Uganda Central Bank cuts rate by 100 bps

Uganda cuts rate 100 bps as inflation outlook improves - Central Bank News

Uganda's central bank cut its central bank rate (CBR) by 100 basis points to 11.0 percent to stimulate domestic demand while the outlook for inflation improves and the forecast is cut.
    It is the Bank of Uganda's (BOU) first rate cut since December after cuts totaling 1,100 basis points in 2012.
    Uganda's headline inflation rate in May rose slightly to an annual rate of 3.6 percent from 3.4 percent in April but core inflation eased to 5.6 percent from 5.8 percent, "an indication that inflationary pressures have remained muted," the BoU said.
    The BoU now forecasts that core inflation will stabilise around the bank's 5.0 percent medium-term inflation target over the next 12 months, with the balance of risks now neutral. In April the BOU forecast core inflation of 1-2 percentage points above the target over the next few months before easing toward the target later this year.
    The change in forecast is mainly due to weaker-than-expected household consumption, which is likely to dampen demand side pressures on consumer prices, and a higher-than-expected appreciation of the the exchange rate, which dampens prices of imported consumer goods.

    Economic growth in the current 2012/13 fiscal year, which ends June 30, is now forecast to be higher than in 2011/12, driven by a recovery in demand for exports and investments.
    The BOU said that in 2013/14 it was unlikely that net export demand would continue to provide the primary source of growth so domestic demand will have to contribute more and household consumption will have to rebound. Investment is also expected to rise, driven by both the public and private sectors.
    Last month the BOU projected Gross Domestic Product growth of 5.3 percent in 2012/13 and 6-7 percent in 2013/14.
    Private sector credit demand remains constrained by high bank lending rates and structural factors and the BOU said strong credit growth will be important in boosting demand, saying its rate cut should "also be a signal for commercial banks to reduce their lending rates further in order to boost demand for bank credit."
    The BOU said it would maintain its band around the central bank rate at plus/minus 2 percentage points and the margin on the rediscount rate at 3 percentage points.
    In 2011 the BOU raised rates to a high of 23.0 percent in response to a rise in inflation to an all-time high of 30.5 percent in October 2011. Inflation then started to drop and hit a two-year low of 3.5 percent in February this year as the central bank slashed rates last year.

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For more details connect with Bank of Uganda's website : http://www.bou.or.ug/bou/home.html 

Thailand Central Bankers cuts rate 25 bps

Thailand cuts rate 25 bps, says ready to take further action - Central Bank News

Thailand's central bank cut its policy rate by 25 basis points to 2.50 percent due to continued concern over financial stability and said it was closely monitoring economic developments, financial stability risks and capital flows and "stands ready to take appropriate action as warranted."
    The Bank of Thailand (BOT), on the front lines of the currency wars, said downside economic risks had increased from lower-than-expected growth in the first quarter and "as inflation remains well within the target, monetary policy has room to further cushion against downside risk to domestic demand."
    Thailand's  Gross Domestic Product contracted by 2.2 percent in the first quarter from the fourth for annual growth of 5.3 percent, sharply down from the fourth quarter's 19.1 percent expansion when growth was boosted by fiscal stimulus measures.
    The BOT's rate cut was largely expected and follows a recent statement by the bank's governor that monetary policy could be eased if the economy was losing momentum. On Monday Thailand's finance minister said he hoped the BOT would cut the policy rate by more than 25 basis points.
     The rate cut signals a sharp worsening in the BOT's outlook since its last regularly scheduled policy meeting on April 3 when it said inflationary pressures warranted monitoring though it was also concerned  that a volatile exchange rate and capital flows could pose a risk to financial stability.

