Central Bank Rates in Turkey, Indonesia and South Africa Left Unchanged

January 17, 2019

The weaker global inflationary outlook has reduced lessened the risk of imported inflation and capital outflows that might caused by tighter monetary policy in the United States and other industrialized economies. The last central bank interest rate changes in Turkey, Indonesia, and South Africa had been upward, but officials at all of them held policy reviews this week that resulted in unchanged policy stances.

The Central Bank of the Republic of Turkey had boosted its one-week repo auction rate by more than 10 percentage points to 24.0% last year. Turkish CPI inflation had soared to a 15-year high in October marginally above 25%, but such has receded to 20%. That enough improvement not raise the interest rate further but not sufficient to persuade officials to begin easing their stance: “While developments in import prices and domestic demand conditions have led to some improvement in the inflation outlook, risks on price stability continue to prevail. Accordingly, the Committee has decided to maintain the tight monetary policy stance until inflation outlook displays a significant improvement.”

Bank Indonesia’s 7-day reverse repo rate reached 6.0% after a 25-basisĀ  point increase last November. Such had been at 4.0% just a half year earlier. Officials now perceive that inflation is on a low and stable path, and recent rupiah appreciation has been welcomed.

The South African Reserve Bank also last raised its policy rate in November by 25 basis points. This move reversed a cut made last March. Officials consider their policy stance to be still appropriately accommodative. South Africa is experiencing only a modest recovery from recession, and the outlook for inflation is improved. A released statement anticipates only one more 25-basis point increase by 2021.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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