Central Bank of Seychelles Monetary Policy Decision Media Presentation June 28, 2018
Monetary Policy Stance for the Third quarter of 2018
Recommendations Maintain Tight monetary policy stance for the third quarter of 2018 Unchanged interest rate corridor SCF at 8% (ceiling) SDF at 2% (floor) MRR remains unchanged at 13% The reserve money target (average): R3,645 million The CBS remains vigilant and continues to monitor inflationary developments during the quarter
Rising inflationary pressures externally
Rising external inflationary pressures expected on domestic prices Previous forecast in March Current forecast as at June Source: Food and Agriculture Organization Source: EIA Short Term Energy Outlook
04-Jan-17 18-Jan-17 01-Feb-17 15-Feb-17 01-Mar-17 15-Mar-17 29-Mar-17 12-Apr-17 26-Apr-17 10-May-17 24-May-17 07-Jun-17 21-Jun-17 05-Jul-17 19-Jul-17 02-Aug-17 16-Aug-17 30-Aug-17 13-Sep-17 27-Sep-17 11-Oct-17 25-Oct-17 08-Nov-17 22-Nov-17 06-Dec-17 20-Dec-17 03-Jan-18 17-Jan-18 31-Jan-18 14-Feb-18 28-Feb-18 14-Mar-18 28-Mar-18 11-Apr-18 25-Apr-18 09-May-18 23-May-18 06-Jun-18 20-Jun-18 SCR Depreciating trend against the USD with EUR and GBP weakening 20.50 19.50 18.50 17.50 16.50 15.50 14.50 13.50 12.50 SCRUSD SCREUR SCRGBP
Mixed indicators from the real sector
Contrasting results in tourist arrivals and tourism earnings Slowdown in arrivals but improvement in yields *Last outcome May 2018 / June figure estimated
Mixed performance from fisheries sector Increase in production but decline in export value *Last outcome 2018 Q1
1.49 42.50 16.69-7.10 11.67-23.52 8.18 19.63-43.23 9.12-0.66 22.38 0.70 4.63-19.67 3.65-0.53 6.03-6.94 174.15 21.02 44.14 3.9 44.8-3.4-32.4-39.7-44.3-20.3-27.4-30.2 6.5-31.9-72.0-2.3-1.9-7.5 1.4-11.2-1.6-2.1 122.1 7.4 5.4 Tonnes Tonnes Millions Litres Litres Litres Litres Litres Nos Nos Litres Kgs kwh klts klts Nos Hours Hours Nos Nos Nos GB Fish catch Canned tuna Egg Production Beer Stout Spirits Soft drinks Mineral Water Tobacco (Cigarettes) Blocks Paint & Paint products Animal Feed Electricity (kwh) Water Consumption Water Production Telecom Services (Mobile Accounts) International Call Local Call Telephone Exchange Lines Internet Connection Cable TV Connections Data Traffic Mixed movements in production statistics in Q1 2018 2018Q1/ 2017Q4 Chg 2018Q1/ 2017Q1/ Chg
Positive GDP growth expected in Q1 2018 Near term forecast in Q1 2018 *Last outcome Q4 2017 / Q1 2018 is an estimate
Economic outlook for 2018 indicates positive GDP growth Mixed indicators Increased air connectivity and positive external growth (WEO forecast) Tourism-related projects IOTC resolution effects Evidence of Growing pessimistic sentiments Infrastructure projects expected to have a slight positive effect on growth Eg. Housing projects Credit schemes including lending to SMEs Developments in Emerging and Established Markets
Money supply growth declining and mixed movements in interest rates
Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec Jan Feb Mar Apr May Per cent (%) Declining money supply growth and credit 22 20 18 16 14 12 10 8 6 4 2017 2018 Total Credit YoY % Private credit YoY % Money supply YoY (%)
Consumer credit has biggest share of private sector credit
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Per cent (%) Per cent (%) Evolution of key interest rates 8 12.8 12.5 12.2 11.9 7 6 5 4 3 2 2017 2018 Average Lending Rate 7-day DAA (sec axis) Savings Rate (sec axis) 91D t-bill Rate
Rise in domestic inflationary pressures
Per cent (%) Slowdown in inflationary pressures 6.0 5.0 4.0 3.0 2.0 1.0 0.0-1.0 CPI Apr May Month on Month (%) 0.15 0.12 Year on Year (%) 4.18 3.59 12-month average (%) 3.78 3.82-2.0 Jan Feb Mar Apr MayJune Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May 2017 2018 Annualised Year-on-year
Potential sources of inflationary pressures in 2018 Increase volatility in energy prices Trade Policies and Impact on production costs Developments in EU and implications on EUR Impact of policy decisions by U.S Federal Reserves and ECB Impact of revision in utility tariffs (domestic) and adjustments Glass Tax Labour Costs Second round effects of depreciating exchange rate Uncertainty in Expectations PIT Implementation and Impact on Demand Populist measures (pressure to meet public expectations) Property Tax and subsequent round effects Movements in interest rates
Maintain a tight monetary policy stance for Q3 2018 in light of rising inflationary pressures and uncertainty that is expected in the short to medium term CBS ready to adjust the policy stance to safeguard price stability
Thank you for your attention Questions?
2016 2017 2018 Dec Dec Mar Jun Sep Dec Jan Feb Mar Apr May June SCR/USD 13.11 13.49 13.58 13.61 13.7 13.78 13.84 13.87 13.86 13.87 13.87 13.88 Change in cents 0.05 0.02 0 0.02 0.03 0.06 0.03 0 0 0.01 0.01 SCR/ EUR 14.24 14.22 14.55 15.31 16.35 16.34 16.89 17.15 17.13 17.09 16.47 16.24 Change in cents -0.33 0.08 0.26 0.18 0.16 0.55 0.26-0.02-0.04-0.62-0.22 SCR/ GBP 19.56 16.76 16.72 17.32 18.12 18.42 18.95 19.3 19.29 19.45 18.65 18.38 Change in cents 0.05-0.2-0.17 0.44 0.27 0.53 0.35-0.01 0.15-0.8-0.27 EUR/USD 1.0863 1.0545 1.0717 1.1253 1.1933 1.186 1.2207 1.2369 1.2354 1.2321 1.1869 1.1699 GBP/USD 1.4915 1.2423 1.2308 1.2724 1.3219 1.3366 1.3696 1.3921 1.3917 1.4024 1.344 1.3235