<![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/11684471/precious-metals-market-analysis-video Fri, 26 May 2017 18:03:43 +0100 http://www.hedgehogs.net/pg/blog/asiablues/read/11684471/precious-metals-market-analysis-video <![CDATA[Precious Metals Market Analysis (Video)]]> By EconMatters


We discuss the Precious Metals Market in this video noting some interesting Price Action in this asset class over the last week, and over the course of the rate hiking schedule of the last nine months. The Dollar is finishing at the highs for the week, and the Precious Metals still have a noticeable bid this week as well. We will pay attention next week for follow through on this recent trend as we close out the month of May in Financial Markets.


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http://www.hedgehogs.net/pg/blog/asiablues/read/11684456/general-market-commentary-5252017-video Thu, 25 May 2017 23:13:44 +0100 http://www.hedgehogs.net/pg/blog/asiablues/read/11684456/general-market-commentary-5252017-video <![CDATA[General Market Commentary 5-25-2017 (Video)]]> By EconMatters


We discuss the major markets in this general market commentary video covering stocks and bonds all the way to copper and gold markets. Now that the shorts have been squeezed, what`s next for equities? I don`t really expect much more out of this move as there just isn`t any more fuel to take the S&P 500 much higher than 2425 at the highest, and we may already have put in the high today at 2417.75, and start moving lower in front of a certain rate hike next month at the June FOMC Meeting. We sure didn`t blow through 2400 prices like we blew through 2300 prices, so even the bulls know they are in rarefied air way up here at these levels. Expect hawkish comments out of the ECB, FOMC, BOE and BOJ over the next two months to put a damper on "irrational exuberance" in equities.



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http://www.hedgehogs.net/pg/blog/asiablues/read/11684425/natural-gas-market-analysis-5242017-video Wed, 24 May 2017 18:13:45 +0100 http://www.hedgehogs.net/pg/blog/asiablues/read/11684425/natural-gas-market-analysis-5242017-video <![CDATA[Natural Gas Market Analysis 5-24-2017 (Video)]]> By EconMatters


We discuss the Fundamentals and Technicals of the Natural Gas Market in this video, reviewing last week`s EIA Natural Gas Report, and talking about the June contract expiration, in line with what the charts are telling us to pay attention to over the next several weeks in this commodity. It is getting to be time for a breakout in this range bound market we have had the last couple of trading months.



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http://www.hedgehogs.net/pg/blog/asiablues/read/11684416/the-bear-market-that-will-cause-fund-mangers-to-sell-video Tue, 23 May 2017 20:03:43 +0100 http://www.hedgehogs.net/pg/blog/asiablues/read/11684416/the-bear-market-that-will-cause-fund-mangers-to-sell-video <![CDATA[The Bear Market That Will Cause Fund Mangers To Sell (Video)]]> By EconMatters



We discuss the Theory of Debt Monetization, the Wealth Effect, Central Banks in relation to the current Bull Market going back into historical records to examine how we think this all plays out when the cycle changes into an outright Bear Market Correction. Most Fund Mangers will not sell in the first year of the Bear Market!



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http://www.hedgehogs.net/pg/blog/asiablues/read/11684403/the-anatomy-of-a-downtrend-video Mon, 22 May 2017 20:23:46 +0100 http://www.hedgehogs.net/pg/blog/asiablues/read/11684403/the-anatomy-of-a-downtrend-video <![CDATA[The Anatomy of a Downtrend (Video)]]> By EconMatters


We discuss Price Action in a downtrend in this market video, describing what is really going on behind the scenes, why price behaves the way it does, and how to avoid one of the biggest traps in trading Price Action. Never Buy a Pullback in a Downtrend!


