Central Bank News and Released Data Share Wednesday’s Spotlight
May 22, 2024
The dollar continues to trade buoyantly, firming overnight by 0.3% against the yen, 0.4% versus the Swissy, and 0.2% relative to the euro and Canadian dollar. Ten-year sovereign debt yields are higher, led by an 11-basis point jump in British gilts following higher-than-projected CPI inflation last month of 2.3% but also including rises of six basis points in Italy, five bps in Spain and four basis points in U.S. Treasury, German bund, and French yields. Stock market movements in the Pacific Rim ranged from a rise of 1.5% in Taiwan to a drop of 0.9% in Japan’s Nikkei-225 index. Major European stock markets are down by 0.3-0.7% so far. SPX and DJIA futures show a 0.2% downtick. Ahead of today’s eagerly awaited first-quarter Nvidia earnings reports, the Nasdaq is steady. The prices of WTI oil, Comex gold and Bitcoin tokens are down by 1.1%, 0.5% and 0.2%.
FOMC minutes from the April 30-May 1 meeting get released today at 14:00 EDT (18:00 GMT).
The National Bank of Georgia‘s policy interest rate has been cut by 25 basis points to 8.0%. This was the third reduction this year and brings the cumulative drop over the past 12 months to 300 basis points. CPI inflation in Georgia of 1.5% is only half the 3% target level but also at an 11-month high and up from zero percent in January. A released statement expresses guarded optimism tempered by caution along the path of interest rate normalization:
The NBG estimates that the gap between economic activity and its pre-pandemic trend has fully closed. As a result, higher-than-expected demand can also trigger inflationary risks. This strong demand is partly driven by increased credit activity. However, according to the baseline scenario, economic activity would stabilize around its potential level, with real growth reaching 5.6%. In this case, demand-side inflationary risks would not materialize.
In light of these factors and analysis of current domestic and external challenges, the National Bank of Georgia has decided to reduce monetary policy rate by 0.25 percentage points to 8.00 percent. The NBG will continue to normalize the monetary policy rate only gradually and cautiously. If factors amplifying inflation expectation risks become more pronounced, the NBG may need to maintain the current tight stance for a longer period or even tighten policy further.
The Reserve Bank of New Zealand’s Official Cash Rate was left at its cyclical high of 5.5% that was reached a year ago after increases totaling 50 basis points in 2021, 350 bps in 2022 and 125 bps in 2023. CPI inflation of 4.0% last quarter was down from a peak of 7.3% in the second quarter of 2022 but also above the central bank target range of 1-3%. A released statement identifies the service sector as the area where disinflation has lagged and expresses concern that easing interest rates now could adversely impact price expectations.
At Bank Indonesia‘s latest monetary policy review, the key interest rate, which had been raised by 25 basis points at the previous review in April, was left at 6.25%. The latest 3.0% consumer price inflation reading was up from 2.3% last September and in the upper half of the 1.5-3.5% target range. The continuing restrictive monetary stance is meant to contain inflation but also to promote a more stable rupiah, which like other developing economy currencies has depreciated this year against the buoyant dollar.
Price data released this Wednesday include
- A smaller-than-expected deceleration of British consumer price inflation to 2.3% overall in April and 3.9% among core items of the index.
- British producer output price inflation rose 0.4 percentage points to an 11-month high of 1.1% in April. Producer input price inflation also was below zero percent for an 11th straight time but their least negative (-1.6%) in that streak.
- South African consumer price inflation ticked down to an above-target 5.2% last month from 5.3% in March and a high point of 7.8% hit in July 2023.
- South Korean producer price inflation rose 0.2 percentage points to a 13-month high of 1.8% last month but remains fa beneath the zenith of 10% touched in mid-2022.
- A 17-month high in Irish wholesale price inflation of 3.8% in April was up from 2.0% in March and -5.2% in July 2020.
- Polish producer price deflation of -8.6% in April was less negative than -9.9% in the prior month and -10.6% in January.
Japanese core private domestic machinery orders unexpectedly rose 2.9% on month in March and 4.4% in the first quarter but are thought likely to drop between 1% and 2% during the second quarter. Foreign orders for Japanese machinery tumbled 9.4% in March and by 4.7% in the quarter.
Japan’s trade deficit of JPY 463 billion last month surpassed expectations, reflecting accelerating import growth. The JPY 561 billion seasonally adjusted deficit was smaller than February’s shortfall and resulted in a JPY 2.127 trillion first-quarter deficit that was 60% narrower than a year earlier.
South Korean business sentiment improved slightly this month to a year and a half high.
U.S. mortgage applications recorded a third straight increase last week, this time of 1.9%, as the 30-year fixed mortgage rate dropped to a six-week low of 7.01%.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank Indonesia, British CPI and PPI, Japanese machinery orders and trade balance, National Bank of Georgia rate cut, Nvidia, Reserve Bank of New Zealand
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