Monthly Newsletter on key sectors of Pakistan Economy with updates on Money Market and Pakistan Stock Exchange (PSX) and latest numbers of Inflation, Current and Fiscal Account.
Since the previous meeting of the Monetary Policy Committee (MPC), several risks to the inflation outlook have begun to materialise. While headline inflation is comfortably within the inflation target band, indications are that we have passed the low point of the current cycle. Developments in the international environment have placed upward pressure on the inflation trajectory, while the domestic growth outlook remains challenging.
Highlights on Global Central Bank Policy Rates as on July 2014Jhunjhunwalas
Highlights on Global Central Bank Policy Rates as on July 2014
#CentralBankOfHungary reduced BaseRate by 20 basis points to 2.10% with effect from 23rd July 2014
#Hungary #MagyarNemztiBank #MNB
#CentralBankOfRussia raised #KeyRate to 8.0 % on July 25th 2014 , #Russia #CBR #BankOfRussia
#ReserveBankOfNewZealand raised OfficialCashRate by 25 basis points to 3.50% on 24th July 2014 , #RBNZ #NewZealand
#CentralBankofNigeria retains #MonetaryPolicyRate at 12% #MPR,#MPC Monetary Policy Comittee met on 21st and 22nd July 2014.
#MonetaryPolicy of #CentralBankofTrinidadAndTobago maintains #RepoRate at 2.75%
#BankOfIsrael , As on 28th July 2014 the #MonetaryCommittee reduces the #InterestRate for August 2014 by 0.25 percentage points, to 0.5 percent, #BankIsrael #CentralBankOfIsrael #Israel
Monthly Newsletter on key sectors of Pakistan Economy with updates on Money Market and Pakistan Stock Exchange (PSX) and latest numbers of Inflation, Current and Fiscal Account.
Since the previous meeting of the Monetary Policy Committee (MPC), several risks to the inflation outlook have begun to materialise. While headline inflation is comfortably within the inflation target band, indications are that we have passed the low point of the current cycle. Developments in the international environment have placed upward pressure on the inflation trajectory, while the domestic growth outlook remains challenging.
Highlights on Global Central Bank Policy Rates as on July 2014Jhunjhunwalas
Highlights on Global Central Bank Policy Rates as on July 2014
#CentralBankOfHungary reduced BaseRate by 20 basis points to 2.10% with effect from 23rd July 2014
#Hungary #MagyarNemztiBank #MNB
#CentralBankOfRussia raised #KeyRate to 8.0 % on July 25th 2014 , #Russia #CBR #BankOfRussia
#ReserveBankOfNewZealand raised OfficialCashRate by 25 basis points to 3.50% on 24th July 2014 , #RBNZ #NewZealand
#CentralBankofNigeria retains #MonetaryPolicyRate at 12% #MPR,#MPC Monetary Policy Comittee met on 21st and 22nd July 2014.
#MonetaryPolicy of #CentralBankofTrinidadAndTobago maintains #RepoRate at 2.75%
#BankOfIsrael , As on 28th July 2014 the #MonetaryCommittee reduces the #InterestRate for August 2014 by 0.25 percentage points, to 0.5 percent, #BankIsrael #CentralBankOfIsrael #Israel
So far Sterling and Japanese and European equity markets have borne the brunt of the initial shock, while the FTSE is down only 3.3% since Thursday and most major and emerging market currencies have been reasonably well behaved (see Figure 1).
But there are still far many more questions than answers and the situation remains extremely fluid.
For starters there is no precedent for a country leaving the EU and thus no clear-cut rulebook to rely on. The government has limited institutional capacity to start negotiations with the UK’s 27 EU partners until Article 50 of the Lisbon Treaty is triggered and no timeline has been provided for when this will happen (assuming it is triggered at all).
Perhaps unsurprisingly given the mammoth task ahead, the Leave campaign leaders have been very short on specifics regarding the mechanics and timing of the UK’s exit from the EU, the likely shape of future trade treaties and national policies such as immigration. Prime Minister Cameron’s de-facto resignation and wholesale changes in personnel in the opposition Labour Party are adding to the head-scratching.
