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The Finanser's Week: 16th January - 22nd January 2012

January 22, 2012 by skinnercm   Comments (0)

Our biggest stories of the week are ...

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WorkMob.com helps employees, customers and fans share and discuss companies they love

January 21, 2012 by Vivek Singh   Comments (0)

WorkMob helps employees, customers and fans share and discuss companies they love. Create a free company profile and start sharing updates with other fans. Everyone can edit and organize information on the site. http://www.workmob.com/

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Monetary Policy Week in Review - 21 Jan 2012

January 20, 2012 by CentralBankNews   Comments (0)

The past week in monetary policy saw interest rate decisions announced by 8 central banks, with 4 of those announcing interest rate cuts, reflecting the ongoing European sovereign debt crisis and slowing global growth.  Those announcing interest rate cuts were Brazil -50bps to 10.50%, Georgia -25bps to 6.50%, Philippines -25bps to 4.25%, and Serbia -25bps to 9.50%.  Meanwhile those that held rates unchanged were Canada 1.00%, South Africa 5.50%, Mexico 4.50%, and Latvia 3.50% (Latvia did however reduce its required reserve ratios 100bps).  Also making headlines was a widening of the interest rate corridor, an effective easing, in Indonesia.


Following are some of the key quotes and comments from the monetary policy statements and media releases issued by the central banks announcing rate decisions:

  • Brazil (cut rate 50bps to 10.50%): "The Monetary Policy Committee believes that the timely mitigate the effects coming from a more restrictive global environment, a moderate adjustment in the level of the base rate is consistent with the scenario of convergence of inflation to the target in 2012."
  • Philippines (cut rate 25bps to 4.25%): "the inflation outlook remains comfortably within the target range, with expectations well-anchored. Latest baseline forecasts indicate that average annual inflation rates are likely to fall within the lower half of the 3-5 percent target range up to 2013. Pressures on global commodity prices are seen to continue to abate amid weaker global growth prospects. However, the impact of strong capital inflows on domestic liquidity and the effect of geopolitical tensions in the MENA region on global oil supplies will continue to pose upside risks to inflation.
  • Bank of Canada (held rate at 1.00%):"While the economy had more momentum than anticipated in the second half of 2011, the pace of growth going forward is expected to be more modest than previously envisaged, largely due to the external environment. Prolonged uncertainty about the global economic and financial environment is likely to dampen the rate of growth of business investment, albeit to a still-solid pace.  Net exports are expected to contribute little to growth, reflecting moderate foreign demand and ongoing competitiveness challenges, including the persistent strength of the Canadian dollar.  In contrast, very favourable financing conditions are expected to buttress consumer spending and housing activity. Household expenditures are expected to remain high relative to GDP and the ratio of household debt to income is projected to rise further."
  • South African Reserve Bank (held rate at 5.50%): "The MPC remains of the view that inflation pressures are primarily of a cost-push nature, but is concerned that a persistent upward trend in inflation and prolonged breach of the inflation target could have an adverse effect on inflation expectations which could reinforce the upward inflation dynamics. However, the MPC is also cognisant of the slowing domestic economy and feels that given the lack of demand pressures, monetary tightening at this stage would not be appropriate. At the same time, the nominal policy rate is at a long term low and the real policy rate is slightly negative, indicating a monetary policy stance that is accommodative and supportive of the real economy."

Looking at the central bank calendar, the week ahead has 8 central banks scheduled to review monetary policy settings.  The one on many people's minds will be the US FOMC, which is unlikely to announce anything but people will be watching for clues of any further quantitative easing measures.  The key emerging market economy, India, will also be closely watched, but with inflation still high is unlikely to move just yet.  Other than that, the broad geography of banks on the calendar next week will provide a timely insight into the status of the global economy.

