Latest news with #MonetaryPolicy
Bloomberg
8 hours ago
- Business
- Bloomberg
Turkey Poised For First Rate Cut Since Political Crisis in March
Turkey's central bank is expected to make its first interest-rate cut since a political crisis in March, which caused policymakers to reverse an easing cycle. The Monetary Policy Committee led by Governor Fatih Karahan is poised to agree to a reduction of 250 basis points to 43.5%, according to the median forecast of 20 economists surveyed by Bloomberg. There are two notable dissenters: Goldman Sachs Group Inc. is predicting a bigger cut of 350 basis points while Capital Economics Ltd.'s Liam Peach penciled in a smaller one of 200 basis points.
Bloomberg
2 days ago
- Business
- Bloomberg
Deutsche Bank Sees 30-Year Yield Up by Half Point on Powell Exit
The potential ouster of Federal Reserve Chair Jerome Powell by President Donald Trump would drive the 30-year Treasury yield higher by more than half a percentage point, according to Deutsche Bank AG strategists. The clearest hedge against risks to the Fed's independence — and a scenario in which US government spending consumes monetary policy — are yield curve steepener trades, a team including Matthew Raskin and Steven Zeng wrote in a note to clients. These trades benefit if the gap widens between short-term and long-term yields.
Zawya
2 days ago
- Business
- Zawya
Nigeria: MPC faces tough balancing act of sustaining price, exchange rate stability
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) faces a tough balancing act: sustain the naira's recent stability, and control inflation while ensuring that borrowing costs do not continue to suffocate businesses and economic growth. The stage is set for what could be one of the most crucial monetary policy meetings of the year, as the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) convenes its 301st session on July 21–22 in Abuja. Coming at a time of relative macroeconomic stability, the meeting is expected to determine whether Nigeria maintains its current tight monetary policy stance or begins to ease interest rates in response to emerging disinflationary signals. Why this meeting matters The MPC's decisions over the past 12 months have shaped Nigeria's economic direction, with aggressive rate hikes introduced to combat runaway inflation and restore investor confidence. At the last meeting in May, the Committee opted to retain the Monetary Policy Rate (MPR) at 27.5 percent, a decision that signaled cautious optimism amid improving fundamentals. Recent data have supported this cautious approach. Inflation is showing signs of moderation, falling to 22.22 percent in June 2025. The exchange rate has stabilized, with the naira appreciating by 3.6 percent in June to close at N1,529.71/$. Foreign exchange (FX) inflows have improved, bolstered by high yields on Nigerian Open Market Operation (OMO) bills and reforms in the FX market. However, the economy is not out of the woods yet. Food inflation remains high due to insecurity and flooding, while global financial conditions and geopolitical uncertainties continue to pose risks. The Case for holding rates For many analysts, the case for keeping rates unchanged remains strong. Afrinvest Securities Limited expects the MPC to maintain its current stance, citing three key reasons: External Risks: Geopolitical instability in Eastern Europe and the Middle East could disrupt global trade and commodity prices. Domestic Food Supply Shocks: Insecurity and flooding have tightened food supply chains, posing risks to inflation despite the recent naira gains. Economic Data Uncertainty: The delayed release of Nigeria's rebased GDP figures for Q1 2025 adds uncertainty to policy formulation. Afrinvest projects inflation to ease further, but it warns that a premature rate cut could derail the naira's recent gains. The Committee has previously emphasized that high yields on Nigerian OMO bills are crucial for attracting foreign portfolio inflows, which in turn support FX stability. Similarly, Cordros Securities advocates a cautious approach. In a note to investors, it stated: 'While domestic inflation is expected to continue easing and GDP growth remains robust, a sudden pivot to monetary easing could undermine FX market stability. A gradual approach is preferable as the MPC balances the disinflationary process with exchange rate stability.' Arguments for a rate cut Despite the strong case for maintaining rates, calls for easing are growing louder. Bismarck Rewane, Managing Director of Financial Derivatives Company (FDC) Limited, is leading that charge. He recommends a 25 basis-point cut to 25 percent, arguing that the economy can no longer bear the burden of excessively high borrowing costs. In an emailed note to stakeholders, Rewane said: 'Interest rates above 30 percent are unsustainable for small businesses and manufacturers. The IMF's forecast