Monetary Policy Statement - Presentation Feb 2016

8/19/2019 Monetary Policy Statement - Presentation Feb 2016

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1

MONETARY POLICY COMMITTEE STATEMENT

FOR

FIRST QUARTER 2016

Governor’s Presentaton to t!e Me"a

12t! Fe#r$ar%& 2016

Bank of Zambia


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2

INTRO'UCTION

The Monetary Policy Committee met on 11th February, 2016. to review evelo!ment" in the #ourth

$uarter o# 201% an ecie on the monetary !olicy "tance #or the #ir"t $uarter o# 2016.

The "tructure o# thi" !re"entation i" a" #ollow"&

1. 'verview

2. (lobal economic evelo!ment"

). Conuct o# monetary !olicy

*. +evelo!ment" in the ome"tic economy

%. Macroeconomic outlook

6. +ecie on the monetary !olicy "tance


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3

O(ER(IE)

i$uiity conition"

ti-htene #ollowin-monetary !olicy

mea"ure" taken to

are"" ri"in-

in#lationary !re""ure"

an "tabilie thee/chan-e rate.

The overni-ht

interbank rate ro"e

"har!ly above the BoZPolicy ate corrior

an overni-ht lenin-

rate.


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4

O(ER(IE)

The wacha a!!reciate a" the #orei-n e/chan-e market "tabili"e


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3MF 4anuary 2016 5' e"timate" -lobal -rowth to have ecline to ).17 in 201% #rom ).*7in 201*.

8vance countrie" an the uro area e/hibite "ome recovery while emer-in- marketeconomie" !articularly China, "ub9:aharan 8#rica ;::8< an evelo!in- economie" re-i"tere

weaker -rowth.

The "lowown in -lobal -rowth i" ue to&

◦ow commoity !rice" ;"ee Table 1


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GLO*AL ECONOMIC 'E(ELOPMENTS

Crue oil !rice" continue to ecline, #allin- by 1>.*7 in the #ourth $uarter.

Co!!er !rice" al"o ecline by >.67.

:ome a-ricultural commoity !rice" al"o ecline ue to e/ce"" "u!!ly.


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3n ::8, -rowth i" e"timate to have ecline to ).%7 #rom %.07in 201*, mainly ue to&

a< +eclinin- oil an metal !rice"= an,

b< +e!re""e #orei-n irect inve"tment inuce by "lowownin the Chine"e economy an a "tron-er ?: ollar.

8



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3n -lobal #inancial market", ::8 an Zambian urobon yiel" ro"e on

eterioratin- #unamental".

9



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3n 2016, -lobal economic activity i" !ro@ecte to !ick u! to ).*7,

re#lectin- &

:tron- !rivate con"um!tion "u!!orte by -rowth in @ob"in avance economie", !articularly, the ?:.

3m!rovement" in #inancial conition", inve"tment an

-overnment "!enin-.

(rowth in mo"t :ub9:aharan 8#rican countrie" i" antici!ate to-raually !ick u! in 2016 a" countrie" a@u"t to lower commoity

!rice" an hi-her borrowin- co"t". 11



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'E(ELOPMENTS IN T+E 'OMESTIC ECONOMY

F,$re 1- Po./% Rate Corr"or an" Inter#an Rate


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Monetary !olicy #ocu"e on the achievement o# the in#lation tar-et o# >.07 #or 201%.

+urin- the #ourth $uarter, the Policy ate wa" rai"e to 1%.%7 #rom 12.%7.

3ncrea"e in the Policy ate wa" motivate by&

o :i-ni#icant increa"e in in#lation to 1*.)7 in 'ctober #rom >.>7 in :e!tember 201%

o levate in#lation outlook #or 2016.

Followin- a #urther ti-htenin- o# monetary !olicy, which inclue re"trictin- acce"" to the

overni-ht lenin- #acility ;'F< to once a week, the interbank rate ro"e "har!ly an e/ceee

both the Policy ate an the 'F rate towar" the en o# the $uarter ;"ee Fi-ure 1 below


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8" a con"e$uence o# ti-ht li$uiity conition", the overni-ht rate remaine

above the Policy ate throu-hout the $uarter.