  • ILS - Israel (Bank of Israel) expected to hold at 2.75% on the 23rd of Jan
  • JPY - Japan (Bank of Japan) expected to hold at 0.10% on the 24th of Jan
  • INR - India (Reserve Bank of India) expected to hold at 8.50% on the 24th of Jan
  • HUF - Hungary (Magyar Nemzeti Bank) expected to hold at 7.00% on the 24th of Jan
  • TRY - Turkey (Central Bank of Turkey) expected to hold at 5.75% on the 24th of Jan
  • USD - USA (Federal Reserve) expected to hold at 0.25% on the 25th of Jan
  • THB - Thailand (Bank of Thailand) expected to hold at 3.25% on the 25th of Jan
  • NZD - New Zealand (Reserve Bank of New Zealand) expected to hold at 2.50% on the 26th of Jan

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Central Bank of Mexico Holds Interest Rate at 4.50%

January 20, 2012 by CentralBankNews   Comments (0)

The Banco de Mexico held its overnight interest rate target steady at 4.50%.  The Bank said [Google Translated]: "the Governing Board believes that the current stance of monetary policy is conducive to achieving the goal of permanent 3% inflation, so has decided to maintain unchanged the target for the interbank interest rate. However, they remain attentive to the outlook for global economic growth and its possible implications for the Mexican economy, which in a context of strong monetary laxity in major advanced countries, in the end could make a suitable policy easing. Also, the Board will continue to closely monitor the behavior of all the determinants of inflation that might alert about widespread pressures on prices to adjust timely monetary stance, seeking at all times the convergence of inflation to its permanent objective of 3%."

The Mexican central bank also kept the overnight interest rate target steady at 4.50% at its previous meeting.  Mexico reported annual inflation of 3.8% in December, up slightly from 3.2% in October, 3.14% in September, 3.42% in August, while inflation was 3.28% at the end of June, 3.4% April and 3% in March, and within the Bank's inflation target range of 3% +/- 1%.

The Mexican economy grew 4.5% (3.2% in Q2, 4.5% in Q1) year on year in Q3 last year, up 1.3% (1.3% in Q2, 0.6% in Q1) from the previous quarter, compared to GDP growth of 5.4% in 2010.  The Mexican peso (MXN) is down about 10% against the US dollar over the past year, and the USDMXN exchange rate last traded around 13.2.

www.CentralBankNews.info

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South African Reserve Bank Holds Repo Rate at 5.50%

January 20, 2012 by CentralBankNews   Comments (0)

The South African Reserve Bank [SARB] held its monetary policy interest rate, the repo rate, unchanged at 5.50%.  The Bank said: "The MPC remains of the view that inflation pressures are primarily of a cost-push nature, but is concerned that a persistent upward trend in inflation and prolonged breach of the inflation target could have an adverse effect on inflation expectations which could reinforce the upward inflation dynamics. However, the MPC is also cognisant of the slowing domestic economy and feels that given the lack of demand pressures, monetary tightening at this stage would not be appropriate. At the same time, the nominal policy rate is at a long term low and the real policy rate is slightly negative, indicating a monetary policy stance that is accommodative and supportive of the real economy."

Previously the SARB also held the repo rate unchanged at its November meeting last year, the Bank last cut the repo rate by 50bps to 5.50% in November 2010.  South Africa reported annual inflation of 6.1% in December, compared to 5.7% in September, 5.3% in August and July, 5% in June, 4.6% in May, and 4.2% in April this year, compared to its official inflation target range of 3-6%. 


South Africa's economy grew 1.3% in the June quarter, and 1.4% in the September quarter of 2011.  Meanwhile the South African Rand (ZAR) has weakened by about 12% against the US dollar over the past year, with the USDZAR 
exchange rate last trading around 7.93

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Latvia Central Bank Holds Rate 3.50%, Cuts Reserve Ratio

January 20, 2012 by CentralBankNews   Comments (0)

Latvijas Banka kept its main monetary policy interest rate, the refinancing rate, steady at 3.50%, and held its other interest rates unchanged, but reduced the reserve ratio for bank liabilities above two years to 2% from 3%, and for other liabilities to 4% from 5%.  The Bank said: "By reducing the reserve ratio, additional financial resources are released for lending and more beneficial conditions for the availability of lending resources necessary for economic growth are created. A simultaneous reduction of the reserve requirement for liabilities of different maturities will promote a balanced impact on the availability of financing in the banking sector and will continue to maintain banks' motivation in attracting long-term financing."

Previously the Bank also kept monetary policy settings unchanged, leaving the refinancing rate at 3.50% at its November meeting.  The Bank of Latvia last reduced the refinancing rate by 50bps to 3.50% in March 2010.  Latvia reported annual inflation of 4% in December, down from 4.4% in October, 4.6% in September, and 4.7% in August.  The Latvian economy expanded 5.6% on an annual basis in Q2, while GDP growth was reported as 3.5% in the previous quarter.  The Latvian currency, the lat (LVL), last traded around 0.54 against the US dollar.

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