Filtered by Topic: Monetary Policy Use setting Monetary Policy
The broadening of the recent product and labour shortages appears to be holding back activity and adding to the upward pressure on inflation. The risk is twofold. First, these shortages may prevent GDP from returning to its pre-pandemic peak until next …
9th September 2021
Headline inflation came in higher than our above-consensus forecast in August and, at 3.0%, reached its highest level for a decade. It is likely to rise a bit further in the coming months: producer price inflation has risen recently and the price …
6th September 2021
Q2 GDP data released over the past month or so did not show a repeat of the across-the-board rises in exports seen in previous quarters, but the external sector still proved an important prop to GDP in many places. Thailand’s economy unexpectedly grew …
31st August 2021
A WeChat post by a prominent blogger voicing support for Xi Jinping’s “ common prosperity ” campaign has been widely re-published by state media, giving it a rare seal of Party approval. The post argues that the recent regulatory crackdown is just the …
Recoveries across Emerging Europe accelerated in Q2 as the easing of virus restrictions pushed GDP to, or above, pre-pandemic levels in most countries and we think this momentum will continue in Q3. However, the recovery has been accompanied by a marked …
26th August 2021
New Zealand has entered a draconian lockdown and new infections continue to rise. The lockdown prompted the RBNZ to refrain from hiking interest rates at its August meeting and financial markets were only pricing in a 50% chance of a rate hike in October …
Foreign portfolio outflows from Indian financial markets have been easing this month (see Chart 1), bucking the broader EM trend. This may have been driven in part by the improvement in the virus situation. Looking ahead, the growing likelihood of the US …
25th August 2021
GDP is on track to return to its pre-pandemic level this month but, with the number of coronavirus infections now picking up, there is a growing risk that the recoveries in some sectors go into reverse. Admittedly, the progress on vaccinations means that …
24th August 2021
Inflation is at, or close to, multi-year highs across Latin America which has prompted a slew of interest rate hikes across the region. We think that central banks in Brazil, Mexico, Chile and Peru will continue their tightening cycles over the coming …
19th August 2021
Several EM central banks have continued to tighten monetary policy over the past month or so in response to strong reopening rebounds ( Chile , Czech Republic , Hungary ) and/or rising inflation concerns ( Brazil , Mexico, Peru , Russia ). A few others, …
18th August 2021
With a whopping 1.0 million people on average having been asked by the NHS App or Test & Trace system to self-isolate in July, the “pingdemic” is likely to have stifled the economic recovery in recent months. (See here .) In July, our Capital Economics …
11th August 2021
The surge in spending as coronavirus restrictions have been lifted will bring the euro-zone economy close to its pre-pandemic level in the coming months. After expanding by 2% q/q in Q2, we expect a similar increase in Q3. Both business and consumer …
4th August 2021
With new virus cases hitting fresh highs this week, Sydney’s lockdown has been extended until end-August and looks set to last for months given the high transmissibility of the Delta variant. Melbourne also briefly re-entered lockdown this month, though …
30th July 2021
Questions about the strength of China’s post-lockdown rebound have become louder since the People’s Bank cut the required reserve ratio three weeks ago. But the trigger for this week’s sharp equity market sell-off was instead growing disquiet about the …
The highly contagious Delta variant of COVID-19 seems to be dominant now across much of Sub-Saharan Africa and is driving new waves in many of the large economies. South Africa appears to be over the worst of its latest outbreak, although it now has to …
29th July 2021
The end of the impasse within OPEC+ this month will result in higher oil output and boost recoveries in the Gulf over the second half of this year and in 2022 . Output quotas will rise by 400,000bpd each month after the UAE backed down in return for …
28th July 2021
The region’s economies have continued to rebound strongly over the past month as virus outbreaks have largely been contained and restrictions have been lifted. Surveys of sentiment in the services sector have surged and high-frequency mobility data have …
In a bold move that will be closely watched across the region, Singapore is set to drop its implicit target of pursuing zero local COVID-19 cases, with restrictions set to be eased gradually from August. In other words, Singapore will learn to live with …
While the regional economic recovery stuttered in Q2, it appears to be gathering pace in Q3. New COVID-19 cases have dropped back, particularly in Chile and Uruguay suggesting that their rapid vaccination programmes are proving effective. Restrictions …
27th July 2021
While infections are now rising sharply nationwide – particularly in Tokyo where the Delta variant has the strongest hold – most of the vulnerable population are now fully vaccinated so we doubt restrictions will have to be tightened any further. …
22nd July 2021
Amid the ongoing debate over inflation in a post-pandemic world, one thing that does appear clear is that near-term price pressures in India have peaked. Consumer price inflation held steady in June at 6.3% y/y, while wholesale price inflation dropped for …
21st July 2021
Falling virus cases, strong economic recoveries and/or inflation worries prompted several more EM central banks – those of Czechia , Chile , Hungary and Mexico – to tighten monetary policy in the past month, joining Russia and Brazil. And a few others, …
15th July 2021
The virus situation in Emerging Asia has improved compared with a month ago. Although cases are rising sharply in Indonesia, daily numbers have come down in Taiwan, Singapore, India and Malaysia, and appear to have stabilised in the Philippines. That …
30th June 2021
With the more contagious delta variant spreading in Australia, half of the population is now in lockdown. This highlights the Achilles heel of both countries’ virus management: their slow vaccine rollout. Just 8% of New Zealanders and 5% of Australians …
Some believe that China is adding to global inflationary pressure. The opposite is closer to the truth: the large increase in China’s trade surplus over the past year signals that supply from China has risen far more than demand. Global consumer goods …
