Filtered by Topic: Monetary Policy Use setting Monetary Policy
In general we think the data released this week are consistent with our three key calls on the euro-zone. The first is that the region is heading for a deeper recession than most anticipate. Our forecast is for a 1.8% decline in GDP in 2023 is below both …
28th October 2022
What to expect in 2023 We published our latest Emerging Asia Economic Outlook this week, which contains our detailed forecasts. Here are three key calls from the report. Sharp slowdown ahead Growth across Emerging Asia looks set to slow sharply over the …
We published our Q4 Nordic & Swiss Economic Outlook this week. The key points are that we expect Switzerland, Sweden and Denmark to suffer recessions, while Norway might escape with only a sharp slowdown. But inflation will remain high in the Nordics and …
The RBI announced this week that it will hold an “additional” MPC meeting on Thursday 3 rd November. It’s not unusual for the committee to convene between scheduled meetings (the next meeting was due to take place in early December). Indeed, “emergency” …
Bank won’t make an about-face The stronger than expected Q3 inflation print has prompted some commentators to forecast a larger 50bp rate hike at next week’s RBA meeting following the step down from the four 50bp hikes in recent months to a smaller 25bp …
The data released this week showed that higher interest rates are yet to have much of a negative impact on construction or consumption and that core inflation is proving stickier than anticipated. This has prompted us to upgrade our forecast for the …
21st October 2022
We do not yet know which of the three PM hopefuls (Boris Johnson, Rishi Sunak, Penny Mordaunt who have attracted early backing from Conservative MPs) will replace Liz Truss. The candidates that gain more than 100 nominations from MPs will be whittled …
Unemployment still low in September Data for Sweden in September show the labour market remained tight. Admittedly, employment fell on the month and the unemployment rate edged up from 6.9% in August to 7.0%. (See Chart 1.) But the monthly numbers are …
The main message from our latest quarterly Euro-zone Economic Outlook , which we published this week, is that we now expect the euro-zone to experience an even more extreme case of stagflation. We now forecast both headline and core inflation to average …
Minutes signal RBA not done yet The RBA this week signalled that even though it slowed the pace of tightening at its last meeting, it is not done yet. In a speech on Wednesday, Deputy Governor Bullock showed that the higher frequency of the RBA’s policy …
Central banks bringing things to a close This week, Chile ’s central bank became the latest in the region to end its rate hiking cycle. The statement accompanying its 50bp policy rate hike, to 11.25%, on Wednesday mentioned that the policy rate “has …
14th October 2022
We still think it’s only a matter of time before the easing of inflationary pressure evident in the surveys and other private-sector data shows up in the official figures. But the September CPI report points to the Fed hiking by another 75bp not just in …
Governing Council members were out in force this week giving their euro cent’s worth on the monetary policy outlook. Sifting through the various comments, there are three main takeaways. First, even the most hawkish are not prepared, in public at least, …
Sweden: consumer prices vs house prices September’s consumer price data were very strong. But there has been a sharp slowdown in the housing market which could mean that the Riksbank’s tightening cycle comes to an end soon. The increase in headline …
Inflation & external pressures force the MNB’s hand The surprise decision by Hungary’s central bank (MNB) to tighten monetary policy further today underscores that the economy is facing much stronger inflation and external pressures than its regional …
RBA flags higher neutral interest rate (sort of) This week’s speech by Reserve Bank of Australia Assistant Governor Luci Ellis on the neutral interest rate was an odd affair. The last time the Bank published an estimate of the neutral rate was in 2017, …
The bi-annual Monetary Policy Review (MPR) released this week by the South African Reserve Bank (SARB) bolsters our view that the monetary tightening cycle will continue to take on a distinct path to most other EM central banks. In many ways, the SARB has …
7th October 2022
The hawkish speech from Governor Tiff Macklem this week suggests that the Bank of Canada has no intention of following the Reserve Bank of Australia in dropping down to a 25 bp hike at its next meeting, despite the growing downside risks to the economy, …
What could the Fed "break"? The recent liquidity issues faced by UK pensions funds and problems at a few European banks have led to speculation that the Fed’s interest rate hikes will trigger some form of financial instability which, via an adverse …
Russia under more strain after Ukraine annexation The macroeconomic fallout from Russia’s call-up of military reservists and its formal annexation of Ukrainian territory has continued to mount, resulting in tighter Western sanctions, a mass fleeing of …
BoK to take cautious approach The consensus is expecting the Bank of Korea (BoK) to increase its policy rate by 50bp at its scheduled meeting on Wednesday. But with the economy slowing sharply, we think a 25bp hike is more likely. A weakening currency …
The Prime Minister, the Chancellor and investors will probably all be breathing a huge sigh of relief today as there was no guarantee that they would end the week in the same positions as they started it. But the lesson from the past couple of weeks is …
A raft of economic data for Sweden published this week added to the evidence that its economy is slowing and, like most of Europe, heading for a recession this winter. The 1.3% fall in Statistics Sweden’s monthly GDP indicator in August was the biggest …
Strong case for even bigger rate increase The case is growing for the ECB to step up the pace of tightening further at its meeting in three weeks. The account of last month’s ECB meeting, published on Thursday, showed that policymakers expect to keep …
Bank not done tightening yet Following the RBA’s surprise decision to hike the cash rate by 25bp instead of the 50bp widely anticipated, the financial markets now price in a peak of 3.6% by mid-2023 instead of 4.2% just before the meeting. Some …
