Norges Bank Keeps Rates Unchanged At 0.75%

Posted: January 24, 2019 10:23:21

Policy rate unchanged at 0.75 percent - Press Release

Norges Bank's Executive Board has decided to keep the policy rate unchanged at 0.75 percent.

In Monetary Policy Report 4/18, which was published on 13 December 2018, the Executive Board's assessment was that capacity utilisation in the Norwegian economy was close to a normal level. Underlying inflation was close to the 2 percent target. The Executive Board's assessment of the outlook and balance of risks suggested that the policy rate would most likely be raised in March 2019.

The outlook and the balance of risks imply a gradual increase in the policy rate. Global growth is a little weaker than projected, and there continues to be considerable uncertainty surrounding developments ahead. In Norway, economic growth and labour market developments appear to be broadly as projected, while inflation has been slightly higher than expected.

"Overall, new information indicates that the outlook for the policy rate for the period ahead is little changed since the December Report", says Governor Øystein Olsen.

ECB Leaves Rates Unchanged At 0%

Posted: October 27, 2018 15:46:03

ECB Full Press Release:

25 October 2018

At today’s meeting the Governing Council of the European Central Bank (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 at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term.

Regarding non-standard monetary policy measures, the Governing Council will continue to make net purchases under the asset purchase programme (APP) at the new monthly pace of €15 billion until the end of December 2018. The Governing Council anticipates that, subject to incoming data confirming the medium-term inflation outlook, net purchases will then end. The Governing Council intends to reinvest the principal payments from maturing securities purchased under the APP for an extended period of time after the end of the net asset purchases, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.

Bank Of Canada Increases Overnight Rate Target To 1.75%

Posted: October 27, 2018 15:38:58

Bank of Canada Full Press Release:

The Bank of Canada today increased its target for the overnight rate to 1 ¾ per cent. The Bank Rate is correspondingly 2 per cent and the deposit rate is 1 ½ per cent.

The global economic outlook remains solid. The US economy is especially robust and is expected to moderate over the projection horizon, as forecast in the Bank’s July Monetary Policy Report (MPR). The new US-Mexico-Canada Agreement (USMCA) will reduce trade policy uncertainty in North America, which has been an important curb on business confidence and investment. However, trade conflict, particularly between the United States and China, is weighing on global growth and commodity prices. Financial market volatility has resurfaced and some emerging markets are under stress but, overall, global financial conditions remain accommodative.

The Canadian economy continues to operate close to its potential and the composition of growth is more balanced. Despite some quarterly fluctuations, growth is expected to average about 2 per cent over the second half of 2018. Real GDP is projected to grow by 2.1 per cent this year and next before slowing to 1.9 per cent in 2020.

The projections for business investment and exports have been revised up, reflecting the USMCA and the recently-approved liquid natural gas project in British Columbia. Still, investment and exports will be dampened by the recent decline in commodity prices, as well as ongoing competitiveness challenges and limited transportation capacity. The Bank will be monitoring the extent to which the USMCA leads to more confidence and business investment in Canada.

Household spending is expected to continue growing at a healthy pace, underpinned by solid employment income growth. Households are adjusting their spending as expected in response to higher interest rates and housing market policies. In this context, household credit growth continues to moderate and housing activity across Canada is stabilizing. As a result, household vulnerabilities are edging lower in a number of respects, although they remain elevated.

CPI inflation dropped to 2.2 per cent in September, in large part because the summer spike in airfares was reversed. Other temporary factors pushing up inflation, such as past increases in gasoline prices and minimum wages, should fade in early 2019. Inflation is then expected to remain close to the 2 per cent target through the end of 2020. The Bank’s core measures of inflation all remain around 2 per cent, consistent with an economy that is operating at capacity. Wage growth remains moderate, although it is projected to pick up in the coming quarters, consistent with the Bank’s latest Business Outlook Survey.

Given all of these factors, Governing Council agrees that the policy interest rate will need to rise to a neutral stance to achieve the inflation target. In determining the appropriate pace of rate increases, Governing Council will continue to take into account how the economy is adjusting to higher interest rates, given the elevated level of household debt. In addition, we will pay close attention to global trade policy developments and their implications for the inflation outlook.

Information note: The next scheduled date for announcing the overnight rate target is December 5, 2018. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR on January 9, 2019.