Moreover, it is not one country seeking to leave the EU, but a union of four countries – England, Wales, Scotland and Northern Ireland – which further complicates matters as both Scotland and Northern Ireland seem intent on remaining part of the EU and potentially breaking free from the UK.
At this point in time, all we can do is take stock of what we know (or at least we think we know) and what we don’t know (but can tentatively try to forecast).
I would conclude, as I did in Europe – the Final Countdown (21 June 2016), that the many layers of political, legal, economic and financial uncertainty are likely to keep UK investment, consumption and employment, as well as Sterling on the back-foot for months to come. Financial market volatility is also likely to remain elevated in coming weeks.
In this context the US Federal Reserve is likely to keep rates on hold in coming months and the European Central Bank can probably afford to do little for the time being. The Bank of England is likely to seriously contemplate cutting its policy rate while the Bank of Japan will be under renewed pressure to curb soaring Yen strength.
Of course, British policy-makers and business associations have come out and said the right things in order to limit the carnage and contagion. But they have far more limited room to reflate the economy and fade gyrations in financial markets than they did during the 2008-2009 great financial crisis. They are not in control at this juncture and it is not obvious who is.
The recent correction in global financial markets has left developed market equities about 10% cheaper and emerging market equities 25% cheaper, removing a lot of the valuation froth that was evident.
Commenting in Novare Investments’ economic report for the third quarter of 2015, Francois van der Merwe, Head of Macro Research, said: “We expect global equities to be supported by continued accommodative monetary policies, soft inflation and a moderate global economic recovery.
Bullard Fed US Macroeconomic Outlook 2017AtoZForex.com
St. Louis President and Chief Executive of the Federal Reserve Bank James Bullard addresses the Fed US Macroeconomic Outlook 2017 during an International Distinguished Lecture at the Australian Center for Financial Studies.
From ELANA Trading: Macroeconomic and Market Outlook 2015 „Bulgaria: Back on ...ELANA Group
This research report offers a thorough view on the major macroeconomic trends in Bulgaria, looking also into all internal and external factors such as crisis in Russia and Ukraine, as well as Greece turmoil. The outlook includes a snapshot of the Bulgarian stock market and its movers & shakers as well as ELANA Trading analysts top picks.
Some analysts points:
- We are cautious for 2015, but looking for a GDP growth pick up in 2016.
- Factors to watch during in 2015 would be the first decisive moves for reforms of the new coalition government, Greece and the crisis in Ukraine.
- The recent capital market decline provides good buying opportunities in various sectors as banks and financial services, electrical equipment, pharmaceuticals, etc.
- Upcoming IT IPO to boost market vitality.
The SVB Asset Management Economic Report, Q2 2017, is a review of and outlook on economic factors that impact global markets and business health.
In this edition, the team discusses the U.K.’s Article 50 notice and the FOMC’s current path towards normalization. The report also examines the Trump Administration’s first 100 days in office and current business sentiment.
Ivo Pezzuto - FEDERAL RESERVE'S RATE RISE. COMING SOON? The Global Analyst Se...Dr. Ivo Pezzuto
This article, written on August 31st, 2015 by Prof. Ivo Pezzuto, predicts that mostly likely the Federal Reserve will hike interest rates at the December 16th-17th FOMC meeting, given the current global economic turbulence and outlook, and that a rate rise will be more likely at the end of 2015 or in early 2016 if the US economy will continue to improve and in the absence of systemic crises.
Standpoint: Global Reflation by Kevin Lings STANLIB
Fears of sustained deflation and stagnant growth in the United States and Europe have been replaced by a more optimistic growth outlook as well as concerns about rising inflation. This has driven developed market equities higher, but also weakened major bond markets.
So far Sterling and Japanese and European equity markets have borne the brunt of the initial shock, while the FTSE is down only 3.3% since Thursday and most major and emerging market currencies have been reasonably well behaved (see Figure 1).
But there are still far many more questions than answers and the situation remains extremely fluid.
For starters there is no precedent for a country leaving the EU and thus no clear-cut rulebook to rely on. The government has limited institutional capacity to start negotiations with the UK’s 27 EU partners until Article 50 of the Lisbon Treaty is triggered and no timeline has been provided for when this will happen (assuming it is triggered at all).