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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11684396/egypt-raises-rate-200-bps-on-growing-risks-to-inflation Mon, 22 May 2017 04:05:33 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11684396/egypt-raises-rate-200-bps-on-growing-risks-to-inflation <![CDATA[Egypt raises rate 200 bps on growing risks to inflation]]>     Egypt's central bank raised its key policy rates by 200 basis points to 16.75 percent, surprising financial markets and investors, and said it "will not hesitate to adjust its stance to offset anticipated upside or downside deviations from the inflation target."
     The Central Bank of Egypt (CBE) has now raised its benchmark overnight deposit rate by 800 basis points since embarking an a tightening cycle in December 2015 and by 200 basis points this year.
    In November 2016 the CBE also took financial markets by surprise by hiking its key rates by 300 basis points as part of a liberalization of foreign exchange markets.
     After Egypt's pound was allowed to float, it immediately lost more than half its value, boosting import prices and thus inflation, but since March it has stabilized just over 18 to the U.S. dollar
    The CBE said previous rate hikes and lower liquidity had helped contain inflation but the balance of risks were now tilted more strongly to the upside due to growing demand-side pressure.
     Although Egypt's headline inflation rate rose further to 31.5 percent in April from 30.9 percent in March, on a monthly basis inflation had eased for the third consecutive month and core inflation, which excludes volatile food items, had risen only slightly after decelerating in February and March.
      But Egypt's economy is showing growing signs of improvement and the central bank is concerned that high inflation, along with improving demand, will boost inflation expectations.
    "Against this background, the MPC judges that hiking the CBE's key policy rates is consistent with the targeted disinflation path, and reiterates that the objective of its tighter stance is not to offset effects of supply-shocks, rather to contain underlying inflation excluding supply shocks that is affected by inflation expectations and the build-up of demand-side pressures," CBE said.
     Egypt's economy grew by an annual rate of 3.9 percent in the third quarter of the 2016/17 year, up from 3.8 percent and 3.4 percent, respectively, in the two preceding quarters, CBE said.
    In addition, the unemployment rate eased to 12.0 percent in the third quarter from 12.4 percent and 12.6 percent in the previous two quarters.
     To help anchor inflation expectations, the central bank said it would begin to publish a targeted disinflation path in its regular policy statements and quarterly monetary policy reports as part of its flexible monetary targeting framework.
     "In accommodation of first-round effects of supply-shocks, the elevated annual headline inflation rate will be temporarily tolerated before it is targeted to decline to 13% (+/- 3%) by 2018 Q4 and to single digits thereafter," the central bank said.
      In addition to raising its overnight deposit rate by 200 basis points, the central bank also raised its other key rates by the same amount, putting the overnight lending rate at 17.75 percent, the rate on its main operation at 17.25 percent and its discount rate at 17.25 percent.


    The Central Bank of Egypt issued the following statement:

   


