Latest news with #disinflation
Reuters
a day ago
- Business
- Reuters
Nigeria's central bank pledges to keep policy tight as it holds key rate again
ABUJA, July 22 (Reuters) - Nigeria's central bank kept its monetary policy rate at 27.50% (NGCBIR=ECI), opens new tab for the third consecutive time this year, pledging on Tuesday to maintain its current stance until inflation risks recede. Consumer inflation (NGCPIY=ECI), opens new tab in the oil-producing West African nation fell for the third straight month in June to 22.22% year-on-year from 22.97% in May. Central Bank Governor Olayemi Cardoso acknowledged that inflation was easing. He said the rate-setting Monetary Policy Committee's decision was based on the need to sustain disinflation. "Maintaining the current monetary stance will continue to address the existing and emerging inflationary pressure," Cardoso said, adding the goal was to get inflation to single digits. Most economists polled by Reuters had predicted the central bank would keep the rate unchanged after hiking it six times in 2024 to fight soaring inflation, which repeatedly hit 28-year peaks last year. Price pressures have been spurred by President Bola Tinubu's reforms since coming to office in 2023, including ending costly subsidies and the devaluation of the naira currency . But inflation dropped sharply in January when the statistics agency updated the base year for its calculations and re-weighted the inflation basket, falling to 24.48% in annual terms from 34.80% in December. However, its decline has since slowed. Cardoso said the fall in inflation in June was largely driven by the moderation in energy prices and stability in the foreign exchange market. "Despite these positive developments, members (of the MPC) observed the uptick in month-on-month headline inflation, suggesting the persistence of underlying price pressures, the continued global uncertainties," he said, adding that tariff wars and geopolitical tensions could sustain price pressures. The World Bank has warned that persistently high inflation remains a challenge for Nigeria, urging it to stick to tight monetary and disciplined fiscal policies.
Khaleej Times
15-07-2025
- Business
- Khaleej Times
India's cooling inflation prompts rate cut calls, raises concerns over weakening domestic demand
te hA slump in India's retail inflation to six-year lows and a likely drop to a record low in July is prompting calls for at least one more interest rate cut this year, with many analysts saying the sharp disinflation is also a sign of weakening demand. The drop in June headline inflation is accompanied by low core inflation, which, excluding gold, silver and fuel prices, remains below 4%, suggesting softer underlying consumption which may need more support from monetary policy, analysts say. The Reserve Bank of India cut interest rates by a deeper-than-expected 50 basis points (bps) at its last policy review in June but changed its stance to 'neutral', signalling limited room to cut rates further. After Monday's surprise inflation reading, however, analysts and markets are reflecting the rising possibility of more easing. Swap rates moved lower on Monday and Tuesday, suggesting bets on at least one more rate reduction ahead. Radhika Rao, an economist with DBS Bank, expects another 50 bps of cuts in the current easing cycle. "Considering the softness in incoming activity indicators (e.g. production, credit growth, auto sales), and below-projected inflation in the first half of fiscal 2026, the RBI monetary policy committee will be inclined to ease rates further," Rao said without giving a specific timeframe. The RBI's next policy review is in early August, though analysts think it will wait for more data and clarity on the global trade war front before likely moving in September or October. Demand weakness is slowly starting to show up in indicators across sectors like autos and real estate. Car sales to dealers fell to a 18-month low in June, data showed on Tuesday. Meanwhile, home sales in India's top seven cities fell 20% in the April-June quarter, real estate consultancy firm Anarock said in a report last month. "High frequency indicators continue to show moderation in urban consumption and tentative private capex," said Gaura Sen Gupta, chief economist at IDFC First Bank, who expects one more rate cut from the central bank in October or December. Rate hints India's central bank expects inflation for the full year to be below 3.7%, Governor Sanjay Malhotra told CNBC TV-18 earlier in the day, adding that the monetary policy committee (MPC) will look at the inflation outlook, and not just current data, while deciding on further rate moves. In an interview with the Business Standard following the June policy decision, he had said room may open up if inflation runs lower than its projections. "With the RBI policy stance being at 'neutral', it is difficult to think of a deep rate cut cycle from here," said Samiran Chakraborty, economist at Citi. "But we think the MPC will utilise the space that has opened because of the softer-than-expected CPI prints." In the April-June quarter, inflation averaged 2.7%, below the RBI's forecast of 2.9%. Citi expects July's inflation rate to fall to a record low of 1.1% and average inflation in the financial year 2025-26 of 3.2%, the lowest since 1990. Urban demand lagging Urban consumption in India began to slow last year, which economists attribute to weak wage growth and depleted household savings. Rural demand showed a recovery after a strong monsoon last year, but the pick-up has been inconsistent. Sales of two-wheel vehicles, one of the proxies for rural demand, saw a modest 4.7% increase in June but fell 12.5% month-on-month. Private investment has remained sluggish as well. Capacity utilisation has been stuck at around 75–76% for over a year — below the threshold that typically triggers new capital expenditures, economists said. Madhavi Arora, an economist with Emkay Global, said investment is unlikely to pick up immediately amid global trade uncertainties and a murky domestic demand outlook. "Broadly, the India growth story is stuck at around 6.0%-6.5% kind of range with the story being of missing private economic agents in India," she added. Government capex has picked up in the first quarter of fiscal 2026. But with the government already having announced tax cuts in the budget, most economists said the ability to provide further stimulus is limited from the fiscal side. "The space for fiscal policy to further support growth is limited with downside risk to tax collection and nominal GDP growth. Hence, monetary policy will have to continue to do the heavy lifting to support growth," IDFC's Sen Gupta said.
