<![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/11691521/south-africa-cuts-rate-25-bps-slashes-growth-forecast Thu, 20 Jul 2017 20:23:11 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11691521/south-africa-cuts-rate-25-bps-slashes-growth-forecast <![CDATA[South Africa cuts rate 25 bps, slashes growth forecast]]>      South Africa's central bank cut its benchmark repurchase rate by 25 basis points to 6.75 percent on an improved outlook for inflation but slashed its forecast for economic growth following a surprise decline in output in the first quarter.
     It is the first rate cut by the South African Reserve Bank (SARB) since July 2012 and the first change in rates since the last increase in March 2016.
    Between January 2014 and July last year SARB raised its rate by a total of 200 basis points as inflation at times topped the central bank's target of 3 - 6 percent.
     Despite the rate cut, SARB underscored it remains concerned over inflation expectations that remain sticky at the upper end of its target range and it's monetary policy committee said it "would prefer expectations to be anchored closer to the mid-point of the target range."
     "In this highly uncertain environment, future policy decisions will be dependent on data outcomes and our assessment of the balance of risks," SARB said, adding it remains "vigilant and would not hesitate to reverse this decision should the inflation outlook and risks deteriorate."
     Four members of the policy committee voted to cut the rate while two members wanted to maintain the rate.
      South Africa's headline inflation rate eased to 5.1 percent in June from 5.4 percent in May and SARB revised downward its 2017 and 2018 inflation forecast by 0.4 percentage points to 5.3 percent and 5.2 percent, respectively.
     For 2019 SARB lowered its inflation forecast by 0.3 percentage points to 5.2 percent with an average inflation of 5.2 percent in the final quarter of 2019.
     The main reason for the improved outlook for inflation stems from changed assumptions regarding oil, electricity tariffs, the exchange rate of the rand and a wider output gap. Food price inflation is also expected to be more subdued, partly on more favorable crop estimates.
      South Africa's economy remains "extremely weak," SARB said, adding it was concerned about the deterioration in the outlook, which is broad-based.
     "It is unclear where the drivers of accelerated growth will come from in the absence of credible structural policy initiatives that will reduce uncertainty and increase business and consumer confidence," SARB said.
      SARB halved its forecast for 2017 growth to 0.5 percent from a previous forecast of 1.0 percent and the 2018 forecast to 1.2 percent from 1.5 percent. In 2019 growth is seen at 1.5 percent, down from 1.7 percent.
      South Africa's Gross Domestic Product shrank by 0.7 percent in the first quarter following a quarterly contraction of 0.3 percent in the final quarter of last year. On an annual basis, GDP rose by 1.0 percent in the first quarter, up from 0.7 percent in the previous two quarters.

    The South African Reserve Bank issued the following statement by its governor, Lesetja Kganyago.

"Since the previous meeting of the Monetary Policy Committee the inflation outlook has improved. Food price inflation has moderated faster than expected, domestic demand pressures remain subdued and international oil prices have declined. Despite a degree of volatility, the rand exchange rate has been relatively resilient in the face of expected monetary policy tightening in some advanced economies, as well as domestic political risks and uncertainties. Risks to the inflation outlook still remain.

At the same time, domestic growth prospects have deteriorated further following the surprise GDP contraction in the first quarter of 2017. The economy has now recorded two successive quarters of negative growth, and although a near-term improvement is expected, the outlook remains challenging. A number of sentiment indicators and data points have reached levels last seen during the 2009 recession, at the height of the global financial crisis.

The year-on-year inflation rate as measured by the consumer price index (CPI) for all urban areas measured 5.4% and 5.1% in May and June, in line with the Bank’s short- term forecast. Food and non-alcoholic beverage inflation measured 6.9% in both months, with the contribution to the overall inflation outcome unchanged at 1.2 percentage points. Meat prices continued to accelerate, and at 13.0%, contributed to the downside stickiness of food price inflation. The Bank’s measure of core inflation, which excludes food, fuel and electricity, measured 4.8% in both months.

Producer price inflation for final manufactured goods measured 4.6% in April and 4.8% in May. The further moderation in food prices was reflected in the PPI with the category of food products, beverages and tobacco products decelerating for the seventh consecutive month to 5.8%. The divergent trends between the subcategories of “products of crops and horticulture” and “live animals” persisted, with year-on-year changes of -24.4% and 21.4% respectively.

