2023-12-14 10:27

Norway raises key policy rate to 4.5% to quell inflation Hike may be the final tightening Majority in Reuters poll had expected unchanged rate Eyes rate cut in autumn of 2024 OSLO, Dec 14 (Reuters) - Norway's central bank raised its benchmark interest rate by 25 basis points to 4.50% in a surprise decision on Thursday as it sought to combat persistent inflation, and said it would likely stay put at that level until late 2024. Of 27 economists polled in advance by Reuters, 15 had expected rates to stay on hold on Thursday while a minority of 12 had forecast a hike to 4.50%. Norges Bank was ready to hike again if necessary but could also cut rates if inflation were to fall more quickly than expected, Governor Ida Wolden Bache told a press conference. "If the economy evolves as currently envisaged, there will not be a need for additional rate hikes," Bache said. "The forecast indicates that the policy rate will continue to lie around 4.5% until autumn 2024 before gradually moving down," she added. The Norwegian crown strengthened by about 1.5% to 11.51 against the euro at 1002 GMT, from 11.67 just before the announcement. The central bank had said last month it would likely raise the cost of borrowing in December, with the caveat that a decline in core inflation could change its monetary policymakers' minds. "We see that the economy is cooling down, but inflation is still too high. An increase in the policy rate now reduces the risk of inflation remaining high for a long period of time," Bache said in a statement accompanying the decision. Having peaked at 7.0% in June, Norway's annual core inflation, which excludes energy costs, stood at 5.8% in November, below the central bank's forecast of 6.1% but still far above the 2.0% target. The central bank raised its forecast for 2024 core inflation to 4.8% from a forecast of 4.7% made in September. The forecast for 2025 was raised to 3.5% from 3.4%. The Norwegian crown has been consistently weaker than predicted by the central bank, potentially stoking inflation. On a trade-weighted basis, the currency had weakened by around 9% this year until Wednesday's market close. The decision to hike was "quite hawkish", Nordea analysts said in a note to clients, having anticipated an unchanged rate. "The new interest rate path is slightly lower further out and shows a certain probability of an interest rate cut by the end of 2024," Nordea said. "Norges Bank has placed more emphasis on the weak crown than soft macro data." Norges Bank's next policy decision is due on Jan. 25. The Federal Reserve left U.S. interest rates unchanged on Wednesday and said the historic tightening of monetary policy is likely over, with a discussion of cuts in borrowing costs coming "into view." The Swiss National Bank on Thursday held its policy interest rate steady at 1.75%. The European Central Bank and Bank of England are also expected to keep rates on hold later in the day. https://www.reuters.com/markets/rates-bonds/norway-hikes-rates-by-25-basis-points-surprise-decision-2023-12-14/

2023-12-14 09:31

KAMPALA, Dec 14 (Reuters) - The Ugandan shilling gained ground on Thursday, lifted by falling demand for dollars from importers in manufacturing and telecoms sectors, traders said. At 0912 GMT, commercial banks quoted the shilling at 3,770/3,780 per dollar, stronger than Wednesday's closing rate of 3,785/3,795. https://www.reuters.com/markets/currencies/ugandan-shilling-strengthens-due-falling-importer-dollar-demand-2023-12-14/