"In its meeting held on May 21, 2017, the Monetary Policy Committee (MPC) decided to raise the overnight deposit rate, overnight lending rate, and the rate of the Central Bank of Egypt's (CBE) main operation by 200 basis points to 16.75 percent, 17.75 percent, and 17.25 percent, respectively. The discount rate was also raised by 200 basis points to 17.25 percent.
Headline inflation registered 1.69 percent (m/m) in April 2017, recording its third consecutive decline due to fading cost-push pressures after averaging 4.01 percent (m/m) between November 2016 and January 2017. Meanwhile, annual headline inflation registered 31.46 percent. Monthly inflation during April was mainly driven by volatile and core food items, while non-food items remained broadly unchanged. Accordingly, core inflation which excludes volatile food items grew by 1.10 percent (m/m) in April, recording a slight increase after decelerating in February and March from the average 4.89 percent (m/m) registered between November 2016 and January 2017. Nevertheless, as monthly core inflation was lower than the respective month of the previous year, the annual rate declined for the second consecutive month to record 32.06 percent.
While the previous tightening of policy rates and the consistent reduction of short-term excess liquidity have so far successfully managed to contain underlying inflation excluding supply-shocks, as evident in the inflation developments above, the balance of risks surrounding the inflation outlook has tilted more strongly to the upside with recent economic and monetary data releases pointing to strengthening demand-side pressures. Furthermore, the MPC envisages risks related to inflation expectations resulting from elevated annual inflation levels despite the continued moderation of monthly rates. Consequently, the MPC decided that tightening monetary conditions are warranted in commitment to its price-stability mandate.
Information received since the MPC met in March show continued improvement of economic activity and a reduction of unemployment. Annual real GDP grew by 3.9 percent in 2016/17 Q3, strengthening from the 3.8 and 3.4 percent recorded in the preceding quarters as well as from the 3.6 percent recorded in 2015/16 Q3. This coincided with the narrowing of the unemployment rate to 12.0 percent in 2016/17 Q3 from 12.4 and 12.6 percent in the preceding quarters.
From the monetary perspective, annual broad money growth has been strongly affected by revaluation effects of its foreign currency components. However, annual broad money growth has also increased excluding revaluation effects due to the recovery of net foreign assets, evident by the CBE's international reserve accumulation, as well as higher loans to the private sector in domestic currency.
Developments in the external environment show that there has been some firming of international commodity prices primarily due to higher oil prices while food price increases were relatively tame. Meanwhile global inflation and economic growth continue to maintain weak pressures on domestic prices, despite their recent recovery.
To further anchor inflation expectations, the MPC decided to increase transparency regarding the targeted disinflation path in its regular statements as well as in the quarterly series of the monetary policy report introduced in March 2017. In accommodation of first-round effects of supply-shocks, the elevated annual headline inflation rate will be temporarily tolerated before it is targeted to decline to 13% (+/- 3%) by 2018 Q4 and to single-digits thereafter. The MPC believes that this target path is appropriate to minimize undesirable macroeconomic volatility. Achieving low and stable inflation over the medium-term supports real incomes and sustains achieved competitiveness gains, which represents a challenge according to Egypt's economic history.
Monetary policy tools are utilized to anchor inflation expectations, contain demand-side pressures and second-round effects resulting from supply shocks that may lead to deviations from inflation targets, as well as to achieve reserve money targets that were designed to be consistent with the inflation targets. The MPC believes that such a flexible monetary targeting framework is appropriate under the liberalized exchange rate regime.
Against this background, the MPC judges that hiking the CBE's key policy rates is consistent with the targeted disinflation path, and reiterates that the objective of its tighter stance is not to offset effects of supply-shocks, rather to contain underlying inflation excluding supply shocks that is affected by inflation expectations and the build-up of demand-side pressures.
The MPC will continue to closely monitor all economic and monetary developments as well as the balance of risks, and will not hesitate to adjust its stance to offset anticipated upside or downside deviations from the inflation target."

    www.CentralBankNews.info





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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11684390/this-week-in-monetary-policy-egypt-ghana-hungary-nigeria-argentina-thailand-canada-paraguay-south-korea-ukraine-moldova-fiji-south-africa-colombia-and-trinidad-tobago Sun, 21 May 2017 21:59:08 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11684390/this-week-in-monetary-policy-egypt-ghana-hungary-nigeria-argentina-thailand-canada-paraguay-south-korea-ukraine-moldova-fiji-south-africa-colombia-and-trinidad-tobago <![CDATA[This week in monetary policy: Egypt, Ghana, Hungary, Nigeria, Argentina, Thailand, Canada, Paraguay, South Korea, Ukraine, Moldova, Fiji, South Africa, Colombia and Trinidad & Tobago]]>
    This week (May 21 through May 27) central banks from 15 countries or jurisdictions are scheduled to decide on monetary policy: Egypt, Ghana, Hungary, Nigeria, Argentina, Thailand, Canada, Paraguay, South Korea, Ukraine, Moldova, Fiji, South Africa, 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 21 - MAY 27, 2017:
COUNTRY                 DATE                RATE           LATEST                 YTD               1 YR AGO       MSCI
EGYPT 21-May 14.75% 0 0 10.75%          EM
GHANA 22-May 23.50% -200 -200 26.00%
HUNGARY 23-May 0.90% 0 0 0.90%          EM
NIGERIA 23-May 14.00% 0 0 12.00%          FM
ARGENTINA 23-May 26.25% 0 150 36.75%          FM
THAILAND 24-May 1.50% 0 0 1.50%          EM
CANADA 24-May 0.50% 0 0 0.50%          DM
PARAGUAY 24-May 5.50% 0 0 5.75%
SOUTH KOREA 25-May 1.25% 0 0 1.50%          EM
UKRAINE 25-May 13.00% -100 -100 18.00%          FM
MOLDOVA 25-May 9.00% 0 0 13.00%
FIJI 25-May 0.50% 0 0 0.50%
SOUTH AFRICA 25-May 7.00% 0 0 7.00%          EM
COLOMBIA  26-May 6.50% -50 -100 7.25%
TRINIDAD & TOBAGO 26-May 4.75% 0 0 4.75%