The Bank’s forecast for headline CPI inflation has shown a marked improvement since the previous meeting. The annual average forecast has been revised down by 0.4 percentage points in 2017 and 2018, and by 0.3 percentage points in 2019, to 5.3%, 4.9% and 5.2%. A lower turning point of 4.6% is expected in the first quarter of 2018 (previously 5.1%), and an average of 5.2% is forecast for the final quarter of 2019.

The main drivers of the improved forecast were the lower starting point; revised assumptions regarding international oil prices, domestic electricity tariffs and the real effective exchange rate; and a wider output gap. These assumptions are set out in the annexure to this statement. Food price inflation is also expected to be more subdued, due to a lower starting point and more favourable domestic crop estimates. Despite a persistent upward trend in meat price inflation, the forecast for food price inflation has been revised down from 7.7% to 7.3% for this year; and from 5.4% to 5.1% in 2018. The forecast for 2019 is unchanged at 5.5%.

The improvement is also evident in the core inflation outlook, with average forecasts of 4.8% for 2017 and 2018, and 4.9% for 2019. This compares with previous forecasts of 5.0%, 5.1% and 5.3% for these years. This improvement is driven in part by lower unit labour costs, in addition to the exchange rate and output gap developments.

Inflation expectations as reflected in the survey conducted by the Bureau for Economic Research show a marginal improvement, with average expectations slightly below 6% in all three years. The decline was most marked among analysts, particularly over the first two survey years, and to a lesser extent among labour unionists. Both these categories of respondents expect inflation to be within the target range over the forecast period. The expectations of business respondents are largely unchanged and remain above 6% for all three years. By contrast, average 5-year expectations of all groups edged up from 5.7% to 5.9%, and ranged between 5.5% for analysts and 6.3% for business respondents.

Median inflation expectations of market analysts improved over the near term. According to the Reuters Econometer survey conducted in July, expected inflation declined by 0.2 percentage points to 5.5% in 2017 and to 5.3% in 2018, compared with the May survey. However, the longer term trend is reversed with an expectation of 5.5% in 2019. Expectations implicit in the difference between nominal bonds and inflation-linked bonds have also declined slightly since the previous meeting, with the 5-year break-even rate at 5.3%.

The global growth backdrop remains positive, with sustained upswings evident in most
regions. This is despite continued uncertainty regarding economic policy reforms in the US. Nevertheless, growth rates and potential output estimates are still generally lower than those in the pre-crisis period. While there are lingering concerns about financial stability risks from the shadow banking sector in China, the recent strong performance of the economy has contributed to the favourable environment for emerging markets.

Underlying global inflation trends remain benign, with inflation below target in most of the advanced economies, notwithstanding the positive growth prognosis and tightening labour markets. An exception is the UK where inflation has accelerated in the wake of the Brexit-induced depreciation of sterling. The subdued global inflation outlook is reinforced by generally slow wage and productivity growth in developed economies.

Despite the absence of inflationary pressures, central banks in a number of advanced economies have signalled intentions to move from highly accommodative monetary policy stances. These countries include the US, the UK, the euro area and Canada. This process is unlikely to be smooth or perfectly synchronised and could generate bouts of uncertainty. In the US, expectations of further near-term rate increases by the Fed have been scaled down following a succession of downside inflation surprises. The gradual nature of the planned balance sheet contraction by the Fed has also been well communicated and appears to be largely priced in by the markets.

While changing expectations regarding ECB and US monetary policy in particular have impacted on a number of emerging market currencies and bond yields, the reaction has been relatively muted, and a repeat of the 2013 so-called taper tantrum episode is not expected. Those economies that were most sensitive to that episode have much improved macroeconomic balances, and their currencies are less vulnerable to possible spill-over effects from gradual monetary tightening in the advanced economies.

The rand has also been affected by these changing expectations, as well as by domestic political developments, including concerns about a proposal to change the SARB’s monetary policy mandate. While the rand is more or less unchanged since the previous meeting of the MPC, it has been relatively volatile, having fluctuated in a range between R12.60 and R13.60 against the US dollar.

The rand’s relative resilience had been underpinned by the generally positive sentiment towards emerging markets, as well as by sustained trade surpluses. The current account deficit is still expected to widen over the forecast period, but the degree of widening has been revised down. The rand remains vulnerable to increased global risk aversion, domestic political shocks, and to the possibility of further ratings downgrades.

