Filtered by Topic: Monetary Policy Use setting Monetary Policy
Investors increased their expectations for interest rate cuts by the ECB after November’s soft euro-zone inflation print this week, but in parts of Central and Eastern Europe (CEE) the latest developments suggest inflation will take a lot longer to fall …
1st December 2023
In light of the inflation and activity data released this week we are bringing forward our forecast for the start of the ECB’s rate cuts from September to June next year. And we now think the deposit rate will come down from 4.0% currently to 3.0% by the …
The prospect of earlier interest rate cuts in the US and the euro-zone has led to a sharp fall in US and euro-zone government bond yields this week. 10-year US Treasury and German Bund yields have fallen by 15 and 22 basis points (bps), to 4.32% and 2.43% …
Ramp up in fiscal support yet to be fully felt Government borrowing has been strong ever since the Politburo called for an acceleration in bond issuance at its July meeting. Momentum has been sustained by a rare mid-year increase in the deficit target …
Revising up our GDP forecasts The activity data this week confirm that India’s economy is rude health. The GDP data for Q3 (Q2 of FY23/24) showed a slowdown in both y/y and q/q, but this was very mild and the bigger picture is that the pace of growth …
Consumption falling but labour market tightening The October activity data were a mixed bag. While industrial production rose by 1% m/m, firms’ forecasts for the next couple of months were weak and point to a stagnation in output across Q4 following …
Zambia and Angola hikes, Nigeria resists High inflation is pushing some African economies to return to monetary tightening but Nigeria has resisted so far. We doubt this will last. Inflation rose again in Nigeria, Angola and Zambia last month as currency …
24th November 2023
It would be a stretch to say the government showed fiscal restraint in the Fall Economic Statement , but the announcement of only a few billion dollars in extra spending measures means that Finance Minister Chrystia Freeland did not pour much more fuel on …
CBRT bringing tightening cycle to a close Turkey’s central bank (CBRT) delivered another chunky 500bp rate hike to 40% this week but it also signalled that its tightening cycle was very close to an end. The local elections in March may be playing a part …
Strong Q3 growth Most countries in Emerging Asia have now published GDP figures for the third quarter. Growth slowed in China, was unchanged in Korea, but rebounded strongly everywhere else. (See Chart 1.) To view our various responses click here . …
Surveys point to renewed slowdown in inflation Following a rather hawkish speech by Reserve Bank of Australia Michele Bullock, the financial markets now price in a 60% chance of another 25bp rate hike at the Bank’s February’s meeting, up from 40% before …
Tensions within OPEC+ rise as threat of cut looms OPEC+ was meant to be in the spotlight this weekend but, in a surprise move, the meeting has been delayed until Thursday. The slide in oil prices and the Israel-Hamas conflict suggest that output quotas …
23rd November 2023
A German constitutional court ruling this week threatens to force the government to cut its planned climate-related expenditure by €60bn or 1.2% of GDP. The decision states that it was not lawful for the government to reallocate this un-used borrowing …
17th November 2023
Back-to-back rate hikes unlikely Bank Indonesia surprised financial markets (and us) by hiking interest rates in October. But we don’t expect it to follow through with another hike at its scheduled meeting on Thursday. The main reason BI hiked last …
The Bank of Canada’s latest Summary of Deliberations was more hawkish than most probably expected, with some members of the Governing Council still seemingly arguing for further rate hikes. That said, the weak GDP data released since the Bank’s last …
10th November 2023
Copom’s inflation and fiscal worries There were two key-takeaways from the minutes to last week’s Brazilian central bank meeting, which were released earlier this week. First, despite the recent falls in inflation, Copom remains concerned about …
Inflation risks stop CEE easing cycles in their tracks Communications from central bankers across Central and Eastern Europe (CEE) this week struck a decisively hawkish tone, suggesting that interest rates could be left on hold across most of the region …
Edging away from ultra-loose policy The “Summary of Opinions” from last week’s Bank of Japan Monetary Policy Meeting released yesterday show a Policy Board increasingly confident that the long-term 2% target is coming into sight. The likelihood of …
BSP on a knife edge The Philippines central bank (BSP) hiked interest rates at an unscheduled monetary policy meeting on 26 th October, and at the time warned the upcoming data on GDP and inflation (both published this week) would be crucial in deciding …
One and done for the RBA The main event this week was the RBA delivering a widely-anticipated 25bp rate hike at its meeting on Tuesday. Our assessment is that the increase in the cash rate is essentially something of an insurance policy, aimed at ensuring …
There is now mounting evidence that the economy is set for a renewed slowdown in the fourth quarter and that inflationary pressures from the labour market continue to ease. Although markets have already moved to price out any real chance of further rate …
3rd November 2023
Copom cuts, but fiscal risks return to the spotlight Fiscal risks are rearing their head again in Brazil after President Lula suggested that the government may no longer aim for a balanced primary budget next year as previously pledged. Finance Minister …
Turkey’s central bank continues to impress Turkey’s central bank (CBRT) governor delivered another convincing message at this week’s Inflation Report briefing and suggested that further policy tightening will be delivered over the coming months. Governor …
ECB policymakers stressed this week that rate cuts are a distant prospect. Dutch central bank governor Knot said that rates should remain at their current “cruising altitude” for some time. And governor of the Bank of France Villeroy de Galhau noted that …
We can understand if the phase “the lady doth protest too much” sprang to mind when listening to the Bank of England after it left interest rates at 5.25% for the second meeting in a row on Thursday. Indeed, the Old Lady of Threadneedle Street stressed so …
