Filtered by Topic: Monetary Policy Use setting Monetary Policy
Consumption set to rebound further The 3.3% q/q rebound in Q3 GDP was stronger than most had expected. The 7.9% q/q rise in consumption reversed half of the drop in Q3, but some sectors are still on their knees. For example, spending on accommodation …
4th December 2020
House prices ready to skyrocket Daily data from CoreLogic suggest house prices in Australia’s five largest capital cities have risen 0.9% from their trough in October. And leading indicators suggest prices may soar before long. Indeed, our sales to new …
27th November 2020
Foreign purchases of equities at record highs Net portfolio inflows into India have surged this month. (See Chart 1.) This mirrors the jump in portfolio inflows to other EMs, suggesting that global factors have been at play, such as the US election …
Minkgate rumbles on in Denmark The political wrangling in Denmark following the outbreak of COVID-19 in the country’s mink farms shifted up a gear this week. The main point of contention remains that the government did not have the legal basis to order …
20th November 2020
Would a vaccine help China’s economy? China is a rare example of an economy that would be worse off initially if effective COVID-19 vaccines were rolled out globally. The diversion of household spending in major economies from services to goods has served …
13th November 2020
BSP under pressure to cut The weakness of the recovery in the Philippines means that the central bank (BSP) is likely to lower interest rates at next Thursday’s scheduled meeting. Third quarter GDP figures published earlier this week confirm that the …
12th November 2020
Output won’t return to pre-virus trend The US elections sent the ASX 200 to fresh highs last week as the prospect of a divided US government means that several measures proposed by president-elect Joe Biden are off the table . And it has risen further …
China tensions continue to bubble Trade data this week suggest that trade was a big drag on Australia’s GDP growth in Q3, though that’s largely because the rebound in domestic demand lifted imports. And despite mounting trade tensions with China, exports …
6th November 2020
October looking good Japan’s economy has been performing well over the autumn months. Indeed, the early evidence points to a further recovery in economic activity having taken place in October. New car registrations surged 22% m/m last month and were …
Fin Min’s growth forecasts appear unfeasible Comments this week from Finance Minister Nirmala Sitharaman that GDP growth would be “near zero” this fiscal year paint an unrealistically optimistic picture of the economic outlook. For a start, India’s …
30th October 2020
Inflation holding up better than expected The 1.6% q/q jump in consumer prices in Q3 was largely due to the reversal of the government’s free childcare policy and on its own tells us very little about the broader inflation picture. More importantly, …
So much for the optimism about Russia’s recovery… Russia’s economy lost a lot of steam at the end of Q3 as the recovery in consumer spending over the summer reversed. (See here .) The rebound was supported by social transfers from the government and the …
23rd October 2020
Minutes reiterate dovish message The minutes of the RBA’s meeting on 6 th October largely sent the same message as Governor Lowe’s speech a week alter. However, there are two points worth highlighting. First, the Board discussed lowering the targets for …
Headwinds facing Czech economy growing The Czech government this week announced stricter containment measures for the next three weeks in an effort to control the surge in COVID-19 cases which, on a per capita basis, is now the worst globally. Last week, …
16th October 2020
West’s virus woes need not deal a major blow China’s goods exports have been strong despite the weakness of the global economy. Data published on Tuesday showed they rose 9.9% y/y last month, with the strength concentrated in shipments of consumer goods …
Political wrangling compounding COVID risks Malaysia’s economy has rebounded rapidly from the crisis. Second quarter national accounts data show that by the end of June the economy was just 3.2% smaller than it was a year ago. (See here .) Recent upbeat …
RBA doubles down on inflation commitment RBA Governor Phillip Lowe gave a speech this week outlining how the Bank can deliver more easing. One change he unveiled was to the RBA’s forward guidance. In recent meetings, the Bank has said that it won’t raise …
Fresh stimulus will have limited impact on demand After dragging its heels for several months, the Finance Ministry announced further stimulus this week with a package worth INR730bn (0.4% of GDP). Around half of this consists of cash vouchers and loan …
IMF wades in on fiscal policy... The IMF made headlines this week with the suggestion in its latest Fiscal Monitor that governments across the globe should continue to spend to support economic recoveries. It’s giving a similar message to Mexico. Indeed, …
9th October 2020
Spending recovered further during Golden Week Tourist activity and spending during the nine-day “Golden Week” holiday that ended yesterday was substantially stronger than during holidays earlier in the year, but still depressed. That might point to …
Surge in Vietnam’s exports puts it in danger Vietnam has so far emerged as the biggest winner of the US-China trade war, as tariffs on goods from China have led US importers to switch suppliers. Vietnam’s exports to the US have doubled since the start of …
Big budget spend up Josh Frydenberg unveiled the 2020/21 Budget on Tuesday announcing nearly $100bn of additional stimulus measures. Of particular note, the Budget brought forward stage 2 of the tax cuts to June 2020 (to be back-dated), introduced a 100% …
Reasons for caution despite improvement in data This week brought some much-needed good news for India’s beleaguered economy. Activity data for September have been promising. The manufacturing PMI jumped to an eight-year high, while export growth turned …
Geopolitical risks grow for Turkey The conflict in Nagorno-Karabakh has opened up another schism between Turkey, the EU and Russia. An escalation in tensions could trigger sharp falls in the lira and push the central bank into more aggressive monetary …
2nd October 2020
Fiscal policy to remain supportive in Indonesia Indonesia has signalled that fiscal policy will remain supportive of the economic recovery after it unveiled a budget for next year that envisages only a very small fall in the budget deficit. Earlier this …