The domestic growth outlook remains a concern, following the surprise broad-based GDP growth contraction during the first quarter of this year. With the exception of the primary sector, all sectors recorded negative growth. While positive growth is expected in the second quarter, the Bank’s annual growth forecasts have been revised down further. The forecast for 2017 has been adjusted down from 1.0% to 0.5%, and the forecast for 2018 is down from 1.5% to 1.2%. Growth of 1.5% is expected in 2019, compared with 1.7% previously.

As a result of these trends, the output gap has widened somewhat despite a further downward revision to potential output growth by 0.3 percentage points for each year, to 1.1% in 2017 and rising to 1.3% in 2019. The weak outlook is consistent with the
decline in the RMB/BER Business Confidence Index to levels last seen during the recession following the global financial crisis. The SARB’s composite leading business cycle indicator has also moderated somewhat since January.

Monthly data for both the mining and manufacturing sectors in April and May suggest that, in the absence of a sharp contraction in June, these sectors are likely to contribute positively to growth in the second quarter, along with the continued rebound in the agricultural sector. The recovery is nevertheless expected to be modest, particularly in the light of a sharp fall in the ABSA Purchasing Mangers’ Index in June, which returned to below the neutral level of 50 index points. The construction sector also remains under pressure following the marked fall in building plans passed in the first quarter of this year, with the negative trend continuing into April.

The continued poor performance of gross fixed capital formation contributes to the weak state of the economy. Although private sector investment recorded positive growth after five consecutive quarters of contraction, at a growth rate of 1.2% it remains very subdued. Given the extremely low level of business confidence, a near- term improvement is unlikely. Policy uncertainty, a recent example being in the mining sector, is likely to constrain investment.

As a consequence, employment growth has been minimal, and the prospects are unfavourable. Given the need for fiscal consolidation, a continued decline in government’s contribution to employment creation is expected. The official unemployment rate increased to 27.7% in the first quarter of this year.

Consumption expenditure by households contracted in the first quarter of this year, amid a further deterioration in consumer confidence. Although the monthly retail sales data suggest a more positive outcome for the second quarter, this improvement is likely to be offset in part by a decrease in new vehicle sales in the quarter. The outlook for consumption expenditure is expected to remain weak, amid employment uncertainty and higher tax burdens.

These consumption trends are mirrored in the continued moderation in credit extension to households. Growth in mortgage advances and instalment sales credit finance remained subdued, reflective of the difficult conditions in the housing and vehicle markets. General loans to households increased moderately in May, but off a low base. Credit extension to the corporate sector, by contrast, remains relatively buoyant, but on a downward trend.

Wage trends have been an important contributor to the persistence of inflation at higher levels. There are, however, indications of some moderation in average salaries, and related unit labour costs, which are expected to remain below the 6% level over the forecast period. The outcome of a number of multi-year wage agreements that are due for renewal in 2017 will be closely watched as they could pose a risk to the inflation trajectory.

The persistent global oil supply glut, along with increased shale gas production in the US, have undermined efforts by OPEC and other producers to support prices through output restrictions. Since the beginning of June, Brent crude oil prices have traded at levels below US$50 per barrel, and the Bank’s oil price assumptions have been revised down over the forecast period. These recent oil price trends, along with the stronger exchange rate, contributed to a 69 cent per litre reduction in the petrol price in July. Following a weakening of the rand and a partial recovery in crude oil prices, a moderate petrol price increase is expected in August.

The inflation outlook has improved significantly since the previous meeting of the MPC and has been fairly broad-based. The lower core inflation outlook is indicative of weaker underlying inflation pressures, at a time when the impact of exogenous shocks on headline inflation has been dissipating. These shocks include drought-induced food price inflation and to a lesser extent international oil price increases earlier this year that have since been reversed.

A number of risks to the inflation outlook persist and the MPC assesses the risks to the inflation outlook to be broadly balanced. Although the rand has been relatively resilient, it remains vulnerable to heightened political uncertainty, global monetary policy developments and possible further credit ratings downgrades. On the positive side, it is supported by a sustained narrowing of the current account deficit and positive investor sentiment towards emerging markets.

A further upside risk relates to the possible supply side shock of a large electricity tariff increase from July next year. Eskom has approached Nersa for an increase of around 20%, but the current forecast assumes an increase of 8%. This assumption will be adjusted in line with any new determinations made by Nersa.

The MPC also remains concerned that inflation expectations remain sticky at the upper end of the target range. To the extent that these expectations are formed adaptively, they should adjust downwards if the lower inflation trajectory is sustained. The MPC would prefer expectations to be anchored closer to the mid-point of the target range.