Perhaps unsurprisingly given the mammoth task ahead, the Leave campaign leaders have been very short on specifics regarding the mechanics and timing of the UK’s exit from the EU, the likely shape of future trade treaties and national policies such as immigration. Prime Minister Cameron’s de-facto resignation and wholesale changes in personnel in the opposition Labour Party are adding to the head-scratching.
Moreover, it is not one country seeking to leave the EU, but a union of four countries – England, Wales, Scotland and Northern Ireland – which further complicates matters as both Scotland and Northern Ireland seem intent on remaining part of the EU and potentially breaking free from the UK.
At this point in time, all we can do is take stock of what we know (or at least we think we know) and what we don’t know (but can tentatively try to forecast).
I would conclude, as I did in Europe – the Final Countdown (21 June 2016), that the many layers of political, legal, economic and financial uncertainty are likely to keep UK investment, consumption and employment, as well as Sterling on the back-foot for months to come. Financial market volatility is also likely to remain elevated in coming weeks.
In this context the US Federal Reserve is likely to keep rates on hold in coming months and the European Central Bank can probably afford to do little for the time being. The Bank of England is likely to seriously contemplate cutting its policy rate while the Bank of Japan will be under renewed pressure to curb soaring Yen strength.
Of course, British policy-makers and business associations have come out and said the right things in order to limit the carnage and contagion. But they have far more limited room to reflate the economy and fade gyrations in financial markets than they did during the 2008-2009 great financial crisis. They are not in control at this juncture and it is not obvious who is.
The recent correction in global financial markets has left developed market equities about 10% cheaper and emerging market equities 25% cheaper, removing a lot of the valuation froth that was evident.
Commenting in Novare Investments’ economic report for the third quarter of 2015, Francois van der Merwe, Head of Macro Research, said: “We expect global equities to be supported by continued accommodative monetary policies, soft inflation and a moderate global economic recovery.
Bullard Fed US Macroeconomic Outlook 2017AtoZForex.com
St. Louis President and Chief Executive of the Federal Reserve Bank James Bullard addresses the Fed US Macroeconomic Outlook 2017 during an International Distinguished Lecture at the Australian Center for Financial Studies.
From ELANA Trading: Macroeconomic and Market Outlook 2015 „Bulgaria: Back on ...ELANA Group
This research report offers a thorough view on the major macroeconomic trends in Bulgaria, looking also into all internal and external factors such as crisis in Russia and Ukraine, as well as Greece turmoil. The outlook includes a snapshot of the Bulgarian stock market and its movers & shakers as well as ELANA Trading analysts top picks.
Some analysts points:
- We are cautious for 2015, but looking for a GDP growth pick up in 2016.
- Factors to watch during in 2015 would be the first decisive moves for reforms of the new coalition government, Greece and the crisis in Ukraine.
- The recent capital market decline provides good buying opportunities in various sectors as banks and financial services, electrical equipment, pharmaceuticals, etc.
- Upcoming IT IPO to boost market vitality.
The SVB Asset Management Economic Report, Q2 2017, is a review of and outlook on economic factors that impact global markets and business health.
In this edition, the team discusses the U.K.’s Article 50 notice and the FOMC’s current path towards normalization. The report also examines the Trump Administration’s first 100 days in office and current business sentiment.
Ivo Pezzuto - FEDERAL RESERVE'S RATE RISE. COMING SOON? The Global Analyst Se...Dr. Ivo Pezzuto
This article, written on August 31st, 2015 by Prof. Ivo Pezzuto, predicts that mostly likely the Federal Reserve will hike interest rates at the December 16th-17th FOMC meeting, given the current global economic turbulence and outlook, and that a rate rise will be more likely at the end of 2015 or in early 2016 if the US economy will continue to improve and in the absence of systemic crises.
Standpoint: Global Reflation by Kevin Lings STANLIB
Fears of sustained deflation and stagnant growth in the United States and Europe have been replaced by a more optimistic growth outlook as well as concerns about rising inflation. This has driven developed market equities higher, but also weakened major bond markets.
In this issue of Economy Matters, we analyse the recent Fed rate hike and Euro Zone economic prospects, in the section on Global Trends. We have covered data trends in GDP, IIP, Inflation, Monetary Policy and Trade in the Domestic Trends section. Find out the results of 2QFY16 In Corporate Performance section. Taxation section covers the views of Sumit Dutt Mazumder, former Chairman of CBEC on GST. The Sectoral Spotlight for this issue is on Financial Conditions Index for 3QFY16. Read Focus of the Month, to know about ‘Skilling India’, wherein experts from diverse areas present their views.
