Monetary Policy Report November Central Bank Conference Facilities, November 2016

Transcription

1 Monetary Policy Report November 216 Central Bank Conference Facilities, November 216

2 Presentation flow 1 International and Domestic Macro-economic Environments 2 Central Bank s Monetary Policy Actions 2

3 1 International and Domestic Macro-economic Environments 2 Central Bank s Monetary Policy Actions 3

4 per cent Global growth was stymied by increased financial market volatility and uncertain future prospects in both advanced and emerging market economies. Per cent Index Value US$/bbl 8 Global Growth (Real GDP annual percentage change) 12. BRIC Nations: Annual Real GDP Growth 3 VIX Index and WTI Brexit Referendum September Fed Meeting Advanced Economies Emerging Market and Developing Economies World Source: IMF World Economic Outlook Brazil China India Russia Source: IMF World Economic Outlook VIX Close (Left axis) Sources: CBOE Volatility Index and Bloomberg WTI (Right Axis) 4

5 per cent Monetary policies in advanced economies are expected to remain broadly accommodative in light of uncertain growth prospects and concerns about deflation. per cent Selected Advanced Economies: Policy Rates Selected Advanced Economies: Inflation Rates Target Inflation Sep-16 US Fed Funds Target Rate UK Bank of England Official Rate ECB Main Refinancing Operations Rate Japan Source: Bloomberg. -1. Japan United Kingdom United States Euro area Source: Bloomberg. 5

6 Exchange rate and monetary policy adjustments in BRIC nations. 9. BRIC Countries: Exchange Rates per US Dollar 7. BRIC Countries: Monetary Policy Positions Country Current Rate 1 Last Change Amount of Change Brazil 14. Oct Russia 1. Sep India 6.25 Oct China 4.35 Oct Indian rupee (INR) (Left axis) Russian ruble (RUB) (Left axis) Brazilian real (BRL) (Right axis) Chinese yuan (CNY) (Right axis) Source: International Monetary Fund Source: Central Bank of Brazil, The Central Bank of the Russian Federation, Reserve Bank of India, and The People s Bank of China. 1. As at October

7 Regionally, tourism dependent countries are poised for improved economic performance in 216. Selected Regional Economies: Main Economic Indicators Main Economic Indicators Jamaica Barbados ECCU Guyana Suriname Output Growth (per cent) Est p Inflation (End of period / per cent) Est p Source: IMF Regional Economic Outlook. 7

8 Per cent A mix of low global commodity prices and reduced domestic energy sector output has negatively impacted economic performance in Trinidad and Tobago. Thousand bbl/d mmcf/d Trinidad and Tobago: Real GDP Growth Domestic Crude Oil and Natural Gas Production , , 3, , 2,5 2, 1, , Energy Non-Energy Total Crude Oil Production (Left Axis) Natural Gas Production (Right Axis) Source: Central Bank of Trinidad and Tobago Source: Central Bank of Trinidad and Tobago 8

9 Per cent Per cent Per cent Headline inflation was relatively contained by the third quarter of 216. Index of Retail Prices (Year-on-Year Per cent Change) Index of Retail Prices Components of Core Index Index of Retail Prices Components of Food Sub-Index Food All Items - Headline Core Housing, Water, Electricity, Gas & Other Fuels - Weight Transport - Weight Vegetables Weight Meat Weight Source: Central Statistical Office. Health - Weight 4.64 Breads and Cereals Weight

10 Number Per cent Labour market conditions weakened throughout Total Employed and the Unemployment Rate Retrenchment Notices Registered by Sector April September 216 (As Proportion of Total Notices Filed) Finance, Insurance, Real Estate and Business Serivices 23% Transportation, Communication and Storage 9% 741 persons retrenched over April to September 216 Petroleum and Other Mining Industries 34% Distribution 7% Construction 11% Manufacturing 25% Total Employment (LHS) Rate of Unemployment (RHS) Source: Central Statistical Office Source: Ministry of Labour and Small Enterprise Development 1

11 Fiscal policy continued to adjust to lower energy revenues. Capital Revenue Capital Expenditure Salaries and Wages Expenditure $53.4 bn Revenue $47.4 bn Taxes on Goods and Services Property Tax Goods and Services Source: Ministry of Finance. $6. bn deficit projected in FY216/17 Energy Revenues Key: Arrows indicate higher or lower from FY 215/16. 11

