year while credit to the public sector remained strong, pushing up the growth of broad money (M2) to 17.7 percent in January, down from 18.4 percent in December.
    "Nevertheless, the declaration in monetary and credit aggregates has been slower than expected," the central bank said.
     Sri Lanka's rupee has been depreciating in several steps since October 2011 and has been falling steadily since August 2015 and was trading at 152.2 to the U.S. dollar today, down 2.5 percent this year and down 5.3 percent since the start of 2016.

    The Central Bank of Sri Lanka issued the following statement:

"As per the provisional estimates of the Department of Census and Statistics (DCS), the Sri Lankan economy grew by 4.4 per cent in real terms during 2016 compared to the growth of 4.8 per cent in 2015. Within this annual growth, Industry related activities grew notably by 6.7 per cent driven by construction related activities, while Services related activities grew by 4.2 per cent mainly with the expansion of financial services, insurance and telecommunications. However, Agriculture related activities contracted by 4.2 per cent in 2016, impacted by supply side disruptions on account of floods in the second quarter and drought conditions during the final quarter of 2016. In spite of challenging external factors such as adverse weather conditions and global developments, an acceleration of growth was observed towards end 2016 with the last quarter of 2016 recording a growth of 5.3 per cent, partly supported by the base effect.
In the meantime, headline inflation, as measured by the year-on-year change in the Colombo Consumers’ Price Index (CCPI, 2013=100), accelerated to 6.8 per cent in February 2017 from 5.5 per cent in January 2017. A similar trend was observed in the National Consumer Price Index (NCPI, 2013=100) based headline inflation, which rose to 8.2 per cent (year-on-year) in February 2017 from 6.5 per cent in January 2017. Year-on-year core inflation based on both CCPI and NCPI also remained high at 7.1 per cent in February 2017. The recent acceleration in inflation is largely due to the impact of prevailing drought conditions and adjustments to the tax structure, and it is projected that inflation would revert to the desired mid single digit levels in the period ahead and stablise thereafter, unless disrupted by adverse inflation expectations.
The earlier tightening of monetary policy and monetary conditions by the Central Bank and the resultant increase in market interest rates are likely to have impacted the growth of credit to the private sector by commercial banks to some extent. Accordingly, the year-on-year growth of private sector credit decelerated further to 20.9 per cent in January 2017 from 21.9 per cent at end 2016. Meanwhile, credit to the public sector increased noticeably, causing year-on-year broad money (M2b) growth to remain high at 17.7 per cent in January 2017, although this was a deceleration compared to 18.4 per cent in December 2016. Nevertheless, the deceleration in monetary and credit aggregates has been slower than expected.
On the external front, the deficit in the trade account of the balance of payments (BOP) was recorded at US dollars 9.1 billion in 2016 compared to US dollars 8.4 billion in 2015, with expenditure on imports increasing by 2.5 per cent and earnings from exports contracting by 2.2 per cent during the year. Provisional data for January 2017 also indicated a widening of the trade deficit. Earnings from tourism and workers’ remittances continued to cushion the adverse impact of the trade deficit on the BOP. In the meantime, outflows of foreign investments from the government securities market observed in early 2017 appear to have subsided, and marginal inflows have been experienced in spite of the increase in policy interest rates in the United States. Gross official reserves were estimated at US dollars 5.6 billion at end February 2017 compared to US dollars 6.0 billion at end 2016, while the Sri Lankan rupee depreciated by 1.2 per cent against the US dollar during the year up to 22 March 2017.
Considering the above developments, the Monetary Board, at its meeting held on 23 March 2017, was of the view that further tightening of monetary policy is necessary as a precautionary measure, in order to contain the build-up of adverse inflation expectations and the possible acceleration of demand side inflationary pressures through excessive monetary and credit expansion. The Monetary Board also took into account the notable improvements in fiscal operations, which have resulted in the overall budget deficit in 2016 declining to envisaged levels. The Board was of the view that these improvements, together with the substantial upward movements already observed in market interest rates, have reduced the required adjustment in policy interest rates. 
Accordingly, the Monetary Board decided to increase the key policy interest rates of the Central Bank, namely the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) by 25 basis points each, to 7.25 per cent and 8.75 per cent, respectively, with effect from 24 March 2017."


http://www.hedgehogs.net/pg/blog/asiablues/read/11672482/natural-gas-market-video Thu, 23 Mar 2017 23:53:44 +0000 http://www.hedgehogs.net/pg/blog/asiablues/read/11672482/natural-gas-market-video <![CDATA[Natural Gas Market (Video)]]> By EconMatters

We discuss the Natural Gas Market in this video, with a trade setup from the long side, given that the technicals are still valid in the long channel off the bottom after the mild winter weather. A good risk reward setup in Natural Gas sets up as we move into the summer air conditioning season for the July timeframe.