Macroeconomic Developments Report. December 2019Latvijas Banka
The Macroeconomic Developments Report is published on a semi-annual basis. This publication assesses developments of the external sector and exports, financial market, domestic demand and supply, prices and costs, and balance of payments, and provides forecasts for the economic development and inflation.
From the Desk of the CEO.
The heat is on. While many of us have been vacationing in cooler climes, the Sensex has kept itself rather busy, gaining another 4% during the month of May. The upmove has come largely on the back of better-than-expected corporate results and expectations of a good monsoon. Markets are also taking cognisance of various indicators like improved auto sales, higher steel and cement offtake, public infrastructure spending, etc. which are positive signs of an imminent economic recovery.
Crude prices have silently crept up and are currently hovering at the $50 level, almost double from the January lows. So despite the adverse implications of higher crude prices on the Indian economy, there seems to be some positive correlation between crude prices and the equity markets. Though this pattern may not have always played out in the last few decades, the first few months of 2016 certainly seem to indicate so. The main reason for this is the significantly high weightage that the Energy sector has in indices the world over. When oil plummeted to sub-$30 levels, it seriously impacted the profitability of some of the world’s biggest corporations, not only causing their stock prices to fall sharply, but also impacting the broader markets in general. It also indicated a global recessionary trend, thus affecting investor sentiment and causing them to become nervous and risk-averse. The bounce back in crude has brought the price to a level that makes it profitable for companies to drill, creating a sense of well-being for both, the Energy sector as well as the countries whose economies are dependent solely on oil. Where crude prices go from here remains to be seen.
After several quarters of benign inflation, the WPI rose to 0.34% while retail inflation soared to 5.39% in April 2016. This, coupled with higher oil prices would make it difficult for Governor Rajan to announce a rate cut at the next RBI policy meeting on 7th June. Across the globe however, Janet Yellen’s comments on improving economic data in the US has the markets believing that a rate hike by the US Federal Reserve is a high possibility during its next meeting in mid-June. The outcome of Britain’s referendum on Brexit is also an event that we will be closely watching.
With markets factoring in all the good news for now, conventional logic says that short term investors need to be cautious. But when the stock market catches momentum, all negative predictions may be proven wrong.
There are of course, many more bulls than bears when it comes to a 1 year plus view. Long term investors may continue their investments and look to buy into any dips.
Wish all of you a happy monsoon season.
Macroeconomic Developments Report. June 2018Latvijas Banka
Based on data from Latvijas Banka, Central Statistical Bureau of Latvia, Ministry of Finance, and Financial and Capital Market Commission, this publication assesses developments of the external sector and exports, financial market, domestic demand and supply, prices and costs, and balance of payments, and provides forecasts for the economic development and inflation. The publication is available only in electronic form.
The SVB Asset Management Economic Report, Q1 2017, is a review of and outlook on economic and market factors that impact global markets and business health.
In this edition, the team discusses the Fed's recent activity and its intentions to raise benchmark interest rates three times in 2017. The report also focuses on how the new U.S. administration will impact domestic and global economies.
LBS Asset Allocation August Update - July 28, 2017Mark MacIsaac
Global economic data continue to point to robust and synchronized economic growth with the release of stronger-than-expected ISM surveys, German IFO business climate survey and Chinese Q2 real GDP growth data.
Borrowing costs for middle-market debt issuers generally declined during the third quarter, despite a modest increase in leverage levels and little change in benchmark rates. The Fed, as expected, left benchmark interest rates unchanged in the third quarter, but did announce a program to gradually reduce its balance sheet from $4.5 trillion (a result of recessionary quantitative easing) to $3 trillion over the next three years. Thus, the prevailing combination of low borrowing costs, high leveragability and a generally benign default rate outlook, presents an attractive backdrop for issuance. This "perfect storm" of market conditions provides a compelling (albeit narrowing) window for middle-market issuers.
Emerging markets analysis from Emerging Markets FX at Swedbank.