    Thailand's headline inflation rate eased to 2.42 percent in April, down from 2.69 percent in March. The BOT, which targets inflation of 0.5-3.0 percent, has forecast inflation of 2.8 percent this year.
    In 2012 the BOT cut its policy rate by 50 basis points and this is the first change in rates this year.
    The BOT said it still expects the Thai economy to continue to expand, but the slowdown in the first quarter from "tepid domestic demand" could weigh on overall economic momentum, particularly if there are delays in the government's infrastructure investment that is expected to start later this year.
     It added that exports were subject to downside risks from lower growth in regional economies, especially China, and inflationary pressures have eased due to lower production costs. Growth of private credit and household debt, however, remain elevated.
    In April the BOT had said it expected exports to expand slowly, in line with global growth.
    But global growth has been slower than expected with Chinese and Asian economies expanding less than expected and this could cause a delay in the recovery of Thai exports, the BOT said.
    In added that the Japanese economy was starting to benefit from economic stimulus.
    "Global financial markets remain volatile, leading to persistent capital flows into the region and exchange rate volatility," the BOT said after a meeting of its monetary policy committee.
     In its statement, the BOT did not mention any initiatives to cushion the impact of the rise in the baht currency on the competitiveness of Thai exports.
    The Thai central bank and the finance ministry are currently considering four measures to combat the strength of the baht, including limits on foreign investors ability to buy some Thai bonds, fees on the profits made by foreign investors from investing in bonds and mandatory hedging by foreign investors of their exchange rate risk.
    The Bank of Japan's launch of aggressive monetary easing in early April has lead to a sharp fall in the value of the yen and triggered fears of large capital inflows into higher-yielding currencies, such as the Thai baht.
    Until recently, the BOT had been reluctant to cut its interest rate in response to the rise in the baht, attributing its appreciation to foreign investors' confidence in the Thai economy and arguing that a rate cut would do little to affect capital flows.
     But on April 30 the BOT met with government and private sector representatives to hammer out a plan to address the growing competitive pressures and voiced its concern over the rapid rise and volatility in the exchange rate.

    The baht was largely stable against the U.S. dollar from 2010 through early 2012. But then it started to rise, hitting a high of 28.6 bath per U.S. dollar in late April from around 30-32 baht in 2010.
    But since late April, the baht has eased, first on speculation that the BOT would intervene but later on news that the central bank is planning to take action to curb the rise in the baht.
news that the central bank is planning to take action to curb the rise in the baht.
    Today the baht was trading just over 30 baht to the U.S. dollar.

    
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Malaysia Central Bank News

Malaysia holds rate on steady growth, modest inflation - Central Bank News

Malaysia's central bank held its benchmark Overnight Policy Rate (OPR) rate steady at 3.0 percent, as expected, saying this stance was appropriate in light of steady domestic growth and inflation that is expected to continue rise modestly.
    The Central Bank of Malaysia, which has held rates steady since June 2011, said domestic supply and costs are expected to push prices higher, but "given the modest global growth prospects, pressures from global commodity prices are likely to be contained."
    At its previous meeting in March, the bank's Monetary Policy Committee made the same observation about the outlook for inflation.
    Malaysia's inflation rate rose slightly to 1.6 percent in March from February.
    Domestic demand is continuing to support Malaysia's economy and investment activity and consumption have remained firm and the bank expects this to continue.
    The central bank forecasts growth of 5-6 percent in 2013 compared with 5.6 percent in 2012 and 5.1 percent in 2011.

    The central bank described the momentum in global growth as "modest" and the recovery uneven and there are still downside risks as growth in advanced countries is constrained by fiscal consolidation, while domestic demand continues to support growth in Asia.
    "Despite the improvements in international financial market conditions, markets remain vulnerable to setbacks and changes in sentiment," Malaysia's central bank said.

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Botswana Central Bank cuts rate 50 bps

Botswana cuts rate 50 bps, inflation outlook positive - Central Bank News

Botswana's central bank cut its Bank Rate by 50 basis points to 9.0 percent, its first rate cut since December 2010, to reignite economic growth while the medium-term inflation outlook is positive.
    The Bank of Botswana (BoB) said economic growth is below potential and unemployment is high and forecasts suggest that a more accommodative policy stance would be consistent with the achievement of the bank's 3-6 percent medium-term inflation objective.
    In the short term, however, the BoB said inflation is expected to remain above the bank's target range due to transitory factors.
    But weak domestic demand and forecast low external inflationary pressures means the "underlying trend is forecast to be downwards, and this means that inflation is anticipated to converge to the medium-term objective range in the second half of 2013," the BoB said.
    In March Botswana's inflation rate rose to 7.6 percent, up from 7.5 percent in February, but down from 8.0 percent in March 2012.
    The BoB said domestic output grew by 3.7 percent in the 12 months to December 2012 with the non-mining sectors slowing to growth of 5.8 percent from 7.8 percent in 2011, while the mining sector contracted by 8.1 percent.
    The central bank expects that non-mining expansion will remain below potential in the medium term and therefore exert minimal inflationary pressure. In addition, the impact of demand on economic activity is forecast to be modest, reflecting trends in government spending and personal income.

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