2023-12-14 09:06

Bank of England set to keep rates at 15-year high of 5.25% Economists expect 3 MPC members to vote for rate hike BoE wrestling with higher inflation than Fed or ECB Weak October growth raises risk of UK recession Markets see almost 125 bps of rate cuts next year LONDON, Dec 14 (Reuters) - The Bank of England looks set to keep interest rates at a 15-year high later on Thursday, but investors are most focused on whether policymakers will push back against fast-growing market bets on a string of rate cuts next year. The BoE has held rates at 5.25% since August after 14 back-to-back rises starting in December 2021. Governor Andrew Bailey has stressed borrowing costs need to stay high "for an extended period" to kill off the threat posed by inflation pressures. With other central banks suggesting that cuts are coming, including the Federal Reserve's clearest signal yet about a change in stance on Wednesday, the BoE's hard line against such talk in Britain is being challenged in markets. Investors on Thursday were pricing almost five quarter-point reductions in Bank Rate during 2024, with the first reduction possibly taking place as soon as March. Those positions may alarm the BoE which remains worried about inflation. While this is down from the 41-year high of 11.1% which it hit in October 2022, it is still more than double the BoE's target, at 4.6%, and higher than in other rich countries. It is forecast to fall only gradually over the next two years. However, data this week has come in weaker than expected, raising the possibility that inflation will fall faster and that the BoE may have to change course sooner than it has suggested. Britain's economy shrank by 0.3% in October, the first drop since July and one which suggests that it - like some countries in the euro zone - is at risk of recession. Wage growth also slowed more than expected - though at 7.3% in the three months to October, it is still close to the record high of 7.9% set over the summer and remains the principle source of the BoE's inflationary angst. The central bank has finance minister Jeremy Hunt's Nov. 22 budget update to consider too, which laid the ground for tax cuts in the run-up to a national election expected in 2024. SLOW FALL IN INFLATION This week's soft economic data may not change the BoE's view that returning inflation to its 2% target will be a slow task. Last month the central bank set out a gloomy prognosis for Britain's economy: growth would be zero next year, but mismatches in the labour market created in part by COVID-19 and Brexit left it more vulnerable to persistent inflation than the United States or the euro zone. "Markets are going - 'They've got to pivot'. I still think that's premature and in some ways they have to be even more gung-ho about keeping rates in restrictive territory," said Hetal Mehta, head of economic research at British investment manager St James's Place. The BoE announcement at 1200 GMT will be sandwiched between those of the U.S. Federal Reserve and the European Central Bank, which is also expected to keep rates on hold at 1315 GMT. Markets have seen the Fed and ECB cutting interest rates earlier and faster than the BoE next year, largely because inflation is much nearer target in both the United States and the euro zone. The BoE has limited opportunity to fine-tune market rate expectations, as this month it has no quarterly forecast update or news conference scheduled. Indeed, some BoE policymakers have been making the case that rates still need to rise. Three of the BoE Monetary Policy Committee's nine members voted for a quarter-point rate rise last month, and according to a Reuters poll of economists last week, they are likely to do so again. The only BoE policymaker to discuss the timing of a rate cut has been Chief Economist Huw Pill who shortly after November's decision said the market expectation then for a first rate cut in August 2024 "doesn't seem totally unreasonable". Two days later, Bailey said it was "really too early" to discuss when rates might be cut. "The trend we've seen lately is that central bankers want to carry on talking tough until they are ready," said Isabel Albarran, Investment Officer at Close Brothers Asset Management. "But it's quite common that they cut rates at a more rapid clip than they raise them." https://www.reuters.com/markets/rates-bonds/bank-england-hold-rates-markets-raise-bets-2024-cuts-2023-12-14/

2023-12-14 09:03

SHANGHAI/SINGAPORE, Dec 14 (Reuters) - China's central bank is expected to ramp up liquidity injections while leaving the key interest rate unchanged when it rolls over maturing medium-term policy loans on Friday, a Reuters survey showed. Among thirty-two market participants polled this week, 29 or 91% expected the People's Bank of China (PBOC) to keep the borrowing cost of one-year medium-term lending facility (MLF) loans unchanged, while the remaining three projected a marginal interest rate cut. The interest rate on the MLF loans currently stands at 2.5%. Additionally, 26 or 81% of all respondents predicted that the central bank would inject fresh funds to exceed the maturing 650 billion yuan ($91.11 billion) worth of the MLF loans on Friday. "We look for an outsized MLF to buffer liquidity demand emanating from bond sales and loans; if there is no outsized MLF, then a reserve requirement ratio (RRR) cut is probably needed," said Frances Cheung, rates strategist at OCBC Bank. Over recent months, China has started to unleash fresh stimulus to shore up the economy. In a surprise move, Beijing in late October approved 1 trillion yuan of sovereign bond issuance for this year - its first such budget deficit expansion in a fiscal year in 23 years - and passed a bill to allow local governments to frontload part of their 2024 bond quotas. The PBOC injected a net 600 billion yuan of cash via MLF loans into the banking system in November, the biggest monthly increase since December 2016. Expectations of an interest rate reduction has increased slightly as China has been facing heightened deflationary pressure, with consumer prices falling the fastest in three years in November while factory-gate deflation deepened. "The main barrier to PBOC rate reductions since the middle of this year has been the strength of the dollar," said Julian Evans-Pritchard, head of China economics at Capital Economics. "However, U.S. yields have fallen and the renminbi has strengthened recently. The currency has now returned to levels that the PBOC is more comfortable with, which should open the door to a resumption of rate cuts." With China's economy sputtering and the U.S. dollar surging until recently, the yuan has had a volatile year, having weakened 6.14% to the dollar at one point before giving back some of the losses on views that U.S. interest rates have peaked. On Wednesday, the Federal Reserve took a decidedly dovish tilt by flagging rate cuts were on the way next year. The yuan strengthened 2.55% in November, its best month this year, but it is still down about 3.3% year-to-date. China will step up policy adjustments to support an economic recovery in 2024, state media said, following the annual Central Economic Work Conference held from Dec. 11-12, during which top leaders set economic targets for next year. "This signals that the Chinese leadership wants to put more weight on the economy than it did earlier this year," said Tommy Wu, senior China economist at Commerzbank. "Monetary policy will continue to be about providing sufficient but not excessive liquidity. This means any rate cuts and stimulus measures will likely be modest." ($1 = 7.1341 Chinese yuan) https://www.reuters.com/markets/asia/chinas-cbank-set-boost-liquidity-injection-keep-key-rate-unchanged-2023-12-14/