This publication is forcasting currency developments for selected emerging markets countries with a time horizon of 3 months.
Similar to Statement of the monetary policy committee 25 may 2017 (20)
Ministry of Justice Extradition Eswatini 3.pdfSABC News
The Ministry of Justice and Correctional Services has confirmed that an extradition application for the two men linked to the murder of Kiernan 'AKA' Forbes and Tebello 'Tibz' Motsoane has been approved and sent to the Director of Public Prosecutions in eSwatini.
January’s Producer Price Index increases to 4.7%SABC News
Statistics South Africa (Stats SA) has released the Producer Price Index (PPI) for January, which rose to 4.7% year-on-year, compared with 4% in December.
MEC MAJUBA SADDENED BY THE PASSING AWAY OF THREE TEACHERS FOLLOWING A CAR ACC...SABC News
The Mpumalanga Department of Education has learnt with shock and sadness about an accident which claimed the lives of three teachers along the N4 road towards Mbombela.
Minister Gordhan Announces New Transnet Board Appointments_11 July 2023.pdfSABC News
The nine Trasnet Non-Executive Directors and the reappointment of two will serve a three-year term. Andile Sangqu has been appointed as the new Chairperson.
REMNANTS OF FREDDY BRINGS HEAVY RAINS IN SOME PARTS OF SOUTH AFRICA WHICH MIG...SABC News
The Minister of Cooperative Governance and Traditional Affairs (CoGTA), Dr Nkosazana Dlamini Zuma has called on communities to heed the warning from the South African Weather Service (SAWS) and the disaster management teams across the country.
Letter to the Speaker re extension 14 November 2022.pdfSABC News
Parliament's spokesperson Moloto Mothapo says retried Chief Justice Sandile Ngcobo, who is chairing the panel, has written to Mapisa-Nqakula asking for an extension.
Minister of Justice and Correctional Services Ronald Lamola’s Keynote Address...SABC News
Minister of Justice and Correctional Services Ronald Lamola’s Keynote Address at the Rand Merchant Bank Investment Big Five Investment Conference, 13 September 2022
role of women and girls in various terror groupssadiakorobi2
Women have three distinct types of involvement: direct involvement in terrorist acts; enabling of others to commit such acts; and facilitating the disengagement of others from violent or extremist groups.
31052024_First India Newspaper Jaipur.pdfFIRST INDIA
Find Latest India News and Breaking News these days from India on Politics, Business, Entertainment, Technology, Sports, Lifestyle and Coronavirus News in India and the world over that you can't miss. For real time update Visit our social media handle. Read First India NewsPaper in your morning replace. Visit First India.
CLICK:- https://firstindia.co.in/
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03062024_First India Newspaper Jaipur.pdfFIRST INDIA
Find Latest India News and Breaking News these days from India on Politics, Business, Entertainment, Technology, Sports, Lifestyle and Coronavirus News in India and the world over that you can't miss. For real time update Visit our social media handle. Read First India NewsPaper in your morning replace. Visit First India.
CLICK:- https://firstindia.co.in/
#First_India_NewsPaper
‘वोटर्स विल मस्ट प्रीवेल’ (मतदाताओं को जीतना होगा) अभियान द्वारा जारी हेल्पलाइन नंबर, 4 जून को सुबह 7 बजे से दोपहर 12 बजे तक मतगणना प्रक्रिया में कहीं भी किसी भी तरह के उल्लंघन की रिपोर्ट करने के लिए खुला रहेगा।
हम आग्रह करते हैं कि जो भी सत्ता में आए, वह संविधान का पालन करे, उसकी रक्षा करे और उसे बनाए रखे।" प्रस्ताव में कुल तीन प्रमुख हस्तक्षेप और उनके तंत्र भी प्रस्तुत किए गए। पहला हस्तक्षेप स्वतंत्र मीडिया को प्रोत्साहित करके, वास्तविकता पर आधारित काउंटर नैरेटिव का निर्माण करके और सत्तारूढ़ सरकार द्वारा नियोजित मनोवैज्ञानिक हेरफेर की रणनीति का मुकाबला करके लोगों द्वारा निर्धारित कथा को बनाए रखना और उस पर कार्यकरना था।
01062024_First India Newspaper Jaipur.pdfFIRST INDIA
Find Latest India News and Breaking News these days from India on Politics, Business, Entertainment, Technology, Sports, Lifestyle and Coronavirus News in India and the world over that you can't miss. For real time update Visit our social media handle. Read First India NewsPaper in your morning replace. Visit First India.
