Filtered by Topic: Monetary Policy Use setting Monetary Policy
Supply disruptions easing, but risks are high There are signs that supply disruptions in India have eased a touch. The PMIs for February released this week show that the backlog of works components have stabilised after rising sharply since the middle of …
4th March 2022
Governor Kuroda’s successor to be more hawkish PM Kishida’s decision to replace arch-dove Kataoka Goushi with centrist Takata Hajime from Okasan Securities at the Bank of Japan could create a slightly less dovish policy board. But it probably won’t make …
GDP will return to pre-virus trend by mid-year The 3.4% q/q rise in Q4 GDP left output just 1.4% below its pre-virus trend, but the recovery remains very lopsided. GDP outside the heaviest-hit sectors has risen by 4.5% since Q4 2019 even as output in …
The good and the bad from high commodity prices The main economic fallout of the Russia-Ukraine crisis on Latin America will come via higher commodity prices, with oil and grains producers set to benefit. But it will also cause inflation to trend higher …
25th February 2022
In his speech late last night, Christopher Waller became the first Fed Governor to throw his weight behind St Louis Fed President James Bullard’s call for 100bp of rate hikes by the middle of the year. Nevertheless, we expect Chair Jerome Powell to push …
The Bank of England has yet to provide any clues to how Russia’s invasion of Ukraine on Thursday may influence how far and how fast interest rates need to rise. (All our analysis on the conflict is collated on one page of our website. See here .) The …
Back in safe-haven mode Just weeks after hawkish messaging from the ECB helped to weaken the Swiss franc against the euro (see here ), the Russia-Ukraine conflict has put the currency back into full-on safe-haven mode. Perhaps unsurprisingly, the exchange …
Communications from the Bank of Canada this week suggest that, as well as raising interest rates next month, the Bank will also begin quantitative tightening (QT). With inflationary pressures broadening in January and house prices rising at the fastest …
18th February 2022
This week saw tensions between Russia and Ukraine get close to boiling point. We have written extensively about the economic implications of a further escalation on both our Emerging Europe and Commodities services and all of our research on the topic can …
Yet another blow to Riksbank’s dovish stance Statistics Sweden made a bid for the most eyebrow-raising data release of the week with the news this morning that core inflation jumped from 1.7% in December to 2.5% in January. (See here .) We, the consensus …
The news this week that CPI inflation climbed to a new high of 7.5% in January prompted another surge in interest rate expectations. Fed funds futures now puts the odds of a 50bp hike in March at more than 50/50 and are pricing in 160bp of tightening for …
11th February 2022
Adam “the hawk” Glapinski takes flight Comments from Poland’s central bank Governor Glapinski this week that the NBP will do whatever it takes to tackle inflation underline the hawkish shift from the NBP this year. This supports our view that interest …
One thing that stands out about the Bank of Canada’s forecasts is its optimism about prospects in 2023. While the Bank’s forecast for GDP growth of 4.0% this year is in line with the consensus, its forecast for a 3.5% gain in 2023 is 0.5%-points higher …
Governor Ingves is not for turning We were surely not the only ones to have thought, “What is the Riksbank playing at?”, following the damp squib of its policy announcement on Thursday morning. Recall that the Bank barely changed its dovish messaging, and …
Anybody expecting the ECB to completely undo the hawkish policy shift that Christine Lagarde delivered at last week’s meeting will have been disappointed by this week’s numerous policy statements. Admittedly, Ms Lagarde herself adopted a more balanced …
The RBI’s policy announcement – in which rates were left unchanged – was the main event this week and our initial response can be found here . One key takeaway was that the Bank remains relaxed about the inflation outlook, even as inflation appears to be …
Bank readies artillery to defend yield target Expectations for a global monetary tightening cycle lifted 10-year Japanese government bond (JGB) yields to just three basis points shy of the top end of the Bank of Japan’s ±0.25% target range yesterday. (See …
What came through most clearly in yesterday’s Monetary Policy Committee (MPC) statement was the signal that the MPC will act to quash rising cost, price and wage expectations. We unpacked the Bank of England’s February meeting, at which it raised interest …
4th February 2022
“Mr Establishment” gets the job Today’s appointment of Jens Stoltenberg as Governor of the Norges Bank shows that worries of potential political nepotism ultimately fell on deaf ears, and completes the trifecta for top jobs for the ex-PM and Finance …
We said in our Drop-in on Tuesday that there would be a high bar to clear for the ECB to change its plans and raise interest rates this year. Three days later, after some strong inflation data, that bar now seems to have been cleared! January’s inflation …
Governor Lowe coming around to rate hikes It’s striking that just six months ago RBA Governor Lowe stated that he couldn’t understand why markets were expecting rate hikes in 2022 or early 2023. But this week the Governor announced the RBA would end its …
One of the more eye-catching elements of the Union Budget was the pledge that the RBI would introduce a Central Bank Digital Currency (CBDC) “starting 2022 and 23”. That would make the Reserve Bank a global front-runner. Many central banks are considering …
Nigeria’s fuel subsidies: Don’t stop me now The announcement this week by the Nigerian authorities to maintain fuel subsidies – instead of ending the scheme as planned – will limit inflation risks, but the budget deficit is set to come in wider than …
28th January 2022
Argentina & the IMF: Devil will be in the details The Argentine government’s agreement with the IMF for a new $44.5bn deal is a positive step to improve macroeconomic stability. But, at first glance, the deal seems to be based on rosy economic …
Powell fuels fears of Ratemaggedon The conventional wisdom is that Fed Chair Jerome Powell left the door open to more than four rate hikes this year in his post-FOMC press conference this week. To our minds that was a bit of a stretch. There is enormous …