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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11672471/taiwan-keeps-rate-steady-to-support-economic-recovery Thu, 23 Mar 2017 14:27:53 +0000 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11672471/taiwan-keeps-rate-steady-to-support-economic-recovery <![CDATA[Taiwan keeps rate steady to support economic recovery]]>     Taiwan's central bank left its benchmark discount rate at 1.375 percent, as expected, saying an "adequately accommodative monetary policy stance is conducive to the economic recovery," while inflationary pressures remain mild although a stronger Taiwan dollar is straining financial conditions.
    The Central Bank of the Republic of China (Taiwan) (CBC) also said its policy decision took into account "elevated uncertainties" over U.S. and European economic policies, a gradual domestic recovery and the fact that output is still below potential output.
    The CBC has maintained rates since June 2016 following four consecutive rate cuts by a total of 50 basis points starting in September 2015. The central bank decides on monetary policy at the end of each quarter.
     Noting that Taiwan's government had approved a infrastructure development plan that is expected to create jobs and bolster productivity, the CBC called on governments around the world to follow suit with fiscal easing and structural reforms as stimulus created by monetary easing after the global financial crises had now faded.
    "The current low-growth, low-rate environment would also prevent fiscal stimulus from crowding out private investment," the central bank said.
    Taiwan's dollar has been firming since January last year and the while the CBC said this was helping keep down imported inflation it also confirmed that it would step into foreign exchange markets to maintain an orderly market if there were excess volatility and "massive and erratic cross-border capital movements" from political and economic changes that could disrupt the country's foreign exchange and financial markets.
    Taiwan's dollar was trading at 30.49 to the U.S. dollar today, up 8.1 percent since the start of 2016 and up 6.4 percent this year.
     Taiwan's inflation rate plummeted to minus 0.04 percent in February from 2.25 percent in January due to lower food prices but the CBC said average consumer price growth in the first two months of this year was 1.09 percent and forecast average inflation of 1.25 percent this year and 1.06 percent core inflation as moderate domestic demand and a negative output gap helps keep inflation mild.
     Taiwan's exports, which accounts for about 60 percent of Gross Domestic Product, have been picking up speed since the start of this year and the government's directorate last month raised its 2017 growth forecast to 1.92 percent from 1.87 percent, up from 2016 growth of 1.50 percent.

    The Central Bank of the Republic of China (Taiwan) issued the following statement:

"I.    Global economic and financial conditions
The global economic growth is expected to pick up this year. Among advanced economies, the US government may soon roll out fiscal stimulus programs to ramp up economic growth, while Japan and the euro area are recovering steadily. Growth in emerging market economies has accelerated thanks to a rebound in commodity prices. The Chinese economy has also kept pace.
Many international forecasting institutions expect the global economy will perform better this year than last year. However, greater economic policy and political uncertainties could be induced by the direction of US policies, the surge in trade protectionism, Brexit negotiations, and crucial elections in major EU member countries. In addition, with monetary policies of many central banks closely associated with the trajectory of future US Fed’s rate hikes and rising global inflation, international financial markets could face growing volatility, adding to the risk to the global economic recovery. 
II.    Domestic economic and financial conditions
1.    Since the beginning of the year, Taiwan's export growth has been boosted by healthier global economic and trade growth, and domestic demand has been supported by renewed fiscal expansion. Labor market conditions continued to improve, the number of persons employed increased moderately, and the unemployment rate generally dropped. The Directorate-General of Budget, Accounting, and Statistics (DGBAS) forecasts Taiwan's economy to advance at an annual rate of 1.92%, faster than the 1.50% of the year before.
2.    For the first two months of the year, the average annual CPI growth rate was 1.09%, mainly owing to higher fuel prices driven by rising international oil prices and larger increases in food prices. Core inflation recorded an average annual growth rate of 0.90%, indicating mild inflation. 
Despite an anticipated price uptrend for oil and other imported raw materials this year, the recent NT dollar appreciation has helped ease the pressure on imported inflation. Meanwhile, moderate domestic demand and a negative output gap have also contributed to a mild inflation outlook. For 2017 as a whole, the CBC forecasts CPI and core CPI inflation to rise 1.25% and 1.06% year on year, respectively. (See Appendix for the forecasts by major institutions.)
3.    Against a backdrop of stable inflation and the ongoing economic recovery, the CBC has conducted open market operations to maintain ample market liquidity. For the first two months of the year, banks' excess reserves recorded an average amount of NT$54.4 billion. The average annual growth rates of bank loans and investments and the monetary aggregate M2 were 4.35% and 3.64% for the same period, respectively. Market liquidity is sufficient to support economic activity.   
Since the beginning of the year, liquidity in the banking system has remained abundant, short- and long-term interest rates have stayed low, and Taiwan's stock markets have gathered steam. However, as the NT dollar appreciated amid foreign capital inflows, the overall financial conditions have tended to tighten, as reflected by the FCI (financial condition index). 
III.    Interest rate decision 
The Board has taken into account elevated uncertainties over US and European economic policies, a gradual domestic economic recovery, and the fact that actual output is still lower than potential output. Meanwhile, current inflationary pressures and future inflation expectations are both mild, whereas a stronger NT dollar has put domestic financial conditions under strains. Considering an adequately accommodative monetary policy stance is conducive to the economic recovery, the Board judged that a policy rate hold will foster robust economic and financial development. 
The Board reached the following decision unanimously at the Meeting today: 
The discount rate, the rate on accommodations with collateral, and the rate on accommodations without collateral are kept unchanged at 1.375%, 1.75%, and 3.625%, respectively.
The CBC will continue to monitor both international and domestic economic and financial developments including those related to realized and expected inflation. We will undertake appropriate monetary policy actions in line with the central bank’s statutory mandate. 
IV.    The NT dollar exchange rate is in principle determined by market forces. Nevertheless, volatile political and economic changes around the world could induce massive and erratic cross-border capital movements and disrupt Taiwan's foreign exchange and financial markets. If the abovementioned factor leads to excess volatility and disorderly movements in the NT dollar exchange rate with adverse implications for economic and financial stability, the CBC will step in to maintain an orderly market.
V.    Around the world, the stimulus created by monetary easing deployed after the global financial crisis has gradually faded and it is imperative to follow up with fiscal easing. To support sustainable, balanced economic development, high-quality investment should be on top of the agenda[1] and complemented with structural reforms. The current low-growth, low-rate environment would also prevent fiscal stimulus from crowding out private investment. In Taiwan today, the government approved the “Forward-Looking Infrastructure Development Plan,” which is expected to create jobs and bolster productivity toward sustained long-term growth while improving living conditions as well as quality of life.  "