CLICK:- https://firstindia.co.in/
#First_India_NewsPaper
In a May 9, 2024 paper, Juri Opitz from the University of Zurich, along with Shira Wein and Nathan Schneider form Georgetown University, discussed the importance of linguistic expertise in natural language processing (NLP) in an era dominated by large language models (LLMs).
The authors explained that while machine translation (MT) previously relied heavily on linguists, the landscape has shifted. “Linguistics is no longer front and center in the way we build NLP systems,” they said. With the emergence of LLMs, which can generate fluent text without the need for specialized modules to handle grammar or semantic coherence, the need for linguistic expertise in NLP is being questioned.
Statement of the monetary policy committee 25 may 2017
1. 1
South African Reserve Bank
PRESS STATEMENT
EMBARGO DELIVERY
25 May 2017
STATEMENT OF THE MONETARY POLICY COMMITTEE
Issued by Lesetja Kganyago, Governor of the South African Reserve Bank
Headline inflation has now returned to within the target range as expected, with
outcomes in March and April surprising on the downside. While the inflation outlook
has improved over the near term, the longer-term forecast trajectory is unchanged
and uncomfortably close to the upper end of the target range. The rand exchange
rate and domestic bond yields benefited from increased global capital inflows to
emerging markets which largely offset the impact of the sovereign credit ratings
downgrade. With further ratings decisions imminent, risks remain for a further
depreciation against the backdrop of continued global and domestic political
uncertainty.
2. 2
Domestic economic growth prospects have deteriorated, as the impact of the ratings
downgrade is expected to weigh on domestic investment and consumer sentiment
over the forecast period. The output gap is estimated to have widened, and
consumer demand has weakened. However, the trajectory of the growth forecast is
still positive, and the growth rate for this year is expected to exceed that recorded in
2016.
The year-on-year inflation rate as measured by the consumer price index (CPI) for all
urban areas moderated to 6.1% and 5.3% in March and April. Food price inflation
was the main contributor to the downside surprise in April when it measured 6.6%.
The contribution of the category of food and non-alcoholic beverages to the overall
inflation outcome declined from 1.5 percentage points in March to 1.1 percentage
points. The Bank’s measure of core inflation, which excludes food, fuel and
electricity, measured 4.8%, down from 4.9%.
Producer price inflation for final manufactured goods also surprised on the downside
at 4.6% in April compared with 5.2% in March. The further moderation in food prices
was also reflected in the PPI with the category of food products, beverages and
tobacco products decelerating for the sixth consecutive month to 6.4%.
The inflation forecast of the Bank has improved over the near term, but is unchanged
in the outer quarters. In line with the previous forecast, headline consumer price
inflation is expected to remain within the range for the rest of the forecast period.
Inflation is expected to average 5.7% this year compared with 5.9% previously, while
the forecast for 2018 has moderated by 0.1 percentage point to 5.3%. The forecast
average for 2019 is unchanged at 5.5%.
3. 3
The improvement is driven by downward revisions to international oil price and
domestic electricity tariff assumptions. In the latter case, a tariff increase of 4.0%
with effect from July 2017 is assumed, down from 8.0%. These revisions have been
offset to some extent by a less appreciated exchange rate assumption, and a slower
decline in food price inflation. A continued moderation of food prices is expected over
the medium term given the favourable agricultural outlook and significant upward
revisions to the maize crop estimates. Food price inflation is expected to average
7.7% and 5.4% in 2017 and 2018, compared with 7.4% and 5.2% previously, and
unchanged at 5.5% in 2019.
The forecast for core inflation in 2017 is 0.4 percentage points lower at 5.0%, partly
due to the lower starting point of 0.2 percentage points following the sizeable
downside surprise in March. The forecast for 2018 declined by 0.1 percentage point
to 5.1%, and is unchanged at 5.3% in 2019.