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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11684385/chile-cuts-rate-another-25-bps-strikes-neutral-guidance Sun, 21 May 2017 21:57:59 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11684385/chile-cuts-rate-another-25-bps-strikes-neutral-guidance <![CDATA[Chile cuts rate another 25 bps, strikes neutral guidance]]>     Chile's central bank cut its monetary policy interest rate by a further 25 basis points to 2.50 percent and signaled a neutral policy stance by saying that "any future changes in the monetary policy rate will depend on the implications of domestic and external macroeconomic conditions on the inflationary outlook."
     The Central Bank of Chile has now cut its rate four times this year by a total of 100 basis points amid rising unemployment, decelerating economic growth and stable inflation.
     The central bank said economic activity and demand in the first quarter of this year was in line with its expectations, illustrating the negative impact from mining and construction. But private consumption is stable, reflecting the labour market.
      Chile's Gross Domestic Product dropped to an annual growth rate of 0.1 percent in the first quarter of this year, down from 0.5 percent in the fourth quarter for the lowest growth rate since 2009 as private consumption eased and exports shrank after a strike at the Escondidada copper mine, the world's largest mine that produces about 5 percent of total global copper output.
     The strike, which ended in March, was estimated to lower Chile's growth by an entire percentage point in the first quarter of this year.
     The central bank has said it expects growth this year of 1-2 percent. The unemployment rate rose for the third month in a row to 6.6 percent in March.
      Chile's inflation rate was steady at 2.7 percent for the third month in a row in April and the central bank said expectations were near its target. The central bank targets inflation of 3.0 percent, plus/minus 1 percentage point.


    The Central Bank of Chile issued the following statement:
   

"In its monthly monetary policy meeting, the Board of the Central Bank of Chile decided to lower the monetary policy interest rate by 25 basis points, to 2.5%.

 Internationally, despite a recent increase in volatility, financial conditions have remained favorable and incoming figures continue to lend support to a scenario of stronger growth in the developed world. Commodity prices again showed mixed fluctuations, with a drop in the copper price. Overall, important risks persist.

On the domestic front, annual inflation remained at 2.7% and expectations at the end of the projection horizon are near the target. The activity and demand outlook depicted in the first-quarter National Accounts were in line with the March Monetary Policy Report, showing the negative impact of mining and construction. Private consumption is stable, reflecting the performance of the labor market.