Government dragging its heels once more We have become accustomed to central banks holding emergency meetings over recent months, but the RBI sprung a surprise this week by postponing at the last minute the meeting that was scheduled to conclude on …
Golden Week to spur consumption growth China’s “Golden Week”, a nine-day holiday that combines both National Day and the Mid-Autumn Festival, kicked off yesterday. It could provide a much-needed boost to consumption, which has lagged the recovery in …
Currency concerns prompt interest rate hikes Central banks in Hungary and Turkey unexpectedly raised interest rates this week amid mounting concern about currency falls and inflation. While we think that this will ultimately be reversed in Hungary, …
25th September 2020
Lacklustre fiscal support in the Philippines Inadequate fiscal support is holding back growth in the Philippines and, unless this improves, the recovery will continue to underwhelm. August data show that fiscal spending remained subdued. It grew by just …
Foreign demand for CGBs is growing FTSE Russell yesterday announced that it will include China in its World Government Bond Index (WGBI). This is an important milestone and means onshore Chinese Government Bonds (CGBs) are now included in all major bond …
Better than expected in Victoria Recent data show that the draconian lockdown in Victoria that forced all non-essential business to shut at the start of August had a much smaller impact on activity than we had anticipated. We learnt last week that hours …
Drop in lira unlikely to prompt outright rate hikes The Turkish lira has come under additional pressure this week as the risk of EU sanctions has continued to rise. The central bank has tightened monetary conditions further, but an outright hike to policy …
18th September 2020
IMF increases lending to Angola The approval of Angola’s IMF programme expansion by $765mn this week will go some way towards easing balance of payments pressures, but further debt restructuring is still not out of the question. In addition to disbursing …
Argentina clamping down on dollars Argentina’s central bank has tightened capital restrictions (“ el cepo ”) to try to regain control over the peso. The strategy is just a short-term fix, though, which may come back to bite in a few years’ time. One of …
A key assumption in our forecasts has been that there will not be a repeat of the spring’s strict nationwide lockdowns that would cause the recovery in economic activity to go into reverse. That assumption is looking a bit shakier in light of headlines …
China’s economy is largely back to normal It’s now a consensus view that China’s near-term economic prospects are bright, especially relative to elsewhere. But even amid upbeat expectations, the August activity and spending data published this week still …
Strength in car sales won’t last Data released this week show that new passenger vehicle sales jumped by 14% y/y in August, the first positive rate of growth since the nationwide lockdown and the strongest monthly number since 2018. (See Chart 1.) That …
A way out of Brazil’s fiscal straitjacket? Brazil’s congress will reportedly receive a plan for the Federative Pact reform next week, which could ease concerns about the public finances. The essence of the Pact is that it will shift spending …
11th September 2020
Seeing the good, the bad and the ugly in SA data Figures released this week provided little cause for optimism about South Africa’s prospects for a strong rebound in activity. The slew of terrible data might, at least, prompt policymakers to lend more …
Second wave fears ease The recent jump in coronavirus cases in Korea, Hong Kong and Vietnam had a negative impact on each economy, with hospitality sectors bearing the brunt of the damage. But with infection numbers now falling again and restrictions …
Melbourne lockdown extended Victorian Premier Daniel Andrews confirmed this week that the state would remain in the current lockdown until at least the end of September, in line with our own expectations. (See here .) But the path out of lockdown he …
Brazil & Mexico’s PMIs diverge The manufacturing PMIs for August published this week were surprising, both for the strength they implied in Brazil’s economy and the weakness in Mexico’s. But in both cases, the surveys are painting an exaggerated picture …
4th September 2020
Slow recovery in the Philippines A long and strict lockdown meant the Philippines suffered one of the biggest falls in GDP in the region in the second quarter. (See here .) The most recent data suggest that it is also experiencing one of the slowest …
Pandemic decimating some services sectors The 7.0% q/q plunge in Q2 GDP was larger than we had anticipated and meant that Australia entered its first recession in 29 years. And while we’ve pencilled in a 0.5% q/q rise in Q3, the risks to that forecast are …
Argentina & the IMF: Take 22… Barring any unexpected hiccups, $66.2bn of Argentina’s international sovereign bonds will be restructured next Friday. As will $41.7bn of local-law FX bonds. Now the government wants to tackle the debts owed to its historic …
28th August 2020
Nigeria’s foreign currency woes Fresh measures by Nigeria’s central bank to clamp down on foreign currency transactions underline the severe pressure on the naira. While the currency will probably be allowed to weaken, further restrictions are likely to …
Turkish lira still vulnerable as EU tensions escalate The Turkish central bank’s tightening of monetary conditions has helped to stabilise the lira but the further ratcheting up of tensions with the EU mean that the risks to the currency lie to the …
QE is edging closer The Bank of Korea (BoK) surprised no one by keeping rates on hold at 0.5% this week. (See here .) Less expected was Governor Lee’s assertion that the Bank has “room for a rate cut”. We’ve now pencilled in a further 25bp cut to 0.25% in …
RBI OMOs a sign of things to come The rise in government bond yields over recent weeks appears to have jolted the RBI into action. The central bank this week held an open market operation (OMO) in which it purchased long-dated bonds with the aim of …
Banks hit with co-pay on stimulus bill When the Global Financial Crisis struck, Chinese policymakers leant heavily on the state-owned banks to shore up economic activity. While the 2009 RMB4trn fiscal stimulus package receives much of the credit, the …
21st August 2020