12 Several Revenue Enhancing Measures were introduced for the 216/17 Fiscal Year. Expenditure $53.4 bn Proposed Revenue Enhancing Measures: Property Tax from 217 New tax bracket of 3 per cent on income and profits above $1 million Introduction of the Revenue Authority Transfer Pricing Regime Revenue $47.4 bn Source: Ministry of Finance. $6. bn deficit projected in 12

13 US$ Million Falling energy exports have led to a decline in the external position by mid Trinidad and Tobago Gross Official Reserves 6, Trinidad and Tobago: Merchandise Trade Balance 14. 4, , 8. QI + QII 215 QI + QII , 4. -4, , Energy Exports Non-energy Exports Energy Imports Non-energy Imports Trade Balance Gross Official Reserves (US$Bn) Import Cover (months) Source: Central Bank of Trinidad and Tobago Source: Central Bank of Trinidad and Tobago 13

14 1 International and Domestic Macro-economic Environments 2 Central Bank s Monetary Policy Actions 14

15 per cent per cent The Bank has held the Repo Rate at 4.75% in the first three quarters of 216, based on domestic weaknesses. 14 Past Experience of Monetary Policy 1. Central Bank s Repo Rate and Commercial Banks Prime Lending Rate Real Non-Energy GDP (Per cent Change) Headline Inflation (Per Cent) Repo Rate (Per Cent) Sources: Central Statistical Office and Central Bank of Trinidad and Tobago.. Repo Rate Prime (Median) Source: Central Bank of Trinidad and Tobago. 15

16 TT$Mn After building in May and June 216, liquidity levels were more tightly managed in subsequent months. 9, 8, 7, 6, 5, 4, 3, 2, 1, Commercial Banks Excess Reserves Over January to October 216: Net Domestic Fiscal Injections ($5.4 billion); The Bank allowed Net OMO s and Fixed Deposit maturities to return $838.8 million into the system (including the maturity of a $1. billion fixed deposit in May 216); Extraordinary withdrawals in July and August, due to two payments of $1.3 million, each. This was from CLICO to the Government; Sales of foreign exchange to authorised dealers withdrew $8.9 billion over the period. Source: Central Bank of Trinidad and Tobago. 16

17 $Billions $ Billions The Bank has continued to manage liquidity flexibly to meet market conditions. Reserve Requirements and Other Liquidity Absorption Measures Outstanding Treasury Open Market Operations Bills and Notes Balances 3 TT$ billions Liquidity Bonds Secondary Reserve Requirement Special Deposits PrimaryReserve Requirement Treasuy Bills Treasury Notes Source: Central Bank of Trinidad and Tobago. 17

18 Per cent Per cent The Treasury yield curve has shifted upwards from a year prior helping to widen the TT US yield differentials. Central Bank of Trinidad and Tobago: Standardized TT Treasury Yield Curve 3- Month and 1 Year TT-US Treasury Yield Differentials T&T Government Yield Curve October 216 T&T Government Yield Curve October 215 T&T Government Yield Curve December Month TT-US Diff. 1-Year TT-US Diff. Source: Central Bank of Trinidad and Tobago. 18

19 Per cent Per cent Private sector borrowing slowed by the third quarter of 216 with business lending declining sharply. Commercial Banks Weighted Average Loan and Deposit Rates Private Sector Credit by the Consolidated Financial System (Year-on-Year Per Cent Change) Consumer Real Estate 8. 6 Total 6. 4 Business Weighted Average Loan Rate Source: Central Bank of Trinidad and Tobago. Weighted Average Deposit Rate 19

20 TT$ per US$ Index Value The Bank continues to support the FX market; the TT$ has depreciated over the first ten months of 216. Jan-1 Jan-1 Oct-1 Nov-1 Jul-11 Sep-11 Apr-12 Jul-12 Jan-13 May-13 Oct-13 Mar-14 Jul-14 Jan-15 Apr-15 Nov-15 Jan-16 Sep-16 Oct-16 US$ Millions Trade Weighted Real Effective Exchange Rate (Jan 2=1) TWREER 8, 7, 6, 5, 4, Authorized Dealers Purchases and Sales of Foreign Currency Nominal TT$/US$ Selling Rate 3, 2, 1, Nominal TT$/US$ Selling Rate Jan-Oct 215 Jan-Oct Source: Central Bank of Trinidad and Tobago. FX Sales to Public FX Purchases from Public Central Bank Interventions 2

21 1 International and Domestic Macro-economic Environments 2 Central Bank s Monetary Policy Actions 21

22 Thank you for your attention 22