Tag Archives: Monetary / Fiscal Policy / Policy Maker

UPDATE 1-RBNZ The governor said the inflation target needed to be met before it tightened | Instant News


(Adding comments and details)

WELLINGTON, February 25 (Reuters) – New Zealand’s central bank governor said on Thursday that inflation must continue to be in the midpoint range of its target before tightening monetary conditions are considered.

“We need to be patient … We need to ensure that actual inflation is sustained at that midpoint before we jump into tightening conditions,” Governor Adrian Orr told a parliamentary committee.

The Reserve Bank of New Zealand (RBNZ) kept interest rates unchanged on Wednesday and said it will continue to do so until it believes inflation is maintained at its 2% per annum target midpoint and employment is at its maximum sustainable rate.

Orr said the RBNZ wanted to ensure the economy did not experience a “deflationary and disinflationary spiral.”

New Zealand’s success in tackling the coronavirus has helped usher in a faster economic recovery, with critical data such as jobs, inflation and business confidence posting better than expected results.

But the RBNZ said risks remained for the New Zealand economy focused on trade and tourism until the pandemic spreads globally.

“You can only be so confident in what New Zealand can do on its own … We need the whole world to come join the party as well so that we are on a strong sustainable path,” said Orr.

“Until that happens, further monetary stimulus is needed,” he added. (Reporting by Praveen Menon; Editing by Jonathan Oatis and Hugh Lawson)

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UPDATE 2-New Zealand’s central bank to consider the impact of monetary policy on housing | Instant News


* Housing is added to RBNZ authority, but not mandate

* The RBNZ needs to explain its impact on housing on a regular basis

* Mortgage debt-to-income and interest-only ratio considered (Adding background, comments from analysts and opposition leaders)

WELLINGTON / SYDNEY, February 25 (Reuters) – The New Zealand government on Thursday tasked the country’s central bank with considering the impact of its monetary and financial policy decisions on housing prices, a move to help calm the country’s fiery property market.

Finance Minister Grant Robertson said the Reserve Bank of New Zealand (RBNZ) should consider government policies regarding more sustainable housing prices.

“Today’s announcement is just the first step as the government weighs broader suggestions on how to cool the housing market,” Robertson said in a statement. “We know the rapid improvements we’ve seen in recent months are not sustainable, which means many first-time home buyers have a hard time accessing the market.”

The government’s authority ceases to impose new monetary policy objectives in the RBNZ, the first step in the world that RBNZ Governor Adrian Orr warned late last year when the government first pitched the idea.

Orr argued that adding housing to the bank’s mandate could make monetary policy less effective and affect the efficiency of financial markets, adding that monetary policy alone cannot fix the housing problem.

Orr on Thursday welcomed the addition of remits, which take effect March 1, noting that monetary and financial policy is one of the “many influences on house prices.” He also stressed the monetary policy committee’s targets – maintaining price stability and maximizing sustainable employment – remain unchanged.

Prime Minister Jacinda Arden’s government is under pressure to fix the country’s housing crisis, especially after the failure of its flagship public housing program failed. Property prices have skyrocketed in the past six months due to severe housing shortages and low interest rates.

Like many central banks during the coronavirus pandemic, the RBNZ has pushed interest rates to record lows, relaxed mortgage lending restrictions and incorporated NZ $ 100 billion ($ 70.4 billion) into quantitative easing programs.

These measures, while boosting the economy, have sparked an unprecedented housing market boom. In its latest forecast, the RBNZ sees house price inflation rising to 22.4% by the middle of this year, much higher than the November forecast of 7.9% for this year to June.

POLICY REGULATION

The New Zealand dollar touched its highest level since August 2017 following the government’s announcement, as it reinforces the view that monetary policy will be tighter. The ten-year New Zealand government bond yield was 1.82%, the highest since May 2019.

“Paying attention to housing may make the Reserve Bank more inclined towards meeting its inflation and employment targets … that means monetary policy is tighter than expected in the near term,” said Westpac senior economist Michael Gordon.

An immediate impact on the housing market itself is unlikely, said Gordon.

“The thing that is going to lower house prices are higher interest rates,” said Gordon. “It’s still cheaper to borrow now because it’s been going on for decades.”

Under the amendment, the RBNZ will retain autonomy over how its decisions take into account potential housing consequences, but will need to explain regularly how it takes into account the housing market outcomes.

Banks should also consider the government’s goals to support more sustainable housing prices, including by reducing investor demand for existing housing stocks to help increase the affordability of first-home buyers.

The RBNZ said it was investigating government requests for advice on implementation tools such as debt-to-income ratios and interest-specific mortgages. (Reporting by Renju Jose and Praveen Menon; editing by Jonathan Oatis, Rosalba O’Brien and Jane Wardell)

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Brazil enacts laws guaranteeing central bank autonomy | Instant News


FILE PHOTOS: Overview of the Central Bank of Brazil during the coronavirus disease (COVID-19) outbreak in downtown Brasilia, Brazil, March 20, 2020. REUTERS / Adriano Machado

BRASILIA (Reuters) – Brazilian President Jair Bolsonaro signed into law on Wednesday a law establishing the autonomy of the country’s central bank to ensure it is free from political interference.

