Egypt Central Bank holds rate

Egypt holds rate, warns won't hesitate quell inflation - Central Bank News

Egypt's central bank held its benchmark overnight deposit rate steady at 9.75 percent to give its recent rate hike time to take effect, but warned that inflationary pressures may build and the bank's Monetary Policy Committee will not hesitate to raise rates to ensure price stability.
    The Central Bank of Egypt (CBE), which raised its key lending rates by 25 basis points in April, said slow economic growth had checked the upside risks to inflation and a rebound in international food prices was not likely, but there is a "possible build-up of upward pressures on inflation going forward" due to local supply bottlenecks and distortions in distribution channels.
    Egypt's headline inflation rate rose by a monthly 1.47 percent in April to an annual rate of 8.11 percent, up from 7.59 percent in March, while core inflation rose to 7.437 percent from 7.03 percent. Higher prices are due to broad-based increases in food and non-food prices.
    Egypt's Gross Domestic Product expanded by a real 2.4 percent in the first half of the 2012/13 financial year, which ends June 30, following a "similarly feeble growth rate" of 2.2 percent in 2011/12, the bank said.

    A "nascent" economic recovery was based on better construction and tourism activity, but manufacturing remains weak, investment low and  the current political transformation is still weighing on consumption and investment decisions, the CBE said.
    The central bank considers its current rates to be "appropriate given the lagged transmission of  the previous rate hike across the economy combined with the mixed balance of risks surrounding the inflation and GDP outlooks at this juncture," the bank said adding that it "will not hesitate to adjust the key CBE rates to ensure price stability over the medium-term."
    In April, when the CBE changed rates for the first time since November 2011, the central bank said it would not hesitate to adjust rates to ensure price stability.

    www.CentralBankNews.info

South Korea Central Bankers cuts rate 25 bps

Korea cuts rate 25 bps, sees considerable global risks - Central Bank News

South Korea's central bank cut its base rate by 25 basis points to 2.50 percent, saying downside risks to global growth remain "considerable" while domestic growth remains weak with the negative output gap likely to continue for a considerable time.
    The Bank of Korea (BOK), which surprised many by holding its rate steady last month, said it would closely monitor the effect of its rate cut and the government's 17.3 trillion won supplementary budget to keep inflation within its target over the medium term.
    Last month the BOK's Monetary Policy Committee also said there were downside risks to the global economy but this month it used stronger language by describing these risks as considerable.
    At its meeting in April, the BOK decided by a narrow 4-3 vote to hold rates steady despite government pressure. It is the BOK's first rate cut this year after two cuts in 2012, when the base rate was cut by 50 basis points.
    The BOK said moderate economic recovery in the US was continuing but the sluggishness of the euro area's economy has deepened and "the trends of improvement in economic indicators in emerging market countries such as China have been weaker than initially anticipated."

    "The Committee expects the global economy to continue its modest recovery going forward, but judges that the downside risks to growth remain considerable due chiefly to uncertainties related to for instance the sluggishness of economic activity in the euro area and to the implementations of fiscal consolidation in major countries," the BOK said.
    Korea's Gross Domestic Product expanded by a stronger-than-expected 0.9 percent in the first quarter from the fourth quarter's 0.3 percent, the highest growth rate in two years, signs interpreted by some observers that last year's rate cuts were starting to pay off.
    But the BOK said growth remains weak, and although exports are recovering, the pace is modest and domestic demand is alternating between improvement and worsening.
    "Going forward, there is no change to the Committee's forecast that the domestic economy will show a negative output gap for a considerable time, due mostly to the slow recovery of the global economy, to the influence of the Japanese yen weakening, and to the geopolitical risk in Korea," the bank said.
    South Korea's economy expanded by 2.0 percent in 2012, down from 2011's 3.6 percent, and the BOK now expects 2013 growth of 2.6 percent, slightly higher than the government's 2.3 percent forecast.
    Korea's inflation rate fell to 1.2 percent in April from 1.3 percent the prior month, well below the BOK's 2.5-3.5 percent range for the 2013-2015 period. Core inflation also eased to 1.4 percent from 1.5 percent in March.
    The BOK expects inflation to remain low for the time being.

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