Underlying demand in the economy is extremely weak and the MPC is concerned about the deterioration in the growth outlook over the forecast period. This decline is broad-based. It is unclear where the drivers of accelerated growth will come from in the absence of credible structural policy initiatives that will reduce uncertainty and increase business and consumer confidence. The MPC assesses the risks to the revised growth forecast to be slightly on the downside.

Given the improved inflation outlook and the deteriorated growth outlook, the MPC has decided to reduce the repurchase rate by 25 basis points with effect from 21 July 2017, to 6.75% per annum. Four members preferred a reduction, while two members preferred an unchanged stance.

As we have emphasised on numerous occasions, the MPC does not view monetary policy as the solution to the structural growth constraints in the economy. Nor does it believe that a reduction in interest rates will provide a significant stimulus to growth in the current environment of low confidence and political uncertainty. It will however provide some relief at the margin.

In this highly uncertain environment, future policy decisions will be dependent on data outcomes and our assessment of the balance of risks. We remain vigilant and would not hesitate to reverse this decision should the inflation outlook and risks deteriorate."


http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11691516/ecb-maintains-rates-asset-purchases-and-guidance Thu, 20 Jul 2017 14:08:29 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11691516/ecb-maintains-rates-asset-purchases-and-guidance <![CDATA[ECB maintains rates, asset purchases and guidance]]>     The European Central Bank (ECB) left its key interest rates steady along with its asset purchase program unchanged  and reiterated that if the outlook were to worsen it "stands ready to increase the program in terms of size and/or duration."
     The ECB, whose president last month said the threat of deflation was gone and reflationary forces were now at play, also confirmed that it expects key "interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases."
     The statements by ECB President Mario Draghi in Portugal signaled the ECB was starting to consider winding down its quantitative easing program and follows the governing council statement in early June that ruled out further rate cuts as the risks to its outlook were now broadly balanced instead of tilted to the downside.
     But in today's statement, the ECB confirmed that asset purchases would continue at the current monthly pace of 60 billion euros until the end of December or beyond, if necessary, to ensure that  inflation is on a sustained path toward 2 percent.
     In June inflation in the euro area declined to 1.3 percent, down from 1.4 percent, but many economists still expect the ECB in September to signal that its asset purchase program will be wound down in light of improving growth.
      Last month the ECB raised its 2017 growth forecast to 1.9 percent from its previous forecast of 1.8 percent, the 2018 forecast to 1.8 percent from 1.7 percent and the 2019 forecast to 1.7 percent from 1.6 percent.
     But at the same time, the ECB lowered its forecast for inflation this year to average 1.5 percent from March's forecast of 1.7 percent and the 2018 forecast to an even-lower 1.3 percent from 1.6 percent before inflation is seen rising to 1.6 percent, down from its previous forecast of 1.7 percent.

     The European Central Bank issued the following statement:


"At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.
Regarding non-standard monetary policy measures, the Governing Council confirms that the net asset purchases, at the current monthly pace of €60 billion, are intended to run until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. The net purchases are made alongside reinvestments of the principal payments from maturing securities purchased under the asset purchase programme. If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the programme in terms of size and/or duration."

http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11691506/boj-holds-stance-watching-inflation-expectations Thu, 20 Jul 2017 05:19:17 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11691506/boj-holds-stance-watching-inflation-expectations <![CDATA[BOJ holds stance, watching inflation expectations]]>      The Bank of Japan (BOJ) left its monetary policy stance unchanged and while it raised its growth forecasts and lowered its inflation forecast it added that risks to both economic activity and prices were skewed to the downside.
     Japan's central bank, which in September 2016 shifted the focus of its policy of quantitative easing toward "yield curve control," said the upward momentum in inflation inflation expectations was not sufficiently firm and "thus developments in prices continue to warrant careful attention."
     The BOJ underscored that it would continue with its policy of quantitative and qualitative easing to reach its price stability target of 2.0 percent and will continue to expand the monetary base until inflation exceeds the 2 percent target "and stays above the target in a stable manner."
      The BOJ again used the adjective of "moderately" to describe Japan's economic expansion, adding that overseas economies were continuing to grow at a moderate pace while business investment was improving across a wide range of industries.
     In an update to its forecast, the BOJ raised its growth forecast for fiscal 2017, which began April 1, to an average of 1.8 percent from 1.6 percent forecast in April while inflation was now seen averaging 1.1 percent, down from 1.4 percent.
     For fiscal 2018, growth was seen averaging 1.4 percent, higher than 1.3 percent previously forecast, while inflation was seen at 1.5 percent, lower than 1.7 percent forecast in April.
    For fiscal 2019, growth is forecast and an unchanged 0.7 percent and inflation at 2.3 percent, down from 2.4 percent for headline CPI. Excluding the impact of the expected increase in consumption taxes, inflation is seen at 1.8 percent, down from 1.9 percent.