The law did not change the way banks set interest rates, but prevented them from becoming political by assigning fixed four-year terms to governors and directors that no longer fit into the presidential election cycle.

The bank president will no longer be part of the ministerial cabinet.

Bolsonaro praised the current head of the bank, Roberto Campos.

“I only signed this law because I believe in your ability and integrity,” said the president.

Monetary authorities already have de facto autonomy to implement policies deemed necessary to achieve inflation targeting goals, but the bank president is technically a member of the cabinet appointed by the Brazilian president.

The law stipulates that the secondary objectives of banks after fighting inflation include ensuring financial system stability, smoothing economic cyclical fluctuations, and promoting full employment.

Economists say it will help boost economic stability, business confidence and attract investment.

Reporting by Anthony Boadle; Edited by Himani Sarkar

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UPDATES The 1-NZ central bank left interest rates unchanged, marking economic uncertainty | Instant News


(Adding details, currency drop)

WELLINGTON, February 24 (Reuters) – New Zealand’s central bank kept its official interest rate at a record low of 0.25%, as expected, on Wednesday, saying the level of stimulation of the current monetary arrangement was needed to meet consumer price inflation and employment payments. .

The Reserve Bank of New Zealand (RBNZ) also maintains a large-scale asset purchase (LSAP) program of NZ $ 100 billion ($ 73.24 billion). Funding for Lending Program (FLP) operations have not changed.

Economists in a Reuters poll unanimously expected the RBNZ to keep interest rates on hold.

“The Committee agreed to maintain the current stimulating monetary arrangement until it is confident that consumer price inflation will be maintained at the midpoint of the 2% per annum target, and that employment is at or above its maximum sustainable rate,” he said in the statement.

Meeting these requirements will take a lot of time and patience, he added.

The New Zealand dollar fell 0.2% after the announcement, settling at $ 0.7359.

The RBNZ said in its Monetary Policy Statement that the recent resilience in the domestic economy implies that no significant additional stimulus is needed at this time.

The central bank cut interest rates by 75 basis points in March last year and said it would remain unchanged for 12 months, while also introducing quantitative easing to support an economy hit by border closures and the coronavirus lockdown.

But the faster recovery of the economy and worries about a burning property market supported by historically low interest rates have led markets to speculate that the easing cycle is over and that a rate hike may come sooner than expected.

Despite improving economic data, the RBNZ, which is one of the most dovish central banks, remains cautious, saying the future economic outlook remains “very uncertain”.

“This ongoing uncertainty is expected to limit business investment and household spending growth,” he said, adding that inflation and employment are likely to remain below their delivery targets over the medium term in the absence of any prolonged monetary stimulus.

The RBNZ has also revised its growth, employment and inflation forecasts, all of which have returned better-than-expected results since the last policy meeting in November. ($ 1 = 1,3654 New Zealand dollars) (Reporting by Praveen Menon and Renju Jose; Editing by Sam Holmes)

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The outlook for Brazil’s 2021 inflation rises to new highs, above the central bank’s target: survey | Instant News


FILE PHOTOS: People walking on a popular shopping street before Christmas, amid the coronavirus disease (COVID-19) outbreak, in Rio de Janeiro, Brazil, December 23, 2020. REUTERS / Pilar Olivares / File Photo

BRASILIA (Reuters) – Brazil’s inflation outlook this year rose for a seventh week and to new highs, a central bank survey of economists showed on Monday, while official interest rates are now expected to double by the end of the year.

The median forecast for IPCA consumer price inflation at the end of this year rose to 3.8% from 3.6%, according to the latest ‘FOCUS’ weekly survey of more than 100 economists.

That’s above the central bank’s target of 3.75%, with a margin of error of 1.5 percentage points on either side, and the highest forecast for 2021 in the series.

The forecast for average inflation over the next 12 months is up to 3.8% from 3.7%. The central bank’s final 2022 target is 3.50%.

A persistently weak exchange rate, strong global commodity prices, and heightened concerns over the government’s fiscal position have all pushed inflation expectations higher, and hence interest rate expectations.

The forecast for the benchmark Selic’s benchmark interest rate at the end of this year rises to 4.00% from 3.75%, the survey showed, showing that markets now expect Selic rates to double this year from the current record low of 2.00%.

Last month, the outlook for the end of 2021 was 3.25%. But the central bank dropped its forward guidance at its January 19-20 policy meeting, citing rising inflation expectations near its target over the next few years.

Credit Suisse and Barclays economists expect the central bank to raise interest rates as early as next month.

The FOCUS survey also showed that economists expect realization later this year at 5.05 per dollar, up from 5.01 per dollar last week. It is currently trading around 5.40 per dollar.

Reporting by Jamie McGeever; Edited by Catherine Evans

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