Bank of Mexico Keep Rates Unchanged at 7.75%

Posted: October 4, 2018 20:32:17

Monetary Policy Statement

Banco de México’s Governing Board decided to maintain the target for the overnight interbank interest rate at 7.75%.

During the second quarter of 2018, the world economy continued to grow at a moderate pace, and the divergence among the main advanced economies’ performance increased. Indeed, in contrast with the Eurozone, Japan and the U.K., which have grown below expectations, economic activity in the U.S. exhibited higher growth, partly in response to the fiscal stimulus implemented. Under conditions of reduced slack in the economy, this could exert greater pressure on inflation. As expected, in September the Federal Reserve raised the target range for the federal funds rate and reiterated its forecast of increasing it gradually, thus leading to an increase in interest rates for all terms. The world economy continues to be subject to a high degree of uncertainty due to risks associated mainly with a further intensification of international trade disputes, a further tightening of financial conditions, and with geopolitical factors. In this environment, international financial markets have recently undergone episodes of volatility and the prices of emerging economies’ assets have performed negatively. Nevertheless, differences related to each country’s macroeconomic fundamentals and to idiosyncratic factors have been observed. Thus, since the last monetary policy decision, the Mexican peso has been more resilient than other emerging market currencies. In addition to Mexico’s prudent macroeconomic management, this result was also associated with the favorable developments related to the trade negotiation with the United States and Canada. Concerning interest rates in Mexico, those of short tenors fluctuated slightly while those of medium and long tenors increased.

The latest information suggests that at the beginning of the third quarter of 2018 economic activity in Mexico expanded, after having contracted during the second quarter. Slack conditions in the economy are estimated to have remained similar to those observed during the previous quarter. Given the complex environment the Mexican economy faces, Banco de México’s Governing Board considers that the balance of risks for growth continues biased to the downside. This bias has decreased at the margin as a result of the recently approved trade agreement with the United States and Canada.

The Mexican economy is well poised to cope with adverse external and domestic scenarios due to the central bank’s monetary policy stance adopted to keep medium- and long-term inflation expectations anchored, the fiscal commitments, and the financial system’s resilience. In this regard, despite the decreased uncertainty associated with Mexico’s trade relationship with the U.S. and Canada, the Mexican economy continues facing a complex environment characterized, among other factors, by the risk of tighter external financial conditions. Under these circumstances, it is particularly relevant that, in addition to following a prudent and robust monetary policy, measures to foster greater productivity are adopted and public finances are consolidated sustainably.

Since June, higher-than-expected rises in the prices of energy-related products have been observed, mainly of gasoline and L.P. gas. Although these shocks are transitory, they have affected the rate at which core inflation has been declining, due to the indirect effects of these price increases on production costs, and they have also delayed the convergence of headline inflation to its target. In this regard, although these price increases stem from higher international references, the gradual adjustment of domestic gasoline prices has made such increases more persistent. This has contributed to keep noncore inflation high for a long period. Although core inflation has been subject to the aforementioned indirect effects, projections that it will continue decreasing within monetary policy’s period of influence are maintained. In this context, expectations for headline inflation for the end of 2018 have been adjusted from 4.25% in July to 4.50% in September, while those for the end of 2019 have increased from 3.60% to 3.70%, respectively. Expectations for core inflation for the end of 2018 decreased from 3.60 to 3.53% during the same months and those for the end of 2019 remained practically unchanged. Expectations for headline inflation for the medium and long terms remain around 3.50%.

The expected evolution of inflation continues to be subject to risks and to a high degree of uncertainty. Among the upside risks are pressures on the peso exchange rate due to an environment of higher external interest rates and to other external or domestic factors. In this regard, should there be a real exchange rate depreciation, Banco de México will make sure this takes place in an orderly manner and with no second-round effects on the economy’s price formation process. On the other hand, the following risks persist: additional upward pressures on energy prices, as indicated by the futures prices of some of these products; escalating protectionist measures worldwide that could affect inflation negatively; and, greater-than-anticipated levels of public expenditure. In addition, if wage negotiations are not consistent with productivity gains, inflationary pressures on the economy could also appear. As for downside risks, the ratification of the new trade agreement with the U.S. and Canada could have a favorable impact on markets and on the Mexican peso exchange rate. Considering all of the above, the balance of risks to the forecasted trajectory of inflation remains biased upwards, in an environment of uncertainty.