Latin America is once again the global epicentre of COVID-19 but, from an economic perspective, the region has built up significant immunity to the virus. Indeed, despite the surge in new virus cases at the start of Q2, the latest activity data show that …
29th June 2021
We think investors may be overestimating how much monetary policy tightening is on the way in emerging markets (EMs), but still expect long-dated EM government bond yields to rise a bit from here. Over the past month the tightening cycle among EM central …
The latest CFIB Business Barometer shows that, as the re-opening process got underway, firms’ selling price expectations surged in June. Firms now expect to raise their prices by an average of 4.7% over the next 12 months, which is by far a record high. …
25th June 2021
Economic activity across Emerging Europe is rebounding strongly now that virus waves have passed and restrictions have been lifted. High-frequency data show that mobility has surpassed its pre-pandemic level in most countries and vaccination programmes …
24th June 2021
Worries about a third wave of COVID-19 in the region have intensified in the past month and the tightening of lockdown measures in some countries – most notably South Africa – will weigh on recoveries. As things stand, surges in cases appear concentrated …
The price of oil has continued to rise and will help to improve balance sheets in the Gulf. With oil prices at $75pb, all Gulf economies with the exceptions of Bahrain and Oman are likely to be running current account surpluses, having run deficits in …
The hawkish surprise delivered by the Fed at its latest meeting and the subsequent market reaction have not changed our view that the 10-year US Treasury yield will end the year higher and that the “rotation trade” in equity markets will resume before …
India’s 10-year government bond yields have remained stable at around 6% over the past month, taking the unexpectedly large jump in inflation in May and a more hawkish turn by the US Fed in their stride. That reinforces our long-held view that borrowing …
23rd June 2021
Inflation has risen sharply across the emerging world in the last few months, prompting much more cautious words from central banks (mainly in Latin America and Emerging Europe), but we expect that EM price pressures will ease in the coming months. (See …
18th June 2021
The risks to our forecast that CPI inflation will rise from 1.5% in April to a peak of 2.6% in November before dropping back in 2022 are increasingly on the upside. Rises in shipping costs and global agricultural commodity prices as well as shortages of …
10th June 2021
State media announced today that China’s family planning policy will be relaxed to allow all families to have three children, up from the current limit of two. This comes shortly after China’s once-a-decade census showed that its population is aging even …
31st May 2021
Australian Treasurer Josh Frydenberg noted in October that the Government would not pursue budget repair until the unemployment rated was comfortably below 6%. However, the unemployment rate fell much more rapidly ahead of the May Budget than almost …
We forecast that emerging market (EM) equities will make further gains between now and end-2022 as the global economy recovers further. However, they have lost a bit of ground to developed market (DM) equities recently and we doubt they will perform much …
27th May 2021
The strength of inflation and expectations for a strong economic recovery have prompted a clear hawkish shift among Central European central banks. In Hungary, the MNB has set in motion the start of a tightening cycle in June and used its meeting this …
While inflation fears have taken some steam out of the US stock market rally recently, we still think that equities in the US, and elsewhere, will make further gains over the next couple of years. Much of the focus in the markets over the past few weeks …
20th May 2021
New virus cases in India remain extremely high, but some solace can be taken from the fact that they have dropped rapidly over the past couple of weeks back to their level in mid-April. The share of tests returning positive has fallen too. Encouragingly, …
Off the back of the weak Q1 GDP data, we now expect output to only rise 2% across 2021. The economy is unlikely to recover much in Q2 as cases are close to record highs and calls for a nationwide state of emergency growing. Moreover, only 4% of the …
19th May 2021
Near-term inflationary pressures appear to be building. Some of this reflects factors that are likely to be only temporary, such as the “reopening inflation” associated with the easing of virus-related restrictions. We also think the broad-based rally in …
17th May 2021
House prices are now surging in both countries. House price cycles in the Australian housing market tend to lag those in New Zealand a little, which is consistent with the forward indicators pointing to a rapid lift in the pace of annual Australian price …
29th April 2021
Our in-house mobility tracker suggests that the surge in virus infections in India is now weighing on activity. (See Chart 1.) This is likely to become more pronounced as the outbreak has become more widespread, causing several state assemblies to tighten …
21st April 2021
Labour markets in both countries have tightened in recent months. In Australia, the unemployment rate has fallen from a peak of 7.1% to just 6.4% in January. And other measures of spare capacity have tightened even more sharply. The underemployment rate …
1st March 2021
Indian GDP data due to be released on Friday are likely to show only a small contraction in annual growth in Q4 2020, and high-frequency indicators point to a relatively strong start to 2021. Indeed, our in-house mobility tracker suggests that activity …
24th February 2021
The pandemic has thrown up many surprises for the Canadian economy, the latest of which is the speed at which oil production has rebounded. Even though global fuel demand remains weak amid ongoing global travel restrictions, the Canada Energy Regulator’s …
23rd February 2021
The strong rise in output in Q4 2020 to just 1.2% below Q4 2019 levels bolsters our view that Japan’s economy will be back to the level it reached before the tax hike and close to its pre-virus path by mid-2022. (See Chart 1.) Daily virus cases have …
22nd February 2021
Our forecast that the euro-zone economy rebounds strongly hinges on Covid-19 restrictions being lifted by the middle of the year. Unfortunately, vaccine supply shortages, distribution problems and concerns about variants could force governments to keep …
4th February 2021