Although the Bank of Canada kept policy unchanged this week, its signal that it intends to start quantitative tightening soon was more hawkish than most were expecting. In the press conference, Governor Tiff Macklem and the new Senior Deputy Governor, …
CBRT puts emphasis on “lira-isation” The upward revision to the Turkish central bank’s inflation forecast in its Q1 Inflation Report this week, from 11.8% y/y to 23.2% y/y for end-2022, was just a matter of catching up with reality. The lira has sunk 30% …
The raft of country-level Q4 GDP data published this morning point to the euro-zone eking out some marginal growth at the end of last year, with Germany contracting by 0.7% q/q. (See here and here .) Nor does the euro-zone appear to have made a strong …
Stage set for Riksbank mea culpa in February The 0.3% m/m increase in Sweden’s GDP Indicator in December, released this morning, left it a whopping 4.7% higher than its February 2020 level. (See Chart 1.) We will have to wait until the 28 th February for …
Underlying inflation set to surpass 3% The 1.0% q/q rise in trimmed mean consumer prices in Q4 was the largest since 2008 and lifted the annual rate to 2.6%. That marked the first time since 2014 that the RBA’s preferred measure of underlying inflation …
Whether the Bank of Canada raises interest rates next week or not, the more important question now is how high will rates eventually rise? Our view is that current market pricing is too aggressive. The Bank’s quarterly business and consumer surveys, which …
21st January 2022
Ukraine’s markets in for a tough few months A positive reaction to today’s talks between the US and Russia may have brought some relief but, even if a renewed conflict doesn’t materialise, local markets are likely to face a difficult few months. Tensions …
A raft of recent economic developments have shaken up our near-term views on monetary policy in South Africa, and we now expect a 25bp interest rate hike at next week’s MPC meeting. However, our forecasts for the next 12-18 months are still more dovish …
We expect the Fed to deliver some heavy hints at next week’s FOMC that it is planning an interest rate hike in March. With the Omicron wave now past its peak nationally, there is little to hold the Fed back, particularly if next week brings news of a …
Denmark achieves a geranium “greenium” Denmark joined the growing list of countries to offer a green sovereign bond, on Wednesday. The country is far from a trailblazer in the area, with the Netherlands, Germany, and the UK all amongst those to have …
Thai tourism to support the baht Better times lie head for Thailand’s tourism industry after the government this week announced it would resume its quarantine-free travel scheme from 1 st February. The scheme was suspended late last year due to fears …
Chile: Boric appoints ‘Super Mario’ Marcel President-elect Boric’s announcement today that (now outgoing) Governor of the Central Bank, Mario Marcel, will be Chile’s next Finance Minister is a clear signal that his government will pursue prudent fiscal …
Virus cases peaking in parts of India Daily COVID-19 cases in India are still rising sharply and are now around an eight-month high. But encouraging signs are emerging in the state-level data. New infections have stabilised in Maharashtra, and they have …
Labour market tightest since 2008 The 64,800 rise in Australian employment in December meant that the unemployment rate fell from 4.6% to 4.2%, the lowest rate since 2008. RBA Governor Lowe noted last year that if the economic data exceeded the Bank’s …
Our new oil price forecasts The price of oil has risen sharply since the turn of the year and, while we still expect it to fall back by year-end, recent supply issues suggest that it will not decrease by as much as we had expected. As a result, the door …
20th January 2022
The continued surge in Omicron infections suggests that the disappointing December activity data will be followed by further weakness in January, but there are no signs that it will delay the Fed’s accelerating plans to tighten policy. This week’s Senate …
14th January 2022
“Dynamic clearing” hasn’t failed yet It is too soon to conclude – as many seem to have – that Omicron will swamp China’s efforts to suppress COVID. Those efforts are far more forceful than anyone else has tried. The country’s first …
Russia-Ukraine tensions hit a new crisis point A tense week of negotiations between Russia, the US and NATO have ended with what now seems to be a more serious ratcheting up in tensions that is likely to weigh on local financial markets for some time. The …
Ha det bra, Governor Olsen You don’t have to be Sherlock Holmes to deduce that next Thursday’s announcement from the Norges Bank will be a non-event in terms of policy action. Having raised interest rates to +0.50% at the last meeting, in December , we …
Economy running hot before Omicron The economic data released this week corroborates our view that GDP surpassed its pre-lockdown level in Q4. For one thing, retail sales values jumped by 7.3% m/m in November and were 6% above their previous peak a year …
Window for Gulf fiscal loosening to close Oil prices have risen to near pre-Omicron highs this week, but we think that is likely to be short lived. As prices drop back the window for governments in the Gulf to loosen fiscal policy will shut. Brent crude …
13th January 2022
Omicron taking hold in Latin America New virus cases have jumped almost five-fold in Latin America over the past two weeks as the contagious Omicron variant is taking hold, but we suspect that the economic fallout will be limited. Caseloads are …
7th January 2022
Omicron tsunami shows few signs of peaking The surge in Omicron infections has quickly developed into a full-blown tsunami, with the seven-day national average now close to 600,000 – three times higher than the previous peak last winter. (See Chart 1.) …
NBP defiant in the face of rising wage growth Poland’s central bank continued its tightening cycle this week, but recent comments from policymakers have made us more concerned that it is failing to appreciate the extent, persistence and possible …
Next stop, rate cut in Denmark? We learnt this week that Denmark’s Nationalbank intervened heavily in the FX market in December to counter upward pressure on the krone. The sale of DKK 47 billion in the month was the biggest intervention in absolute terms …
