16th February 2014
Sri Lanka’s central bank maintained its monetary policy stance, as widely expected, and said there had been a net inflow to the country’s bond and stock markets so far this year, confirming that “the effect of the US quantitative easing programme on the Sri Lanka economy is expected to be minimal.”
The Central Bank of Sri Lanka maintained the 150 basis point spread in its new Standing Rate Corridor (SCR), with the Standing Deposit Facility Rate (SDFR) at 6.50 percent and the Standing Lending Facility Rate (SLFR) at 8.0 percent.
The central bank restructured its monetary policy framework last month, with SDFR setting a floor in its new corridor and SLFR the ceiling. At that point it narrowed the spread in its corridor to 150 basis points from 200 points due to reduced volatility in the call money market.
Net inflows to the Sri Lankan bond and stock markets have amounted to US$ 119 million up to Feb. 10 from the start of the year and the central bank said it had absorbed a net $58.7 million, helping the rupee remain stable. Gross official reserves were at comfortable levels, the central bank said, and the equivalent of 5.3 months of imports.
This year the rupee has remained stable against the U.S. dollar, trading at 130.8 dollar today, down by 2.4 percent since the end of 2012.
Sri Lanka’s inflation rate is expected to remain around the current level throughout 2014, supported by well managed demand and conditions and improved domestic supply, the bank said.
In January headline inflation eased to 4.4 percent from 4.7 percent in December. The average rate in 2013 was 6.9 percent and the central bank targets inflation of 4-6 percent this year, declining to 3-5 percent in 2015 and 2016.
Market interest rates adjusted downwards following the central bank’s compression of the rate corridor last month and higher levels of liquidity in the domestic money market due to proceeds from the country’s sovereign bond in January.
Growth of credit to the private sector by commercial banks accelerated marginally to 7.5 percent in December from 7.3 percent and is expected to grow by some 16 percent this year.
Referring to the government’s “mega infrastructure drive,” that is increasing the economy’s capacity, the central bank said its board was of the view that it would be “appropriate to further encourage the utilization of this investment potential, since such policies by the government would give rise to increased and accelerated sustainable economic growth in the period ahead.”
Sri Lanka’s Gross Domestic Product expanded by an annual 7.8 percent in the third quarter, up from a rate of 6.8 percent in the second quarter, the third quarter of accelerating growth. The central bank has estimated that the economy grew by 7.2 percent last year and should grow by 7.8 percent this year.
Last month Ajith Nivard Cabraal, governor of the central bank, said in an interview with Bloomberg that interest rates were at an appropriate level and the central bank would probably keep rates steady for the next three to six months under current conditions.
Sri Lanka raised US$ 1 billion in last month’s sovereign bond issue to help finance its investment program, with the bond priced around 6 percent. U.S. investors purchased more than 60 percent of the bond, a central bank official said.
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Georgia Central Bank raises Interest rates 25 bps on improving economy in the second week of February
12th February 2014
Georgia’s central bank raised its benchmark refinancing rate by 25 basis points to 4.0 percent, saying there was no need to maintain the easy policy stance as economic growth is improving and this trend is expected to continue in the first half of 2014.
The National Bank of Georgia, which cut rates by 150 basis points in 2013, also said inflation was projected to get closer to the bank’s target in the second half of the year.
The central bank, which targets inflation of 6.0 percent end-2014, said in December that it was maintaining a relaxed policy stance but would tighten policy to ensure inflation remains on target.
In January Georgia’s inflation rate jumped to 2.9 percent, the fourth month of rising prices after deflation in most of 2012 and 2013.
The impact of last year’s depreciation of Georgia’s lari was estimated to have raised the inflation rate by about 1 percentage point, an impact the central bank said was contained in its forecast.
The lari depreciated by 4.6 percent against the U.S. dollar last year and fell further to 1.79 to the dollar at the end of January. But it has risen in recent weeks, trading at 1.73 today.
Georgia’s economic growth is estimated to have picked up to 8 percent in the November-December period and the central bank said it was forecasting 6.9 percent growth in the fourth quarter along with a 3.1 percent expansion for the entire 2013 year.
In 2012 Georgia’s GDP grew by 6.1 percent but the International Monetary Fund forecast 2.5 percent expansion in 2013. In the third quarter, Georgia’s GDP grew by an annual 1.4 percent.
The central bank said domestic demand was boosting imports, especially of investment goods that should encourage overall economic growth. Banks’ lending activity has increase significantly in recent months, with banks’ credit portfolio up by 16 percent.
12th February 2014
Rwanda’s central bank “will maintain its accommodative monetary policy stance to stimulate credit to the private sector as long as inflationary pressures will remain limited,” the bank’s governor said.
Presenting the National Bank of Rwanda’s (BNR) policy and financial stability statement, John Rwangombwa also said the country’s economy slowed in 2013 compared to recent years due to the impact of cuts and delays in budgets in 2012.
Annual growth in Rwanda’s Gross Domestic Product fell to 3.9 percent in the third quarter of 2013 from 5.7 percent in the second quarter and the country’s finance and economic planning ministry has therefore revised down its 2013 growth forecast to less than 6.0 percent, Rwangombwa said.
Rwanda’s inflation rate eased to 2.43 percent in January, down from 3.65 percent in December, and he said deposit interest rates and lending rates had declined in line with the bank’s monetary stance. The lending rate declined to 16.9 percent in December from 17.8 percent in September.
At the last meeting of its monetary policy committee in December 2013, the BNR held its repo rate steady at 7.0 percent following a 50 basis point rate cut in June