http://www.hedgehogs.net/pg/blog/asiablues/read/11691500/eia-oil-report-analysis-7192017-video Thu, 20 Jul 2017 03:03:43 +0100 http://www.hedgehogs.net/pg/blog/asiablues/read/11691500/eia-oil-report-analysis-7192017-video <![CDATA[EIA Oil Report Analysis 7-19-2017 (Video)]]> By EconMatters

We discuss the EIA Oil and Petroleum Products report in this video, focusing on what story the fundamentals are telling us about the oil market, and then check out the Price Action from a technicals standpoint. The Gasoline Market Backwardation clue really nailed this oil trade the last couple of weeks!

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http://www.hedgehogs.net/pg/blog/asiablues/read/11691488/edge-sorting-and-advantage-play-in-trading-theory-video Tue, 18 Jul 2017 22:33:42 +0100 http://www.hedgehogs.net/pg/blog/asiablues/read/11691488/edge-sorting-and-advantage-play-in-trading-theory-video <![CDATA[Edge Sorting and Advantage Play in Trading Theory (Video)]]> By EconMatters

We discuss the concepts of Edge Sorting and Advantage Play in regards to improving or creating an edge as a Trader in this video. There are a lot of ideas in Game Theory that can be applied to Trading Concepts to make you a better trader.

Here's a link: The new ESPN 30 for 30 podcast has just been released, focusing on Phil Ivey who employs some considerable Game Theory to create a statistical edge against the Casino who routinely has the house advantage over the player.


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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11691478/kenya-maintains-rate-to-anchor-inflation-expectations Mon, 17 Jul 2017 22:04:12 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11691478/kenya-maintains-rate-to-anchor-inflation-expectations <![CDATA[Kenya maintains rate to anchor inflation expectations]]>      Kenya's central bank left its Central Bank Rate (CBR) at 10.0 percent to help anchor inflation expectations while overall inflation is expected to continue to decline over the next few months, supported by lower food and fuel prices.
     The Central Bank of Kenya (CBK), which has maintained its rate since cutting it to the current level in September last year, added the economy "remained resilient" in the first quarter of this year despite a slowdown in private sector credit growth.
     "The Committee continues to monitor the implications of the capping of interest rates on lending and the transmission of monetary policy," the CBK said, adding annual growth in credit to the private sector fell further to 2.1 percent in May, partly due to significant repayments in manufacturing, transport and communications, and developments in the trade sector.
    In September last year Kenya's government imposed a cap on banks' interest rates despite concern by the International Monetary Fund, which said experience from other countries shows such rate controls are ineffective, impede the effectiveness of monetary policy, can give rise to unintended consequences, lead to lower economic growth and undermine efforts to reduce poverty.
     Kenya's inflation rate declined to 9.21 percent in June from 11.7 percent in May due to lower prices of food, including potatoes, cabbages, sugar and milk, reflecting the impact of recent rains and government measures.
    Non-food, non-fuel inflation has remained below 5 percent over the last seven months, the CBK added, saying this suggests that demand pressures remain subdued.
     The foreign exchange market remains relatively stable, the central bank said, noting it was reflecting seasonal trends.
     Kenya's shilling has been depreciating steadily since early March this year and was trading at 103.9 to the U.S. dollar today, down 1.6 percent this year.
     Kenya's Gross Domestic Product grew by an annual 4.7 percent in the first quarter of this year, down from 6.1 percent in the previous quarter, supported by stable macroeconomic conditions despite a poor performance by the agricultural sector due to adverse weather and the impact of a slowdown in private sector credit growth.