that Nigeria's inflation will drop to 18 percent in 2026 provides further justification for a gradual shift toward monetary easing.' FDC had projected that headline inflation rate would fall to 22.65 percent in June, citing lower PMS prices, a stable naira, and slowing money supply growth. It eased below the forecast. However, it expected food inflation to tick up slightly to 21.56 percent due to supply chain disruptions. The wider implications of a rate cut, according to FDC, include reduced borrowing costs for small and medium-sized enterprises (SMEs); increased credit availability for the productive sector, and improved consumer demand, which could stimulate growth. FDC further argues that Dangote Refinery's recent decision to cut ex-depot PMS prices could exert additional downward pressure on pump prices, easing inflation further in coming months. Cardoso's caution and CBN's strategy CBN Governor Olayemi Cardoso has, however, consistently signaled caution. Speaking after the 300th MPC meeting in May, he underscored the need to consolidate recent gains rather than risk a premature policy reversal. 'We will continue to enhance collaboration with the fiscal sector to drive growth. Stabilising forex rates, controlling inflation, and boosting investor confidence remain our priorities,' Cardoso said. He reiterated that the apex bank's goals include reducing inflation from double digits to single digits over the medium term, maintaining transparency in FX operations through reforms such as the Electronic Foreign Exchange System (EFEMS) and the Nigerian Foreign Exchange Market (NFEM) FX Code. Sustaining FX liquidity to support exchange rate stability Recent data supports his cautious optimism. The naira gained 6.95 percent in the parallel market to trade at N1,510/$ as of February 20, driven by improved FX liquidity, subdued demand, and consistent CBN interventions. Businesses, especially in the real sector, have applauded the MPC's decision to hold rates, viewing it as supportive of the naira's rally and a restraint on further borrowing cost increases. Macroeconomic fundamentals improving Nigeria's macroeconomic indicators are showing steady improvement, giving the MPC some room to consider future policy easing. GDP Growth: The Committee anticipates robust GDP growth in the medium term, driven by strong non-oil sector performance and increased crude oil production, which stood at 1.74 million barrels per day recently. Trade Balance: A favourable trade balance has eased pressure on FX demand. Inflation Outlook: The rebasing of the Consumer Price Index (CPI) and adjustments to consumption basket weights are expected to reflect more realistic consumption patterns, with inflationary pressures projected to moderate further. Investor Confidence: Transparency in FX operations and the clearing of over $7 billion FX backlog have improved Nigeria's credibility among foreign investors and multilateral organisations. Stakeholders call for policy mix While monetary tightening has been effective in stabilising the exchange rate, some stakeholders argue that Nigeria has reached the limits of what monetary policy alone can achieve. Charles Abuede, Research Head at Cowry Asset Management Limited, said the MPC must now focus on balancing price stability with growth. 'With MPR already at 27.5 per cent and Cash Reserve Requirement (CRR) at 50 percent, monetary policy has been stretched to its limits. We need complementary fiscal and development finance interventions, especially in tackling food inflation,' Abuede said. The Nigeria Economic Summit Group (NESG) agrees, predicting that the MPC could adopt a more accommodative stance later in the year. 'As inflation continues to ease, a gradual reduction in interest rates would stimulate economic activity, particularly in the productive sector,' NESG noted. Global context: Risks and opportunities Globally, the MPC must also weigh risks such as: Geopolitical Tensions. The Russia-Ukraine conflict and Middle Eastern tensions continue to disrupt global trade flows. Tight Global Financial Conditions: Higher interest rates in advanced economies make it challenging for emerging markets like Nigeria to attract portfolio inflows if local yields fall too fast. Trade Policy Uncertainty: The possibility of a global trade war, driven by US tariff hikes, could raise global inflation and dampen growth. However, there are also opportunities. The International Monetary Fund (IMF) has maintained a global GDP growth forecast of 3.3 percent for 2025 and 2026, suggesting that global demand may remain relatively stable. Outlook: What to expect from the 301st meeting Given the mixed signals, most analysts expect the MPC to hold rates at 27.5 percent in July, maintaining its cautious stance until inflation moderates further. However, discussions around a gradual easing in the second half of 2025 are likely to gain traction