Headline inflation rises again Figures published this week for Korea show that headline inflation rose from 3.7% y/y in September to 3.8% last month – a third consecutive monthly rise. Inflation has now been above the BoK’s target for 31 consecutive …
Threat of yen intervention remains As we had expected, the Bank of Japan retained its 1% cap for 10-year yields at this week’s meeting . However, by downgrading that cap to a “reference” and by stopping its daily fixed-rate operations offering to buy an …
The string of central bank meetings across Emerging Europe this week highlighted the unique challenges that policymakers across the region are currently facing, but one common thread in all countries is that inflation risks are persisting and we think …
27th October 2023
Food prices risk delaying Africa interest rate cuts Inflation across Africa has been falling back recently, but persistent food price pressures pose a threat to policymaker’s ambitions to start cutting interest rates. The SARB’s Deputy Governor Fundi …
The Bank of Canada’s insistence that inflationary risks have increased seems at odds with its new forecasts, which show a large degree of economic slack opening up next year. Our view that the Bank is still overestimating the near-term outlook for both …
Argentina: it’s not the economy, stupid? Elections in Argentina rarely fail to surprise and Sunday’s vote was no exception. While it was widely expected that the election would go to a run-off between Peronist and current Economy Minister Sergio Massa …
This week’s data releases provide further evidence that the euro-zone is probably in a mild recession. The euro-zone Composite PMI declined to a level consistent with GDP contracting by 0.2% q/q (see here ) and although the Ifo Business Climate Indicator …
Note: We’ll be discussing the latest Fed, ECB and Bank of England policy decisions in a Drop-In at 3pm GMT on Thursday 2 nd November . (Register here .) In the last few months there has been more concern over the accuracy of key economic data. The recent …
Taiwan’s growth moderated in Q3 Activity data published this week for Taiwan paint a mixed picture of the economy. Consumer demand is coming off the boil but exports have rebounded. More details will be available in the Q3 GDP figures due next week. …
BoJ probably won’t tweak Yield Curve Control Media reports suggest that the Bank of Japan may tweak Yield Curve Control yet again at next week’s Board meeting. That’s certainly possible: 10-year JGB yields have risen sharply since the launch of the new …
RBA has more work to do Most of the data published this week highlight the imperative for the RBA tighten policy. To start with, Wednesday’s CPI release showed that Australia’s inflation problem is far from over. In fact, there are two pieces of …
Fiscal support coming in Israel, rates to stay on hold There remains significant uncertainty around how the Israel-Hamas war will evolve, but developments this week confirm that fiscal policy will be loosened as policymakers provide support to the …
20th October 2023
The apparent strength of third-quarter GDP growth won’t convince the Fed to resume hiking its policy rate, particularly with the ongoing surge in long-term bond yields presenting a growing threat to the economy. Q3 GDP growth strong Despite the recent hit …
Government is gearing towards elections Several policy measures announced by India’s government this week are likely geared towards shoring up popular support ahead of next month’s state elections and next year’s general election. The cabinet approved …
Africa’s debt challenges look set to continue Sovereign debt restructuring discussions between Zambia and Ghana and their bilateral creditors have been encouraging. But the next challenge is talks with private lender, which may prove lengthy. Zambia …
Continued currency weakness Asian currencies have continued to weaken against the US dollar over the past week on the back of a further rise in US bond yields and growing concerns about the worsening situation in the Middle East. Most are now down by 1-6% …
Data released this week reinforce the case for the ECB to keep rates on hold at its meeting next week . There was more evidence of economic weakness in the construction activity figures, which showed that output fell by 1.1% m/m in August and is likely …
One more hike for the road Labour market data published yesterday showed that Australia's unemployment rate fell anew, from 3.7% to 3.6% in September, due largely to a pullback in workforce participation. As we explained in this Update , it increasingly …
Export values hit record high in September Export volumes bounced back by 4.6% m/m in September following the 6.1% m/m plunge in August. However, that left them a touch below the record high reached in July and means that export volumes have largely tread …
Ecuador’s presidential run off Ecuadorians head to the polls on Sunday in a run-off vote for the country’s next president that pits left-wing candidate Luisa González against centre-right businessman Daniel Noboa. Whoever wins will serve the remainder of …
13th October 2023
There appears to be growing support at the Fed for the idea that the recent sell-off in long-term Treasuries reduces the need for further policy rate hikes, but the more persuasive reason for the Fed to pause is that inflation is continuing to ease …
Almost as fast as gilt yields rose (see here ) they have subsided. After surging from 4.68% on 2 nd October to a 21-year high of 5.11% last Friday, the 30-year gilt yield dropped to 4.72% on Thursday, although it has since ticked up to 4.85% on the back …
The Hamas-Israeli conflict has so far had relatively little impact on oil prices but has pushed up European natural gas prices by nearly 30% this week, to €53 per MWh at the time of writing. There has been a small direct impact on the supply of gas as …
Feeling the spillovers… Latin America has been far from immune from spillovers from the sell-off in global bond markets. (For more on the impact on the global economy, see here .) Like in DMs, local currency bond yields in the region have risen sharply, …
6th October 2023
Turkey: rebalancing now underway Data releases this week finally provided some signs that Turkey’s inflation and current account problems are starting to ease. Admittedly, inflation continued to rise in September, to 61.5% y/y, from 58.9% in August. But …