Market-based inflation expectations are largely unchanged since the previous
meeting of the MPC, with the median forecasts in the latest Reuters Econometer
survey similar to those of the Bank. The median expectation for 2017 declined
marginally to 5.7%, and is unchanged at 5.5% and 5.4% for the next two years.
Expectations implicit in the break-even inflation rates in the bond market have also
moderated since the previous meeting. Break-even inflation rates for shorter-dated
maturities are below 6% but higher than this level for longer-dated maturities.
4. 4
The global growth outlook continues to show signs of sustained recovery amid rising
world trade volumes. Nevertheless, the trend growth rate is expected to be lower
than that experienced before the global financial crisis. The current recovery is
characterised by downward revisions to potential output growth in numerous
countries, and generally low levels of productivity and wage growth. Despite a weak
first quarter, US growth is expected to average above 2.0% this year, although
further policy uncertainty could undermine investor and consumer confidence.
Growth rates in the euro area and Japan are expected to be sustained at around
2016 levels, supported by accommodative monetary policies.
The outlook for emerging markets is also generally positive. Concerns about
Chinese growth have dissipated somewhat following policy intervention, but high
leverage in the financial sector remains a risk. While Russia has emerged from
recession, the expected recovery in Brazil may be undermined by current political
uncertainty. The outlook for commodity producers may be tempered by recent
weaker commodity price trends, particularly those of iron ore and coal.
Global inflation remains relatively benign although country experiences differ.
Inflation is below target in most of the advanced economies, apart from the UK, and
the risk of deflation is low except in Japan. Where high inflation rates are being
experienced in a number of emerging markets, these are generally driven by
exchange rate shocks rather than underlying global price pressures.
5. 5
Monetary policies are also likely to remain divergent. The US Fed is expected to
maintain its moderate pace of tightening, dependent to some degree on the size and
nature of possible fiscal reforms. Policy rates are expected to remain low in most
other advanced economies, but a reduction in quantitative easing is possible in the
near future in the euro area. In general, emerging market economies have displayed
a loosening bias, particularly in those countries where previous policy tightening had
resulted in improved inflation prospects. The high yield differentials of emerging
markets have persisted, sustaining capital flows to these economies.
At the time of the previous meeting of the MPC, the rand was trading at around
R13.00 against the US dollar. It then depreciated following the domestic cabinet
reshuffle and the consequent sovereign credit ratings downgrades by two ratings
agencies. Having reached a weak point of almost R14.00 against the US dollar in
April, the rand subsequently recovered some of these losses in line with improved
sentiment towards emerging markets in general. Some of these gains were reversed
by spill-over effects of recent political uncertainty in Brazil. Since the previous
meeting the rand has appreciated by 0.4% against the US dollar and depreciated by
1.6% on a trade-weighted basis. At current levels the rand is still more appreciated
relative to rates prevailing at this time last year.
Despite the recent weakening, the rand has been supported by a more favourable
current account outlook, following a significant narrowing of the deficit in the final
quarter of last year. A further positive trade balance was recorded in the first quarter
of this year, but a moderately wider current account deficit is expected over the
forecast period, due in part to a recent deterioration in the terms of trade.
6. 6
Non-residents remained net buyers of domestic government bonds in April and May
to date, to the value of R23.2 billion, despite the recent ratings downgrades. This
may change should further downgrades occur, particularly with respect to domestic
currency ratings. The rand therefore remains vulnerable to this prospect, as well as
to changes in global risk sentiment towards emerging markets.
The domestic growth outlook has deteriorated amid weak business and consumer
confidence. The Bank’s forecast for GDP growth has been revised down for the
entire forecast period, by 0.2 percentage points for 2017 and 2018, and by 0.3
percentage points in 2019. Annual growth rates of 1.0%, 1.5% and 1.7% for the
forecast years are now expected. This downward revision is due in part to the
expected impact of the sovereign credit ratings downgrade on domestic private
sector gross fixed capital formation in particular. The downgrade is also likely to
weigh on public sector investment through higher funding costs and more difficult
access to funding.
At the sectoral level, a strong near-term improvement is expected in the agricultural
sector, and mining output has also rebounded. By contrast, the manufacturing sector
outlook remains constrained, with a third consecutive quarterly contraction expected
in the first quarter of this year. In line with this, the latest ABSA Purchasing
Managers Index showed a sharp decline. Growth in the trade sector also appears to
have moderated somewhat.