To guide its monetary policy actions, Banco de México’s Governing Board follows closely the development of inflation vis-à-vis its anticipated trajectory, taking into account the monetary policy stance adopted and the time frame in which monetary policy operates, as well as available information on all inflation determinants and on medium- and long-term inflation expectations, including the balance of risks for such factors. Given the Mexican economy’s recent developments, that the shocks that have affected inflation recently are of a transitory nature, and that the expected trend for core inflation remains downward, Banco de México’s Governing Board has voted by majority to maintain the target for the overnight interbank interest rate unchanged at 7.75%. One member voted for increasing the rate by 25 basis points. The Governing Board will monitor the potential pass-through of the shocks that have affected non-core inflation as well as other factors that could affect the evolution of core inflation, which is particularly relevant in the present scenario, since this indicator is still above 3%. In this regard, the central bank will take the necessary actions, specifically, maintaining or possibly strengthening the current monetary policy stance so that headline inflation converges to Banco de México’s target within monetary policy’s period of influence.

Banco de México’s Governing Board will maintain a prudent monetary policy stance and will continue to follow closely the potential pass-through of exchange rate fluctuations to prices, the monetary policy stance relative to that of the U.S. under an adverse external environment, and the conditions of slack in the Mexican economy. In the presence and possible persistence of factors that, by their nature, involve risks to both inflation and inflation expectations, monetary policy will be adjusted in a timely and robust manner to achieve the convergence of inflation to its 3% target and to strengthen the anchoring of medium- and long-term inflation expectations so that they attain such target.

RBA Keeps Rates Unchanged At 1.50%

Posted: October 2, 2018 07:05:34

Statement by Philip Lowe, Governor:
Monetary Policy Decision

At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

The global economic expansion is continuing. A number of advanced economies are growing at an above-trend rate and unemployment rates are low. Growth in China has slowed a little, with the authorities easing policy while continuing to pay close attention to the risks in the financial sector. Globally, inflation remains low, although it has increased due to both higher oil prices and some lift in wages growth. A further pick-up in inflation is expected given the tight labour markets, and in the United States, the sizeable fiscal stimulus. One ongoing uncertainty regarding the global outlook stems from the direction of international trade policy in the United States.

Financial conditions in the advanced economies remain expansionary, although they are gradually becoming less so in some countries. Yields on government bonds have moved a little higher, but credit spreads generally remain low. There has been a broad-based appreciation of the US dollar this year. In Australia, money-market interest rates are higher than they were at the start of the year, although they have declined since the end of June. In response, some lenders have increased their standard variable mortgage rates by small amounts, while at the same time reducing mortgage rates for some new loans.

The latest national accounts confirmed that the Australian economy grew strongly over the past year, with GDP increasing by 3.4 per cent. The Bank's central forecast remains for growth to average a bit above 3 per cent in 2018 and 2019. Business conditions are positive and non-mining business investment is expected to increase. Higher levels of public infrastructure investment are also supporting the economy, as is growth in resource exports. One continuing source of uncertainty is the outlook for household consumption. Growth in household income remains low and debt levels are high. The drought has led to difficult conditions in parts of the farm sector.

Australia's terms of trade have increased over the past couple of years due to rises in some commodity prices. While the terms of trade are expected to decline over time, they are likely to stay at a relatively high level. The Australian dollar remains within the range that it has been in over the past two years on a trade-weighted basis, but it has depreciated against the US dollar along with most other currencies.

The outlook for the labour market remains positive. The unemployment rate is trending lower and, at 5.3 per cent, is the lowest in almost six years. The vacancy rate is high and there are reports of skills shortages in some areas. A further gradual decline in the unemployment rate is expected over the next couple of years to around 5 per cent. Wages growth remains low, although it has picked up a little. The improvement in the economy should see some further lift in wages growth over time, although this is likely to be a gradual process.

Inflation is around 2 per cent. The central forecast is for inflation to be higher in 2019 and 2020 than it is currently. In the interim, once-off declines in some administered prices in the September quarter are expected to result in inflation in 2018 being a little lower than otherwise.

Conditions in the Sydney and Melbourne housing markets have continued to ease and nationwide measures of rent inflation remain low. Growth in credit extended to owner-occupiers remains robust, but demand by investors has slowed noticeably as the dynamics of the housing market have changed. Credit conditions are tighter than they have been for some time, although mortgage rates remain low and there is strong competition for borrowers of high credit quality.

The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual. Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

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