The Bank re"i"te brin-in- the interbank rate back into the Policy ate

corrior a" in@ectin- li$uiity into the market ri"ke tri--erin- volatility o#

the e/chan-e rate, an hence in#lationary !re""ure".

The ti-ht li$uiity conition", which were al"o !artly the re"ult o# Bank o#

Zambia !roviin- o# #orei-n e/chan-e "u!!ort to the market com!elle bank"

re"ort to the 'F an ei"count winow #or li$uiity.

Con"e$uently, Trea"ury bill rei"count" an the amount o# #un" borrowe on

the 'F "oare ;"ee Fi-ure" 2 an )


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F,$re 2- *ans’ A//ess to OLF F,$re - T3#.. Re"s/o$nts


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Ti-ht li$uiity conition"

were al"o re#lecte in a

*07 increa"e in interbank

train- to 26.* billion a"

bank" looke to meet their

li$uiity re$uirement"throu-h the interbank

money market.

F,$re 4- Inter#an *an A/tvt%


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17


Govern5ent Se/$rtes Maret

Ti-ht li$uiity level" re"ulte in the ecline in eman #or (overnment

"ecuritie" ;"ee Fi-ure *a7 in thir $uarter.

Con"e$uently, yiel rate" on Trea"ury bill" -enerally ecline, with

the com!o"ite rate #allin- to 20.>7 #rom 21.>7 ;"ee Fi-ure %


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F,$re 4a- Peror5an/e o Govern5ent Se/$rtes A$/tons


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F,$re 4#- Govern5ent Se/$rtes Ye." Rates 789


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F,$re :

Forei-n !ort#olio inve"tment" in (overnment "ecuritie" continue to ecline #rom the

!eak reache at the en o# 4une 201%, #allin- 267 by en9+ecember 201%.


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Fore,nE;/!an,eMaret

The wacha a!!reciate a" the #orei-n e/chan-e market "tabili"e


8-ain"t the ?: +ollar, the

wacha a!!reciate by

A.67 to 10.A at en9+ecember #rom the level

o# 1).> at en9

:e!tember.

The wacha al"o #irmea-ain"t other ma@or train-

!artner currencie".

F,$re 6


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The a!!reciation o# the wacha wa" ue to monetary !olicy mea"ure"

unertaken by the Bank to curb volatility ra!i e!reciation o# the wacha,which inclue&

• 3ncrea"in- the Policy ate to 1%.%7 #rom 12.%7=

• e"trictin- acce"" to the 'F winow by bank" to once !er week=

• BoZ !rovi"ion o# #orei-n e/chan-e "u!!ort to the market=

•) Publication o# iniviual bankD" interbank rate" to the !ublic= an

•) ei-htene monitorin- o# commercial bank" activitie", an "tren-thenin-

the market coe o# conuct.



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F,$re


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+eman #or #orei-n e/chan-e #rom the !ublic ro"e a" re#lecte in an increa"e in

commercial bank" net "ale" to the !ublic


F,$re =


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Mone% s$.% an" 'o5est/ Cre"t

• Money "u!!ly -rowth "lowe own to 1.%7 #rom on a $uarter by $uarter

ba"i" #rom a -rowth o# 26.)7 in the thir $uarter ;"ee Fi-ure 11


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F,$re 10- 'eve.o5ents n Mone% S$.%


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28


F,$re 11- Cre"t Gro>t! an" Se/tora. Contr#$ton

Public nter!ri"e"

Private nter!ri"e"

Total +ome"tic Creit

ou"ehol"

Eon9Bank Financial 3n"titution" ;EBF3<

(overnment

920 910 0 10 20 )0 *0 %0

Se31: 'e/31:


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Economic activity generally remained constrained …

Natona. O$t$t

eal (+P -rowth #or 201% i" !ro@ecte to be ).67 com!are to the tar-et o#

>.07 on account o#&

• 8ver"e weather conition", which a##ecte the 201*1% a-riculture

!er#ormance=

• Continue weakne""e" in the -lobal economy, re#lecte in a ecline in

co!!er !rice"=

• :ubue !er#ormance o# the minin- "ector, which al"o a##ect -rowth o#

"ervice" an manu#acturin- "ector"=• ei-htene !ower rationin- in the "econ hal# o# the year= an,

• /chan-e rate e!reciation, increa"e in #uel !rice" G i-h co"t o# im!orte

in!ut" an !rouction co"t".

