Several Central Bank Policy Meetings Elsewhere on This U.S. Thanksgiving Day

November 24, 2022

With the U.S. observing its quintessentially most unique holiday, the dollar continued to back off from recent highs, dropping 0.3% on a weighted DXY basis  overnight and extending its cumulative decline from peak to 7.8%. The dollar lost 0.9% against the yen today and 0.6% versus sterling but just 0.1% relative to the euro.

Prices for WTI oil and Bitcoin declined 0.4% and 0.3%. The ten-year German bund yield slumped nine basis points, and equities are mostly higher, with gains this Thursday of 1.0% in Japan and South Korea, 1.2% in Taiwan, 0.8% in Hong Kong, 0.7% in Germany, and 0.6% in Italy.

The Central Bank of Sri Lanka‘s policy interest rate was left unchanged at 14.5%, well below CPI inflation of 66.1%. The rate was only 5.0% at the beginning of 2022, and currency depreciation has been one of several factors driving inflation upward.

The Swedish Riksbank’s repo rate was increased today by 75 basis points to 2.5%, and another increase early in 2023 is also anticipated. Even before the pandemic’s onset, Riksbank officials had experimented with a negative interest rate of as much as -0.50% until a pair  of 25-basis point hikes in December 2018 and December 2019. The rate was kept at zero percent until April 2022, when a 25-basis point hike was engineered. This was hurriedly followed by hikes of 50 bps in June, 100 bps in September and now 75 basis points, but officials released a statement that readily admits that inflationary pressures have evolved and endured more aggressively than they were expecting to 9.3%, well over target.

The Bank of Koreas repo rate has been lifted by a further 25 basis points to 3.25%, highest since late in the second quarter of 2012. It was at 1.0% when 2022 began even after a pair of 25-basis point hikes in August and November of last year. CPI inflation of 5.7% currently is expected to stay above 3% next year.

At the South Africa Reserve Bank, another 75-basis point repo rate hike was announced, same as the size of the prior two increases done in July and September. Monetary tightening began a year ago in November 2021 from a pandemic low of 3.50% and has now doubled to 7.0%. Both that level and CPI inflation of 7.6% currently lie above the central bank’s 3-6% medium-term inflation target. In taking today’s action, officials revised projected economic growth a bit lower and again raised the expected future path that they envision for inflation.

The curious case of monetary policy at the Central Bank of Turkey moved further down the rabbit hole today with a 150-basis point additional drop in the policy rate to 9.0%. That’s ten percentage points below the 19% level that prevailed from March 2021 until September 2o21. This easing has been juxtaposed against accelerating inflation, which at 85.5% in October was at a 24-year high and infinitely above the central bank target of 5%. Under great pressure, the central bank has done Turkish President Erdogan’s bidding, but a statement released today says that the series of rate cuts will end for now at least: “Considering the increasing risks regarding global demand, the Committee evaluated that the current policy rate is adequate and decided to end the rate cut cycle that started in August.”

Data released today revealed:

A single point dip in the British industrial trades orders index to minus 5, a 3-month low. A record high reading of +26 had been reported one year ago.

The German IFO Institute’s monthly business climate index improved to a 3-month high of 86.3 in November in spite of a weaker assessment of current conditions. IFO officials in summing up the latest findings opined “the recession could prove less severe in Germany than many had expected.”

Overall French business confidence remained steady in November with a reading of 102.2 versus 113.3 a year earlier, but both manufacturing and services deteriorated a bit.

Japan’s preliminary purchasing managers composite index in November dropped sharply to 48.9 from 51.8 in October. Manufacturing fell  to a 2-year low score of 49.4, and services declined 3.2 points to straddle the 50.0 no change threshold.

In the Czech Republic, consumer confidence bounced above October’s record low to a 3-month high, but business confidence dropped to a 19-month low.

South Korean producer price inflation slowed to a 16-month low of 7.3% in October from 10.0% a year earlier.

Finnish PPI inflation of 22.3% in October was down from 33.9% in June but still above the October 2021 reading of 20.8%.

South African PPI inflation slid to a 5-month low of 16.0% last month, having crested  in July at 18%.

Turkish manufacturing sentiment declined to a 29-month low of 97.9 this month.

Belgian business confidence deteriorated to a 29-month low in November and with a reading of -16.6 was below zero for a sixth straight month.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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