if inflation continues to trend downward. The MPC's decisions will likely hinge on three key factors: the trajectory of inflation in Q3 2025, sustainability of the naira's recent stability, global financial market trends and portfolio inflows. In the words of Rewane: 'Balancing risks remains delicate – tighten too much, and you stifle growth; ease too soon, and inflation spirals. The MPC must tread carefully.' While there is increasing optimism over easing inflation, the MPC faces a delicate balancing act: cut rates too soon, and it risks undoing recent gains in exchange rate stability; keep rates too high, and economic growth could be stifled. Whatever the outcome of next week's meeting, one thing is clear—policymakers must carefully navigate the twin goals of sustaining price and exchange rate stability while gradually reviving domestic productivity and investor confidence. For now, stakeholders can only wait as the CBN charts its next steps in navigating Nigeria's economic recovery. Copyright © 2022 Nigerian Tribune Provided by SyndiGate Media Inc. (
Times of Oman
6 days ago
- Business
- Times of Oman
RBI may go for another 25 bps rate cut in August, repo rate to come down at 5.25%: Report
Mumbai: The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) may go for another cut in the policy rate of 25 basis points (bps) in the upcoming August policy meeting, bringing it down to 5.25 per cent, according to a report by ICICI Bank. The report explained that the growth outlook in India remains mixed. While urban demand is weak, rural demand continues to remain strong. Goods exports to the United States are showing improvement, but exports to other regions remain weak. Considering these trends and the current inflation situation, the report believed that August is the right time for a rate cut. It stated "we believe this opens up policy space for an additional 25bps rate cut, taking the terminal rate to 5.25 per cent. When would the MPC cut the policy rate? We believe that August would be the appropriate time for the same, given the muted inflation scenario". The report added that inflation has been much lower than expected since the last MPC meeting. It now estimates inflation for FY26 to average at 2.9 per cent, which is much lower than RBI's earlier projection of 3.7 per cent. This downward trend in inflation opens up space for further policy easing, especially since the MPC currently maintains a neutral stance, which means decisions depend on economic data. The report also mentioned that inflation is expected to rise in Q4 and FY27 due to the base effect. Therefore, the opportunity for the MPC to cut rates may not be available later in the year. On the global front, the report said that the economic outlook remains uncertain and volatile due to tariffs and geopolitical events. A brief conflict in the Middle East last month led to a sharp rise in oil prices. Also, the recent tariffs announced by U.S. President Donald Trump, set to be implemented from August 1, are higher than current levels and are already reflecting in inflation data. U.S. inflation rose to 2.7 per cent year-on-year in June from 2.4 per cent in May. While the U.S. economy has performed better than expected, there are signs of slowing momentum. Private hiring is weakening and retail sales have dropped, which indicates possible stagflation in the near term. This situation is currently preventing the U.S. Federal Reserve from cutting interest rates. However, as growth weakens further in the coming months, the Fed may turn more supportive of rate cuts later this year.
Reuters
6 days ago
- Business
- Reuters
Ghana's central bank convenes emergency MPC meeting
ACCRA, July 17 (Reuters) - Ghana's central bank convened an emergency meeting of its Monetary Policy Committee on Thursday to assess recent economic developments, the bank said in a statement. The Bank of Ghana's fourth rate-setting MPC meeting for the year had initially been slated to start on July 28, with the rate decision expected on July 30. In a statement released late Wednesday, the central bank said the MPC would "review recent developments in the economy" during the special session. The outcome of the meeting, including any policy decisions, will be announced on Friday. The Bank of Ghana last held a scheduled MPC meeting in May, where it opted to maintain the policy rate at 28.0%, maintaining its tight monetary policy as inflationary pressures continued to ease due to exchange rate stability and fiscal consolidation. Ghana's consumer price inflation slowed for the sixth month in a row to 13.7% in June, its lowest level since 2021, while the bellwether producer price inflation fell to 5.9% year-on-year in June compared with 10.2% the previous month. The finance minister is expected to present the cocoa-, gold-, and oil-producing West African nation's mid-year fiscal policy review on July 24.