Reuters
11-07-2025
- Business
- Reuters
ECB should ease monetary policy if disinflationary trends intensify, Panetta says
MILAN, July 11 (Reuters) - The European Central Bank should continue to loosen its monetary policy if threats to economic growth from international trade tensions and geopolitical instability strengthen the current disinflationary trends, a policymaker said on Friday. ECB governing council member Fabio Panetta told an annual meeting of Italy's banking association that the current outlook, which projects euro zone inflation at 1.4% in early 2026 with a return to 2% the following year, was highly uncertain. "The key issue now is whether the current level of interest rates is adequate to keep inflation close to target, avoiding persistent deviations in either direction," he said. "If downward risks to growth were to strengthen disinflationary trends, it will be appropriate to continue with the policy easing," he added.
Bloomberg
11-07-2025
- Business
- Bloomberg
ECB's Schnabel Calls Bar for Another Cut Very High: Econostream
European Central Bank Executive Board member Isabel Schnabel said there'd have to be a major downward shift in inflation to justify another reduction in borrowing costs. In an interview with Econostream, Schnabel said interest rates are 'in a good place,' with disinflation proceeding broadly as expected and the 20-nation economy proving resilient.
Reuters
02-07-2025
- Business
- Reuters
No scope for rate cuts with inflation outside tolerance band, Hungary central banker says
BUDAPEST, July 2 (Reuters) - Hungary's central bank would need to see faster and more durable disinflation to consider any easing in monetary conditions, a deputy governor told Reuters, adding that rate cuts were off the table as long as inflation exceeded the bank's tolerance band. The bank left its base rate on hold at the European Union's joint highest level of 6.5% for the ninth straight month in June while inflation rebounds despite efforts by Prime Minister Viktor Orban's government to tame it ahead of a 2026 election. Hungary and neighbouring Romania recorded the 27-member bloc's highest inflation rates in the first quarter based on EU data, preventing rate cuts despite slowing growth in Romania and protracted stagnation in Hungary. Deputy Governor Zoltan Kurali said with inflation rebounding to 4.4% in May, there was "nothing to discuss" in terms of policy easing, despite the bank's latest forecasts projecting hardly any economic growth for a third successive year. "A single headline inflation reading dipping into our (2% to 4%) tolerance band is not a sufficient condition on its own for us to consider easing monetary conditions," he said in an interview late on Tuesday. "Inflation needs to return sustainably toward the 3% target on the policy horizon," said Kurali, a former investment banker and head of Hungary's debt agency AKK, who joined the bank in April. Kurali avoided direct comment to questions on whether the bank had any room to lower interest rates this year and said the bank was currently not providing forward guidance. But with its June forecasts showing inflation exceeding the bank's target range all year, Kurali's comments suggest the bank is all but certain to avoid rate cuts despite lingering analyst bets on a small reduction by the end of 2025. Asked why the prolonged weakness of Hungary's economy has failed to rein in price growth, Kurali said high inflation expectations played a key role and justified keeping monetary conditions tight. He said the forint's recent stability versus the euro would have a dampening impact on inflation and inflation expectations via the FX transmission channel, and it was positive that monetary transmission worked effectively in money markets. However, with Orban's government imposing controls on food prices and forcing telecoms companies, banks and insurers to forego planned fee hikes until after the 2026 election, the risk of an inflation rebound looms when they adjust prices again. Kurali also said the bank was reviewing its international reserves management strategy to make it "more active and more flexible," while firmly ruling out the inclusion of any crypto assets. He said the strategy would "not be drastically different from current practice". "There will be no crypto in any shape or form," he said of the bank's reserves, which stood at 45.8 billion euros ($54.0 billion) at the end of May, consisting mostly of euro-denominated assets and gold. ($1 = 0.8485 euros)