The Board reiterates its commitment to conduct monetary policy with flexibility so that projected inflation stands at 3% over the policy horizon. Any future changes in the monetary policy rate will depend on the implications of domestic and external macroeconomic conditions on the inflationary outlook."

     www.CentralBankNews.info



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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11684380/mexico-raises-rate-25-bps-as-risks-to-inflation-worsen Sun, 21 May 2017 21:56:49 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11684380/mexico-raises-rate-25-bps-as-risks-to-inflation-worsen <![CDATA[Mexico raises rate 25 bps as risks to inflation worsen]]>     Mexico's central bank raised its benchmark interest rate for the third time this year prevent higher inflation and anchor inflation expectations risks to inflation had deteriorated "moderately."
     The Bank of Mexico (Banxico) has now raised its rate by 375 basis points since the U.S. Federal Reserve began normalizing its policy stance in December 2015, by 100 points this year and by 150 points since the election of Donald Trump as U.S. president.
     The rate cut came as a surprise to many economists who had expected the central bank to keep its rate steady in light of the rise in the peso. Banxico's benchmark target for the overnight interbank rate now stands at 6.75 percent.
     But the central bank is clearly worried that rising inflation, from past depreciation of the peso, will spark second-round effects on other prices and wages.
     Mexico's headline inflation rate rose to a higher-than-expected 5.82 percent in April from 5.35 percent in March, well above the bank's midpoint target of 3.0 percent. It was the 10 consecutive month of rising inflation, with prices boosted by higher food and energy prices following a rise in regulated gasoline prices at the start of the year.
     Baxico noted that the rise in core inflation to 4.72 percent in April from 4.48 percent due to the impact of past peso depreciation and price adjustments and a non-core inflation rate of 9.25 percent, which reflects both energy prices and higher prices of some agricultural products.
     Although inflation expectations remain largely stable, the central bank expects inflation to continue to be affected by higher motor transport rates and some agricultural products as well as the accumulated impact of peso depreciation so it will remain above its range of 2.0 to 4.0 percent.
     However, during 2018 inflation is expected to resume its fall toward the 3.0 percent target.
     The central bank noted the "significant appreciation" of the peso compared with the beginning of this year and although volatile remains high, it was lower than in the first quarter.
     Mexico's peso began falling in mid-2014, in sync with the fall in crude oil prices, and hit a historic low of almost 22 to the U.S. dollar in mid-January this year. The fall in the peso has pushed up import prices and thus inflation
    But since January the peso has appreciated sharply, supported by Baxico's rate hikes and expectations that Trump will not impose major tariffs on Mexican exports. 
    Today the peso was trading at 18.79 to the dollar, up 10.4 percent this year.
     Mexico's economy grew by an annual rate of 2.7 percent in the first quarter of this year, up from 2.4 percent in the fourth quarter of last year, despite weakness in public and private investment form uncertainty over the relationship with the United States, the central bank said.

    www.CentralBankNews.info

    

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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11684375/indonesia-holds-rate-confirms-5054-growth-forecast Sun, 21 May 2017 21:55:38 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11684375/indonesia-holds-rate-confirms-5054-growth-forecast <![CDATA[Indonesia holds rate, confirms 5.0-5.4% growth forecast]]>     Indonesia's central bank left its benchmark 7-day reverse repurchase rate (RR) at 4.75 percent, as expected, and confirmed that it expects the country's economy to grow between 5.0 and 5.4 percent this year, supported by stronger exports and investments along with "tenacious consumption."
     Bank Indonesia (BI) has maintained its rate since October 2016 when it last cut its rate. From January through June last year BI lowered its previous benchmark rate four times by a total of 100 basis points and then cut the current RR rate by a total of 50 basis points in August and October.
     Indonesia's Gross Domestic Product grew by an annual rate of 5.01 percent in the first quarter of this year, up from 4.94 percent in the first quarter, helped by higher government spending on infrastructure projects, improved exports and higher commodity prices, especially of coal and rubber.
     Last year Indonesia's economy grew by 5.02 percent, up from 4.88 percent in 2015.
     While BI expects the global economy to improve, it noted several risks, including the Federal Reserve's expected rate hike in June and the reduction in its balance sheet, U.S. fiscal and trade policies, and the geopolitical condition in the Korean Peninsula.
    "As global economic growth improves, world trade volume and non-oil commodity prices increase," the BI said.
     Domestically, BI is keeping a close eye on the impact on inflation from administered prices.
     Indonesia's headline inflation rate rose to 4.17 percent in April from 3.61 percent in March, still within the bank's target range of 4.0 percent, plus/minus 1 percentage point.
     Administered prices were the main contributor to higher consumer prices, with a rise in electricity rates for some users, airfares, petrol and cigarette prices. From March administered prices were up 1.27 percent in April for an annual rise of 8.68 percent wile volatile food prices fell by a monthly 1.26 percent due to an abundant supply.
    Core inflation, however, eased to 3.2 percent in April from 3.3 percent in March, helping anchor inflation expectations and the appreciating rupiah, BI said.
      After falling sharply from June 2013 through October 2015, the rupiah has been more stable in 2016 and this year.
     "Rupiah appreciation was driven by maintained non-resident capital inflows after the sovereign rating outlook was upgraded, solid macroeconomic data was released and positive sentiment regarding the domestic economic outlook prevailed," BI said.
      But shortly after today's BI's decision, the rupiah dropped sharply to around 1,3454 a U.S. dollar from around 1,3320. Compared with the start of this year, the rupiah is up 0.3 percent.


