Monetary policy: Week in review (Jan 7, 2011)

Article written by Prieur du Plessis, editor of the Investment Postcards from Cape Town blog.The article below comes courtesy of Central Bank News, an authoritative source on monetary policy developments.The past week in central banking and monetary policy was relatively quiet, with just five central banks announcing interest rate decisions. Those changing interest rate settings were: Romania -25bps to 5.75%, Bangladesh +50bps to 7.75%, and Cape Verde +150bps to 5.75%. Those that held rates unchanged were Uganda at 23.00%, and Trinidad & Tobago at 3.00%. Also making news was the signing into law of sanctions against Iran’s central bank by the US, Chinese leaders commenting on the direction of monetary policy in 2012, and the ECB appointing Belgian, Peter Praet, as Chief Economist; replacing the outgoing Jurgen Stark.Following are some of the key quotes from the central bankers that announced decisions last week:

• Romania (cut 25bps to 5.75%): “The recovery of the Romanian economy has continued – underpinned by favourable dynamics of exports, as well as of industrial and farming output – whereas the growing uncertainties regarding global and European growth amid a worsened global risk appetite and heightened sovereign debt crisis in the euro zone are hindering the short-term outlook for the overall economic activity in Romania.”
• Uganda (held at 23.00%): “I acknowledge the fact that the long-term solution to controlling inflation rests on addressing the structural constraints and improving productivity, but controlling inflation in the short to medium term is extremely crucial in stimulating this long-term economic growth.”
• Trinidad & Tobago (held at 3.00%): “While there are signs that credit demand may be increasing, the basis for a sustained economic recovery is still to be established.” The Bank also noted “The increase in the headline inflation rate was mainly attributable to higher food prices. Core inflation, which excludes the impact of food prices, has been relatively well contained for most of 2011, indicative of the overall sluggish demand conditions in the economy.”
• Cape Verde (increased 150bps to 5.75%): “The unfavorable balance of payments, the persistence of serious financial problems at the international level – in particular in the euro area – which could have impact on the evolution of the economy and domestic economic developments, require the making of monetary policy measures consistent with ensuring exchange rate stability and financial system.”

Looking at the central bank calendar, there’s a few key central bank meetings scheduled in the week ahead. The market will be closely watching the decisions from the Bank of England and ECB; while neither are expected to change policy settings just yet, the statement from the ECB will merit close study. Also due in the week ahead is China’s quarterly data dump, many are picking the PBOC will cut the RRR before Chinese Lunar New Year (23 Jan), and the data may (or may not) provide an additional excuse to move. The Fed is also scheduled to release its Beige Book economic report on Wednesday.

• PLN – Poland (National Bank of Poland) expected to hold at 4.50% on Jan 11
• GBP – UK (Bank of England) expected to hold at 0.50% on Jan 12
• EUR – EU (European Central Bank) expected to hold at 1.00% on Jan 12
• IDR – Indonesia (Bank Indonesia) expected to hold at 6.00% on the Jan 12

Source: Central Bank News, January 6, 2011.Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.Monetary policy: Week in review (Jan 7, 2011) was first posted on January 8, 2012 at 8:10 am.©2011 "Investment Postcards from Cape Town". Use of this feed is for personal non-commercial use only. If you are not reading this article in your feed reader, then the site is guilty of copyright infringement. Please contact me at wordpress@investmentpostcards.comFeed enhanced by the Add To Feed Plugin by Ajay D'Souza