     The Central Bank of Kenya issued the following statement:

"The Monetary Policy Committee (MPC) met on July 17, 2017, to review the outcome of its policy decisions and recent economic developments. The meeting was held against a backdrop of declining food prices, sustained macroeconomic stability, and continued resilience of the economy.
Month-on-month overall inflation fell to 9.2 percent in June from 11.7 percent in May 2017, largely due to decreases in food prices, particularly Irish potatoes, kales (sukuma wiki), tomatoes, cabbages, sifted maize flour, sugar, and milk. The fall in prices of these key food items reflected the impact of the recent rains, and Government measures. Non-food-non-fuel (NFNF) inflation has remained below 5 percent over the last seven months, suggesting that demand pressures remain subdued. Overall inflation is expected to continue to decline over the next few months, supported by lower food and fuel prices.
The foreign exchange market continues to reflect seasonal trends and remains relatively stable. The 12-month current account deficit widened to 6.2 percent of GDP in May 2017 from 6 percent in March, due to short-term imports of cereals, sugar, and SGR-related transport equipment. The current account deficit is expected to narrow in the second half of 2017 in part due to resilient tea and horticulture exports, stronger diaspora remittances, and continued recovery in tourism.
The CBK’s foreign exchange reserves currently stand at USD7,802.7 million (5.2 months of import cover), falling from recent record levels of USD8,276.5 million at end-May 2017, almost entirely as a result of anticipated payments for Government obligations of USD560.7 million. These reserves continue to provide a buffer against short-term shocks, together with the Precautionary Arrangements with the International Monetary Fund (IMF), equivalent to USD1.5 billion.
The banking sector remains resilient with improved performance indicators. Average commercial banks’ liquidity and capital adequacy ratios stood at 44.7 percent and 19.6 percent, respectively, in June 2017. The distribution of liquidity in the sector has also improved, although credit risk remains elevated as large corporates restructure their borrowings. The ratio of gross non-performing loans to gross loans rose to 9.9 percent in June from 9.6 percent in April, partly reflecting a decline in gross loans. However, the ratio of net non-performing loans to gross loans has remained below 5 percent since December 2016.
Growth of credit to the private sector fell further to 2.1 percent over the 12 months to May 2017, partly due to significant repayments in manufacturing, transport and communication, and developments in the trade sector. The Committee continues to monitor the implications of the capping of interest rates on lending and the transmission of monetary policy.
The economy remained resilient in the first quarter of 2017, recording a growth rate of 4.7 percent relative to the first quarter of 2016. This performance was supported by stable macroeconomic conditions, despite poor performance of the agriculture sector due to adverse weather conditions. Strong performance was recorded in the transport, real estate, construction, mining and quarrying, tourism, and information and communication sectors. This is despite the impact of the slowdown in private sector credit growth.
The MPC Private Sector Market Perception Survey conducted in July 2017 showed that inflation was expected to decline due to lower food prices and Government interventions already in place. However, there were mixed views with regard to growth in 2017. Non-bank private sector firms expect a stronger growth relative to the May survey, largely due to macroeconomic stability and ongoing public infrastructure investments. On the other hand, banks’ expectations remain unchanged on account of weaker private sector credit growth and concerns over the forthcoming elections.
  The outlook for the global economy remains uncertain, particularly with regard to the direction of U.S. economic and trade policies, normalization of monetary policies in the advanced economies and the Brexit outcome.
The Committee concluded that the current policy stance remains appropriate. The MPC therefore decided to retain the Central Bank Rate (CBR) at 10.0 percent in order to continue to anchor inflation expectations. The CBK will continue to closely monitor developments in the global and domestic economy, and stands ready to take additional measures as necessary."


http://www.hedgehogs.net/pg/blog/asiablues/read/11691475/the-economics-profession-is-bankrupt-from-a-values-standpoint-video Mon, 17 Jul 2017 15:53:42 +0100 http://www.hedgehogs.net/pg/blog/asiablues/read/11691475/the-economics-profession-is-bankrupt-from-a-values-standpoint-video <![CDATA[The Economics Profession Is Bankrupt from a Values Standpoint (Video)]]> By EconMatters

We discuss why Macroprudential Regulation after such distorted Central Bank Policy Measures is a complete absurdity, why the Economics profession is corrupt to the core from a value and ideas standpoint, and why artificial markets always lead to disastrous results in the end. If you want wages to rise just have the central banks buy up workers, and put them on their books like bonds! The Monetization of the Debt model relies on Money Printing and Needs High Inflation to sustain the current Ponzi Scheme Loop for as long as possible. The Debt Model fails at the Household level, Business Level, and Government level; until economists get this notion inculcated in their little brains, there is no hope for the profession as a rational coherent enterprise for study and practice, let alone deciding monetary policies for the entire global financial and economic system!