     Bank Indonesia issued the following statement:

"The BI Board of Governors agreed on 17th and 18th May 2017 to hold the BI 7-day (Reverse) Repo Rate (BI-7 day RR Rate) at 4.75%, while maintaining the Deposit Facility (DF) and Lending Facility (LF) rates at 4.00% and 5.50% respectively, effective 19th May 2017. The decision is consistent with Bank Indonesia’s efforts to maintain macroeconomic and financial system stability by driving the domestic economic recovery process. Bank Indonesia continues to monitor various global and domestic risks. Globally, the US policy directions and geopolitical conditions, specifically in the Korea Peninsula, are several risks that require vigilance. Domestically, however, the risks include the possible impact of adjustments to administered prices (AP) on inflation, coupled with ongoing consolidation in the banking and corporate sectors. Therefore, Bank Indonesia will continue to optimise its monetary, macroprudential and payment system policy mix in order to maintain macroeconomic and financial system stability. Furthermore, Bank Indonesia will continue to strengthen coordination with the Government to control inflation within the target corridor and accelerate structural reforms to support sustainable economic growth.
The global economy is expected to improve despite the broad range of risks that must be monitored. The global economic outlook are improving on the back of stronger growth in the US, China, Europe and Japan. Solid consumption is driving the US economy, supported by a bump in non-residential investment. In China, economic growth improved along with stronger private investment and export. In Europe, the manufacturing sector is leading economic growth in line with improvements in consumption and export, combined with milder geopolitical risks after the result of the French Presidential Election was announced. In Japan, increasing domestic demand and exports have supported its national growth. As global economic growth improved, world trade volume and non-oil commodity prices increases. Looking forward, Bank Indonesia shall continue to remain vigilant of the various global risks, including the proposed Fed Fund Rate (FFR) hike, US fiscal and trade policies, planned reduction to the Fed’s balance sheet as well as geopolitical condition in various regions, especially the Korea Peninsula.
Indonesia’s economic growth improved in the first quarter of 2017. Economic growth was recorded at 5.01% (yoy) in the reporting period, up from 4.94% (yoy) last period, and 4,92% (yoy) the same period last year. Export and government expenditure recorded ample growth. Stronger export are mainly caused by the improvement in global commodity prices such as coal and rubber, as well as global economic growth. Government capital dan goods expenditure may improve investment, specifically building investment, as government infrastructure projects continued. Regionally, national GDP growth was supported by economic momentum on the islands of Java on the back of investment, and Kalimantan on the back of export. On the other hand, slower growth was recorded in Sumatra due to lower investment and inter-region trade, whereas a decrease in mining export caused slower growth in Sulawesi, Maluku, Papua, Bali and Nusa Tenggara. Bank Indonesia predicts the domestic economy to grow in the range of 5.0-5.4% (yoy) in 2017, underpinned by stronger export and investment performance as well as tenacious consumption.