2023-12-14 08:38

Bullish bets firm on most Asian currencies Bearish bets on indian rupee, chinese yuan ease Thai baht turns bearish again Dec 14 (Reuters) - Bullish bets firmed on most emerging Asian currencies as expectations of an end to U.S. interest rate hikes triggered an easing in the greenback, boosting investors' appetite for riskier assets, a Reuters poll showed on Thursday. Long positions on the Taiwanese dollar , the South Korean won and the Singapore dollar strengthened, according to a fortnightly poll of 10 analysts. Sentiment towards riskier Asian currencies has improved in recent times as market participants bet on U.S. dollar weakness after the U.S. Federal Reserve's latest economic projections indicated an end to the interest-rate hike cycle. The dollar sank to a fresh four-month low after the Fed left interest rates unchanged on Wednesday and said the historic tightening of monetary policy was likely over with inflation falling faster than expected and a discussion of cuts in borrowing costs coming "into view." "The FOMC's pivot to internally discussing rate cuts at its last meeting for 2023 (from rate hikes before) has pushed USD-Asia down sharply. It looks like Asian currencies will end the year 2023 on an optimistic note again like they did in 2022," analysts at HSBC wrote. Bullish bets on the Philippine peso also firmed. Most of the responses were received before the Bangko Sentral ng Pilipinas kept its benchmark interest rate steady at 6.50% for a second straight meeting, but signalled policy would stay tight for longer to bring inflation back to target. Data from Thailand, the Philippines and South Korea last week showed that inflation eased in November, likely providing central banks a little breathing room in terms of rates. In contrast, data from India showed retail inflation in November rose at its fastest pace in three months, bolstering bets that the Reserve Bank of India will not ease interest rates anytime soon. Short positions on the Indian rupee were at the lowest since late July. The investors turned slightly bearish towards the Thai baht after briefly turning bullish on the currency a fortnight ago. Bearish bets on the Chinese yuan and the Malaysian ringgit also eased. The Chinese economy has struggled to mount a strong post-pandemic recovery as the deepening housing crisis, local government debt concerns, slowing global growth and geopolitical tensions have curbed momentum, and the flurry of policy support measures have proven only modestly beneficial. "With the fear of the Fed now out of the way, the remaining common headwinds for Asian currencies in 2024 are: slowing global growth (as earlier rate hikes start to bite in the advanced economies), US election cycle uncertainty, and downside risks to the Chinese economy," HSBC analysts added. The Asian currency positioning poll is focused on what analysts and fund managers believe are the current market positions in nine Asian emerging market currencies: the Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Indian rupee, Philippine peso, Malaysian ringgit and the Thai baht. The poll uses estimates of net long or short positions on a scale of minus 3 to plus 3. A score of plus 3 indicates the market is significantly long U.S. dollars. The figures include positions held through non-deliverable forwards (NDFs). The survey findings are provided below (positions in U.S. dollar versus each currency): https://www.reuters.com/markets/currencies/asian-fx-bulls-firm-investors-bet-rates-peaking-eye-cuts-ahead-2023-12-14/

2023-12-14 08:13

C.bank says policy needs to remain "sufficiently tight" Risks to inflation lean to the upside Some economists think cbank done hiking rates MANILA, Dec 14 (Reuters) - The Philippine central bank kept its benchmark interest rate steady at 6.50% for a second straight meeting on Thursday as price pressures have started to ease, but said policy would have to stay "sufficiently tight" to bring inflation back to target. All but one of the 24 economists in a Dec. 5-11 Reuters poll correctly predicted the central bank's decision. One expected a quarter-point hike. "The Monetary Board continues to see the need to keep current policy settings sufficiently tight," Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona told a press conference, reiterating the central bank's readiness to adjust policy as needed. Annual inflation rose at its slowest pace in 20 months in November at 4.1% versus the previous month's 4.9%, bringing the average rate over the 11-month period to 6.2%, which was still well outside the central bank's 2%-4% target. The central bank lowered its risk-adjusted inflation forecast to 6.0% this year from 6.1%, and to 4.2% next year, from 4.4%, but noted that risks to inflation "still leans significantly toward the upside." Economists in the same Reuters poll believed the central bank was done hiking rates, with median forecasts showing policy on hold until the end of the second quarter of 2024, with the next move likely to be a cut. "With inflation headed lower and the Fed dovish, more signs point to BSP being done with rate hikes," ING Economist Nicholas Mapa said on X platform. But when asked if the central bank was nearing or at the end of its tightening cycle, senior assistant governor Illuminada Sicat said: "We need some firm indications that inflation expectations are already anchored firmly within the target range." The Fed left interest rates unchanged on Wednesday and Chair Jerome Powell said its historic tightening of monetary policy is likely over, with a discussion of cuts in borrowing costs coming "into view". https://www.reuters.com/markets/rates-bonds/philippines-cbank-keeps-benchmark-rate-unchanged-650-2023-12-14/