Central banks in Central Europe are attempting to draw their tightening cycles to a close, but with inflation very high and currencies under pressure, there is a clear risk that this could be premature. This week Hungary’s central bank sprung a surprise …
30th September 2022
The government-induced turmoil in the markets this week has altered our thinking in five key ways. First, we have raised our forecast for the peak in interest rates from 4.00% to 5.00%. At the end of last week, we had thought that the tax cuts announced …
The accepted wisdom is that strong immigration reduces the pressure on the Bank of Canada to raise interest rates, as it will eventually help to ease labour shortages. But the immediate impact has been to boost rental growth at a time when the Bank is …
Mortgage rate floor relaxed, LPR cuts now less likely After being slashed this year, mortgage rates in most cities are now at the regulatory floor which, for first-time buyers, is currently set at 20 basis points below the five-year loan prime rate …
C/A deficit widens to multi-year high Data released this week show that India’s current account deficit widened to 2.8% of GDP in Q2, its largest since 2013. The data can however be volatile, so we prefer to take a longer perspective. In the year to Q2, …
OPEC+ weighing up a further output cut The latest reports suggest OPEC+ is seeking to follow up last month’s surprise 100,000bpd cut to oil output quotas with another reduction next week, increasing the downside risks to our Gulf GDP growth forecasts. …
29th September 2022
Policy tightening in Ghana: past, present and future Despite the release of better-than-expected Q2 GDP growth figures in Ghana, the economic outlook remains gloomy as policy tightening to address the country’s debt woes will increasingly bite. Data …
23rd September 2022
The hawkish message from the Federal Reserve this week has prompted us to revise up our forecast for the peak policy rate in Canada to 4.0%, even as the latest data suggest that inflationary pressures are easing and the economy faces a growing risk of …
The Fed’s transformation from inflation-denier back to Volcker-style inflation-slayer is all but complete. As Chair Jerome Powell acknowledged in his press conference this week, “we have got to get inflation behind us. I wish there were a painless way …
Argentina’s second IMF review This week the IMF announced that a staff-level agreement has been reached with Argentina to release a $3.9bn tranche of the $44bn programme, which will help the government to continue external debt repayments (mainly to the …
Inflation and currency key concerns for SBV Central banks stepped up tightening cycles across the region this week, with hikes in the Philippines, Indonesia (both 50bp) and Taiwan (12.5bp). There was also an unscheduled move from the central bank …
In a quiet week for euro-zone economic data, attention has focused on the bumper interest rate hikes by central banks elsewhere, including the Fed , Bank of England , the Riksbank , the SNB and the Norges Bank . The scale of the rate hikes and the …
In what has proven to be an action-packed week for major central banks, those in the Nordics and the SNB kept their end up and delivered historically large rate rises. And more tightening is likely from all three before the year is out. The 100bp rate …
First intervention to buy yen since 1998 In the wake of the Fed’s hawkish 75bp rate hike on Wednesday, the yen approached 146 against the dollar for the first time since 1998. Back then the government intervened to shore up the yen and it did so again …
Drop in FX reserves not a macro concern Data to the first week of September show that the RBI’s FX reserves have dropped in value to US$550bn, the lowest level in almost two years. (See Chart 1.) While part of that is a valuation effect, it is mainly …
Aussie falls to our year-end forecast With the Fed delivering a hawkish 75bp rate hike by signalling that it will continue tightening aggressively, the Australian dollar has slumped to US$0.66, on par with our end-year forecast. The exchange rate …
UAE seeking to accelerate oil ramp up Reports that the UAE is aiming to increase oil production capacity faster as peak oil demand draws closer could create tensions within OPEC+ over the group’s cautious approach to output quotas The Abu Dhabi National …
22nd September 2022
Manufacturing outlook remains muted Although manufacturing sales volumes increased by 0.5% m/m in June and 0.6% m/m in July, those gains only partly reversed the 2.1% decline in May. Furthermore, the July gain looks like it was boosted by a …
16th September 2022
August CPI data reinforce monetary policy divide The latest batch of inflation data out of Central and Eastern Europe (CEE) provides support to our view that tightening cycles in Czechia and Poland are at an end, but that Hungary’s central bank (MNB) …
Policymakers worried by falling won The Korean won has continued to fall against the US dollar over the past week and is now at its lowest rate against the greenback since the 2008-09 Global Financial Crisis. It has fallen by 15% against the dollar since …
The economic data this week suggest that slowing activity growth isn’t yet putting downward pressure on core inflation, which is likely to see the Fed remain in hawkish mode at its meeting next week. But we still think that picture could change quite …
PBOC trying to loosen without triggering renminbi The onshore renminbi weakened past 7/$ for the first time in two years today. Recent currency weakness has clearly put the PBOC on edge. It has been pushing back via the daily fixing. The exchange rate …
Data released this week brought yet more evidence that the euro-zone is heading for recession. The energy crisis was already weighing on industry in July, with output in the sector contracting sharply, especially among energy-intensive producers. And …
Not a lot appears to link electricity, hot drinks, furniture and eggs, but this week all four made it into Statistics Sweden’s CPI categories with the highest annual inflation rates in August. The message from this week’s inflation release for August …
Hawkish signals from Lowe tilt the balance The release of stronger-than-expected US inflation figures on Tuesday prompted a small repricing of market expectations for the upcoming RBA meeting in October Markets now price in around a 50% chance of …