Indonesia’s balance of payments (BOP) recorded another surplus in the first quarter of 2017. The BOP surplus stood at Rp4.5 billion in the reporting period, relatively unchanged on the previous quarter but much improved on the Rp0.3 billion deficit posted one year ago. Foreign capital flow was large enough to elevate the capital and financial account surplus to USD7.9 billion. The improvement was in line with increased economic growth momentum and investors’ positive perception of the domestic economic outlook. Meanwhile, the current account deficit was recorded at USD2.4 billion on the back of deficits in the oil and gas trade balance and primary income account, which are larger than the increase of non-oil and gas trade. The oil and gas trade deficit expanded as the global oil price increased against a backdrop of less lifting, while the larger primary income account deficit stemmed from higher scheduled interest payments on government debt. Consequently, the position of reserve assets at the end of the first quarter of 2017 stood at USD121.8 billion, rising thereafter to USD123.2 billion in April 2017, equivalent to 8.9 months of imports or 8.6 months of imports and servicing government external debt, which is well above the international standard of three months.
The rupiah appreciated throughout the first quarter and remained relatively stable in April 2017. In the first quarter of 2017, the rupiah appreciated 1.1% (ptp) to a level of Rp13,326/USD. The Rupiah remained stable throughout April 2017, closing at Rp13,329/USD. Rupiah appreciation was driven by maintained non-resident capital inflows after the sovereign rating outlook was upgraded, solid macroeconomic data was released and positive sentiment regarding the domestic economic outlook prevailed. Bank Indonesia shall continue to stabilise rupiah exchange rates, however, in line with the currency’s fundamental value, while maintaining market mechanisms.
Headline inflation was controlled within the target corridor for 2017, namely 4±1%. The Consumer Price Index (CPI) recorded inflation of 0.09% (mtm) or 4.17% (yoy) in April 2017. Administered prices (AP) were cited as the main contributor to CPI inflation, as phase II of the adjustments to electricity rates for non-subsidised 900VA subscribers, higher airfares as well as rising petrol and cigarette prices drove AP inflation to 1.27% (mtm) or 8.68% (yoy). Low core inflation was recorded at 0.13% (mtm) or 3.28% (yoy), in line with limited domestic demand, anchored inflation expectations and rupiah appreciation. In contrast, volatile foods (VF) experienced deflation of 1.26% (mtm) or 2.66% (yoy) due to abundant supply in the wake of the harvesting season. Moving forward, Bank Indonesia shall continue to strengthen coordination with the Government to control inflation in the face of several risks, including adjustments to administered prices (AP) as part of the Government’s energy reforms, as well as the risk of rising volatile food prices during the approach to the holy fasting month of Ramadan.
Maintained banking industry resilience and stable financial markets continued to support solid financial system. In March 2017, the Capital Adequacy Ratio (CAR) of the banking industry was recorded at 22.7% and the liquidity ratio at 22.0%, while non-performing loans (NPL) stood at 3.0% (gross) or 1.3% (net). The transmission of easing monetary and macroprudential policy continued to improve, albeit restrained by the banks’ prudence in managing credit risks. Credit growth in March 2017 was recorded at 9.2% (yoy), up from 8.6% (yoy) the month earlier, boosted by the increase of forex and corporate loans. Furthermore, stronger credit growth is expected to persist as economic activities gain traction. Deposit growth in March 2017 stood at 10.0% (yoy), accelerating from 9.2% (yoy) one month earlier. Congruent with the expected economic gains and ongoing impact of monetary and macroprudential policy easing, credit and deposit growth are predicted to accelerate to 10-12% and 9-11% respectively in 2017."


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