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http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11691446/kazakhstan-holds-rate-but-chance-of-further-cuts-rising Mon, 17 Jul 2017 14:42:59 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11691446/kazakhstan-holds-rate-but-chance-of-further-cuts-rising <![CDATA[Kazakhstan holds rate but chance of further cuts rising]]>     Kazakhstan's central bank left its base rate steady at 10.50 percent on stable inflation and said an expected deceleration of inflation "increases the possibility of lowering the base rate both in the short-run and in the horizon of the upcoming 12-18 months."
     The National Bank of Kazakstan (NBK) has cut its rate by 150 basis points this year, most recently in June, and by 650 points since embarking on an easing cycle in May 2016 as inflation has eased and the exchange rate of the tenge has gradually risen.
     The NBK's guidance of further likely rate cuts follows its statement last month when it said further rate cuts were not ruled out if inflation develops as expected and there are no economic shocks.
     Kazakhstan's inflation was steady at 7.50 percent in June, the same as in April and May and within the central bank's target range of 6-8 percent.
     In its quarterly inflation forecast from June 7, the NBK projected inflation would remain within its target corridor this year and then smoothly enter its 2018 target corridor of 5-7 percent in 2018.
     A slight rise in inflation by the end of this year may ensue due to the base effect, but this will be short-lived and inflation will continue to decline next year, the bank said, confirming its view from last month that it didn't plan to respond with higher rates to any brief uptick in inflation.
     Any inflationary risk seen in recent months from supply issues of vegetables and meat has now largely been resolved and inflationary expectations have been largely stable since the start of the year, with expectations for inflation one year ahead slightly down to 6.4 percent, the NBK said.
     Risks to inflation stem from oil below $50 a barrel - the central bank's baseline scenario - along with higher global prices of dairy and crops, the NBK added.
      Depositors in Kazakhstan are still favoring putting their money into the domestic tenge, with preliminary June data showing that the excess of tenge deposits over foreign currency deposits keeps rising, with the share of loans in tenge also on the rise.
      The tenge fell sharply in August 2015 after the central bank moved to a floating exchange rate in response to capital outflows and the conversion of many tenge bank deposits to foreign currency.
      Since January 2016 the tenge has been trending upward though it has eased since late May appreciating and was trading around 326 to the U.S. dollar today, up 2.3 percent this year.
      Kazakhstan's economy is continuing to recover and domestic programs to increase the sustainability of the banking sector in the third quarter should help improve credit activity.
      Last month the NBK raised its forecast for 2017 growth to 2.8 percent from 2.2 percent and experts 3.6 percent growth next year, higher than the country's potential and thus leading to inflationary pressures.
      In May the International Monetary Fund said Kazakhstan's economy is expected to grow by 2.5 percent this year as oil production rises and fiscal spending stimulates activity with the medium-term outlook improved and growth in the non-oil sector slowly picking up to 4 percent as bank lending resumes and structural reforms take hold.
     Kazakhstan's Gross Domestic Product grew by an annual rate of 3.4 percent in the first quarter of this year, up from 1.0 percent in the fourth quarter of last year and contraction of 0.1 percent in the first quarter of 2016.

     The National Bank of Kazakhstan issued the following statement:

"The National Bank of Kazakhstan has decided to keep the base rate at the level of 10.5% with a corridor of +/-1%. The annual inflation rate matches the forecasted estimates of the National Bank and remains within the target range, the inflationary expectations gets formed on the stable level. The inflationary risks are possible on the account of the supply factors, appearing in some specific goods markets, and external parameters deviations from the base scenario of the economic development. However, the deceleration trajectory of forecasted inflation in the medium term increases the possibility of lowering the base rate both in the short-run and in the horizon of the upcoming 12-18 months in order to provide the correspondence of the real interest base rate with the long-run potential economic growth rate.
The annual inflation in June 2017 amounted to 7.5% and it keeps remaining within the target range of the National Bank (6-8%). The important signs of the descending inflation trend are the lower rate of inflation in the first half of the current year (3.7%) in comparison to that of the first half of 2016 (4.6%), and also the indicators of the base inflation, which do not take into the account the price shocks and volatility components, that are significantly decelerating since the beginning of the year and gets formed on the lower than the general inflation level. In June the base inflation rate amounted to 6.8% (in December 2016 – 8.9%).
The short-term inflationary risk of the past months comes from the situation in the specific segments of the food market; however the beginning of the new harvest period has smoothed the negative tendencies of the general food price dynamics.
The inflationary expectation of the population remains stable since the beginning of 2017. In June the quantitative assessment of the inflation for a year ahead amounted to 6.4% and remains below the actual inflation rate, and also within the target range for 2018. The results of the June survey show that the perceivable annual inflation rate and expectations for a year ahead have slightly decreased.
The situation in the external commodity market can be characterized as volatile. The observed formation of the oil prices below the level of 50 dollars per barrel and the price index acceleration in the world food markets in May-June, mostly as a result of the price rise of diary and crops products, might lead to the increased inflationary pressure.
The currency preferences of the depositors remain in favor of the assets in tenge. According to the preliminary data of June the excess of the tenge deposits share over those of foreign currency keeps extending. The share of the loans in tenge is also on the rise. Along with that, the demand for the crediting recourses remains stable and is accompanied with the gradual decrease of the rates. The short-term crediting dynamics is restricted by the consolidation processes in the banking sector.
The economic activity continues demonstrating the recovery; the dynamics of the internal economic indicators affirm maintaining the recovery tendency. This way, in June the growth of the short-run economic indicator that characterizes the aggregate supply in the country amounted to 107.4% in the annual terms. However reconsideration of the estimates of the real income of the population by the statistical agency toward the significant decrease causes the uncertainty of the further dynamics of consumer demand.
The monetary conditions remain neutral. In the condition of the excess liquidity the money market rates remain next to the lowest limit of the interest rate corridor. Due to the implementing the program aimed to increase the financial sustainability of the banking sector in the third quarter of the current year the further recovery of its crediting activity is being expected.
The next decision on the base rate will be announced on August 21, 2017 at 17:00 Astana time. "


http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11690672/this-week-in-monetary-policy-kazakhstan-kenya-hungary-japan-indonesia-euro-area-south-africa-and-paraguay Sun, 16 Jul 2017 22:41:49 +0100 http://www.hedgehogs.net/pg/blog/CentralBankNews/read/11690672/this-week-in-monetary-policy-kazakhstan-kenya-hungary-japan-indonesia-euro-area-south-africa-and-paraguay <![CDATA[This week in monetary policy: Kazakhstan, Kenya, Hungary, Japan, Indonesia, euro area, South Africa and Paraguay]]>
    This week (July 16 through July 22) central banks from 8 countries or jurisdictions are scheduled to decide on monetary policy: Kazakhstan, Kenya, Hungary, Japan, Indonesia, the euro area, South Africa and Paraguay.
    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.

JUL 16 - JUL 22, 2017:
COUNTRY                 DATE                RATE           LATEST                 YTD               1 YR AGO       MSCI
KAZAKHSTAN 17-Jul 10.50% -50 -150 13.00%          FM
KENYA 17-Jul 10.00% 0 0 10.50%          FM
HUNGARY 18-Jul 0.90% 0 0 0.90%          EM
JAPAN 20-Jul -0.10% 0 0 -0.10%          DM
INDONESIA 20-Jul       4.75% 1) 0 0        6.50% 2)          EM
EURO AREA 20-Jul 0.00% 0 0 0.00%          DM
SOUTH AFRICA 20-Jul 7.00% 0 0 7.00%          EM
PARAGUAY 20-Jul 5.50% 0 0 5.50%
1): RRR
2): BI

http://www.hedgehogs.net/pg/blog/asiablues/read/11690669/comprehensive-financial-market-analysis-7162017-video Sun, 16 Jul 2017 22:23:46 +0100 http://www.hedgehogs.net/pg/blog/asiablues/read/11690669/comprehensive-financial-market-analysis-7162017-video <![CDATA[Comprehensive Financial Market Analysis 7-16-2017 (Video)]]> By EconMatters

We discuss most of the financial markets from equities and the VIX, to Gold, Silver, Copper and Bonds all the way to the Energy Complex in this market video. Was Friday the day to buy Protection Puts for the Stock Market Bulls? The Fed may hike rates because of the asset price bubbles in financial markets and not the inflation readings which are on the decline. However, some of these lower inflation readings (at least in the Headline Inflation Reading) may be the poor comps year over year, especially in items like oil and petroleum products which may reverse rather quickly if the Oil Market actually does start to rebalance year over year the rest of the third quarter of 2017.

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