http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11672466/philippines-holds-rate-inflation-forecasts-slightly-down Thu, 23 Mar 2017 13:28:23 +0000 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11672466/philippines-holds-rate-inflation-forecasts-slightly-down <![CDATA[Philippines holds rate, inflation forecasts slightly down]]>     The central bank of the Philippines maintained its key overnight reverse repurchase rate (RRP) at 3.0 percent, as widely expected, and said the latest forecasts for inflation were "slightly lower" than previous forecasts though still within its target range for this year and next.
    Bangko Sentral ng Pilipinas (BSP), which has kept its monetary policy stance since September 2014 on "manageable" inflation, reiterated its view from February that the balance of risks surrounding inflation remain tilted to the upside due to the temporary impact of possible changes to transport fares and electricity rates and a proposed reform of taxes.
    On the other hand, the central bank said lingering uncertainty over the global economy, due to "possible shifts in macroeconomic policies in advanced economies" continues to pose a downside risk to the inflation outlook.
     Although inflation in the Philippines ticked up to 3.3 percent in February for the highest rate since November 2014 on higher food and oil prices, the BSP said latest baseline forecasts were slightly down but still within its target range of 3.0 percent, plus/minus 1 percentage point.
    Last month the BSP raised its 2017 inflation forecast to 3.5 percent from 3.3 percent and the 2018 forecast to 3.3 percent from 3.1 percent.
     Inflation expectations remain anchored to the inflation target, the central bank added.
     Today's policy decision was widely expected by investors and follows the central bank governor's statement from last week that policy settings would likely remain unchanged following the U.S. Federal Reserve's latest tightening, which he said would benefit global growth and U.S. trading partners, including the Philippines.
     Although the BSP's monetary policy stance has been steady since September 2014, the RRP rate was lowered by 100 basis points last year when it adopted an interest corridor system.
     The BSP also said it expected domestic economy activity to remain firm, supported by household consumption and private investment, increased government spending and ample credit and liquidity.
     The Philippine economy grew by 6.8 percent last year, up from 5.9 percent in 2015, and the International Monetary Fund last month raised its 2017 growth forecast to 6.8 percent from 6.7 percent on strong domestic demand.

    Bangko Sentral ng Pilipinas issued the following statement:

"At its meeting today, the Monetary Board decided to maintain the interest rate on the BSP’s overnight reverse repurchase (RRP) facility at 3.0 percent. The corresponding interest rates on the overnight lending and deposit facilities were also kept steady. The reserve requirement ratios were likewise left unchanged. 
The Monetary Board’s decision is based on its assessment that the outlook for inflation remains manageable, consistent with favorable growth prospects. While the average headline inflation for the first two months of 2017 has risen due to the recent increases in food and oil prices as well as base effects, latest baseline forecasts are slightly lower than previous forecasts and within the target range of 3.0 percent ± 1 percentage point for 2017-2018. Inflation expectations also remain anchored to the inflation target over the policy horizon.
The Monetary Board also observed that the balance of risks surrounding the inflation outlook remains tilted toward the upside, given the transitory impact of the proposed tax reform program as well as possible adjustments in transportation fares and electricity rates. Meanwhile, lingering uncertainty over the prospects of the global economy, due in part to possible shifts in macroeconomic policies in advanced economies, continues to pose a key downside risk to the inflation outlook. The Monetary Board also noted the beneficial effects on inflation of the removal of quantitative restrictions on rice importation. The Board emphasized that domestic economic activity is projected to stay firm, supported by buoyant household consumption and private investment, increased government spending, and ample credit and liquidity.
With these considerations, the Monetary Board believes that prevailing monetary policy settings remain appropriate. Looking ahead, the BSP will continue to monitor evolving economic conditions to ensure price and financial stability conducive to sustainable economic growth."