7. 7
A slower but positive pace of household consumption expenditure growth is forecast
for this year. Real retail and wholesale trade sales contracted in the first quarter of
this year. While domestic sales of passenger motor vehicles improved, the outlook
for the sector remains subdued. Factors such as low consumer confidence, higher
tax burdens, the absence of significant wealth effects and stagnant employment
growth have contributed to these weaker consumption trends.
In addition to these factors, credit extension to the household sector in particular
remains weak, and is reflected in further household deleveraging. Although credit
extension to the corporate sector is still relatively robust, the downward growth trend
has persisted. There may, however, be some relief to consumers from moderating
inflation, while increases in real disposable income over the forecast period are also
expected to provide some support to consumption, but to a lesser extent than
previously.
Nominal salary and wage increases have continued to show signs of moderation, but
are still at levels that contribute to the persistence of inflation at higher levels. While
continued moderation of nominal unit labour costs are expected over most of the
forecast period, the trajectory has been revised slightly upwards largely due to the
weaker economic growth projections.
International oil prices have firmed since the previous meeting, having declined to
levels below US$50 per barrel at one stage. The recovery was a response to
indications that the OPEC agreement to curtail output would be extended for a
further six months. However, the fragility of this agreement, and the increase in shale
8. 8
production in the US is expected to cap increases going forward. The international oil
price assumption has been revised down by US$2 per barrel for each forecast year,
but the moderate upward trend has been maintained. Domestic petrol prices
increased by around 50 cents per litre in May, due to the weaker exchange rate and
higher international product prices. The current over-recovery on the petrol price
indicates that a reduction of around 20 cents per litre is likely in June, mainly due to
international price movements.
The short-term inflation outlook has improved further since the previous meeting of
the Monetary Policy Committee. Headline inflation in April was lower than expected,
largely related to the pace of food disinflation. The MPC notes, however, that there
have been broad-based downside surprises in core inflation as well. The current
forecast does not incorporate the most recent outcomes, and further downside
surprises in the coming months could impact of the starting point of the forecast and
lower the entire trajectory. However, in the absence of such revisions, the MPC
remains concerned about the persistence of the longer-term forecast trend at
elevated levels within the target. This gives very little headroom to absorb the impact
of possible adverse shocks.
The rand remains a key upside risk to the forecast. The rand has, however, been
surprisingly resilient in the face of recent domestic developments. This is partly due
to offsetting factors, particularly positive sentiment towards emerging markets and
the improved current account balance. The current level of the exchange rate, at
below R13.00 against the dollar, is slightly stronger than at the time of the last
9. 9
meeting and stronger than that implicit in the starting point for the real exchange rate
assumption.
The outlook for the rand, and therefore the risks to the inflation outlook, will be highly
sensitive to unfolding domestic political uncertainty, as well as decisions by the credit
ratings agencies. The rand could weaken significantly in the event of a worst-case
ratings downgrade scenario that could result in South African government bonds
falling out of the global bond indices.
A downside risk may come from electricity tariffs. The increases from July may be
lower than the 4.0% now assumed, given the 1.8% guideline for municipalities
published by Nersa. However, there is a great deal of uncertainty with regard to this
assumption for next year, when a new application from Eskom is likely. Currently an
8.0% increase is assumed from July next year.
The MPC assesses the risks to the inflation outlook to be more or less balanced.
Domestic demand pressures remain subdued, and, given the continued negative
consumer and business sentiment, the risks to the growth outlook are assessed to
be on the downside.
In light of these developments the MPC has decided to keep the repurchase rate
unchanged at 7.0% per annum. Five members preferred an unchanged stance while
one member preferred a 25 basis point reduction.
10. 10
The MPC remains of the view that the current level of the repo rate is appropriate for
now and that we are likely at the end of the tightening cycle. A reduction in rates
would be possible should inflation continue to surprise on the downside and the
forecast over the policy horizon be sustainably within the target range. However, in
the current environment of high levels of uncertainty, the risks to the outlook could
easily deteriorate, and derail the current favourable assessment.
Lesetja Kganyago
GOVERNOR
Contact person:
Zamandlovu Ndlovu
012 399 7118
media@resbank.co.za