REAL SECTOR ACTI(ITY


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FISCAL POLICY

Preliminary ata inicate that #i"cal e#icit at 2.17 o# (+P,wiene mar-inally in the #ourth $uarter

Thi" re#lect" hi-her e/!eniture" on account o# the e!reciation o#

the e/chan-e rate an hi-her "ub"iy !ayment"

The im!lementation o# the Trea"ury "in-le account i" e/!ecte to

contribute to im!rove #i"cal mana-ement an more e##icient

im!lementation o# monetary !olicy


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INFLATION

Inflation accelerated to 21.1% in December from 7.7% in September 2015…..

The hi-her in#lation wa" mainly a" a re"ult o#&

• Pa""9throu-h e##ect" o# the "har! e!reciation in the e/chan-e rate in the thir

$uarter=

• i-h !rouction co"t" inuce by !ower rationin-, increa"e in electricity tari##",

an=

• ow "u!!ly o# "ome #oo item", which ke!t #oo in#lation at elevate level".

The"e #actor" cau"e #oo an non9#oo in#lation to accelerate to 2*.A7 an 1>.17

in +ecember 201% #rom A.17 an >.)7 in :e!tember 201%, re"!ectively ( "ee

Fi-ure 16 .


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INFLATION

F,$re 14- 'eve.o5ents n In.aton

*12>%

*1)06

*1))*

*1)6%

*1)%

*1*26

*1*%6

*1*A>

*1%1A

*1%*A

*1%>

*160

*16*0

*16>1

*16

*1>)0

*1>60

*1>1

*1A21

*1A%2

*1AA)

*11)

*1**

*1>*

*200%

*20)6

*206*

*20%

*212%

*21%6

*21A6

*221>

*22*A

*22>A

*2)0

*2))

0

%

10

1%

20

2%

)0

'verall 3n#lation Foo in#lation Eon9#oo in#lation

Per/ent


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MACROECONOMIC OUTLOO?

eal (+P -rowth i" e"timate to have ecline to ).67 in 201%, the lowe"t

level recore over the !a"t 10 year".

3n 2016, -rowth i" e/!ecte to mar-inally im!rove to ).>7, an recover

-raually towar -rowth rate" o# aroun 6.%7 in the meium9term.

The ri"k" to the -rowth outlook are "i-ni#icantly wei-he to the own"ie in

the "hort9run an inclue&

Poor rain#all !attern" in the 201%16 "ea"on=

Continue !ower rationin-= an,

ow co!!er !rice"


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MACROECONOMIC OUTLOO?

3n#lation i" e/!ecte to remain hi-h, !articularly in the #ir"t hal# o# 2016, but

ecline "har!ly #rom the thir $uarter an tren towar" "in-le i-it level" bythe en o# 201>.

The ri"k" to the in#lation outlook are "kewe to the u!"ie, an inclue the

#ollowin-&

ow -lobal eman #or commoitie", which will aver"ely a##ect co!!er

e/!ort earnin-" with con"e$uence" #or e/chan-e rate "tability=

lectricity rationin-, which will kee! the co"t o# !rouction at elevate

level"= an,

i-h #oo !rice", which may be wor"ene by rou-ht weather conition" in

mo"t a-riculture !rouctive !art" o# the country.

MPC 'ECISION


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MPC 'ECISION

The MPC ecie to maintain the Policy ate at 1%.%7.

The Committee took the #ollowin- #actor" into account in eciin- to

maintain the Policy ate at 1%.%7&

The e##ect" o# the current monetary !olicy "tance, which i"con"iere to be ti-ht an "till takin- e##ect.

ey river" o# ob"erve in#lation, which inclue #oo !rice" an the

e/chan-e rate.

-rowth o# the economy

Financial "tability


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END OF PRESENTATION…THANK YOU!!!

ank of Zambia

Documents

Monetary Policy Statement - Presentation Feb 2016