Filtered by Topic: Monetary Policy Use setting Monetary Policy
Hungary’s central bank (MNB) stepped up the pace of tightening today with a 100bp increase in its base rate, to 4.40%, and the hawkish communications underline the view that the central bank will respond to the deterioration in the inflation outlook with …
22nd March 2022
The Central Bank of Egypt’s (CBE) decision to hike interest rates by 100bp, to 9.25%, and devalue the pound by 10% against the dollar suggests that policymakers have finally woken up to the worsening external position. The move could pave the way for a …
21st March 2022
Migration is rebounding much faster after the border reopening than we had anticipated. While that will slow the decline in the unemployment rate, the labour market is already historically tight and inflation is set to surge. The upshot is that the RBA …
The post-meeting speech by Russia’s central bank (CBR) governor Elvira Nabiullina made clear that policymakers think sanctions and autarky are here to stay for the long term. But at the same time, officials at the CBR appear to want to revert back to …
18th March 2022
The Bank of Japan kept policy settings unchanged today and signalled that it is more worried about the negative impact of higher commodity prices on activity than about inflation spiralling out of control. Indeed, we expect the Bank to keep policy loose …
Today’s 25bps hike takes interest rates up to the pre-pandemic and post-Global Financial Crisis high of 0.75% and, although the Monetary Policy Committee (MPC) sounded a bit less hawkish than it did at its past meeting in February, it still signalled that …
17th March 2022
The rise in mortgage rates implied by our new higher policy rate forecasts would reduce affordability by 12% over the next year which, in isolation, is not especially alarming when considering that the home sales-to-new listing ratio is still pointing to …
Taiwan’s central bank (CBC) today unexpectedly raised its main policy rate by 25bps to 1.375%, but we doubt this is the start of an aggressive tightening cycle given the mounting downside risks to growth and the relative weakness of inflation. We had …
Brazil’s central bank slowed the pace of its hiking cycle with a 100bp hike (to 11.75%) yesterday, but the hawkish tone of the statement suggests that Copom is more concerned about the coming jump in fuel inflation than we had thought. As a result, we …
Bank Indonesia (BI) left interest rates unchanged at 3.5% at its meeting today, and the weakness of inflation and strong performance of the rupiah mean the tightening cycle is likely to be very gradual. The decision came as little surprise and was …
The Fed began its tightening cycle with a 25bp hike today and, despite the uncertainty caused by the war in Ukraine and China's efforts to contain the spread of the Omicron variant, officials look set to hike rates by an additional 25bp at each of the …
16th March 2022
Central banks in the Gulf will have to follow the US Federal Reserve in raising interest rates by virtue of their dollar pegs, which will weigh on domestic demand and recoveries in non-oil sectors. And higher debt servicing costs could cause concerns in …
We now expect inflation to reach a 21-year high of 5.2% in Q3 as fuel prices surge and firms pass on higher raw material costs to consumers. With the labour market nearing full employment and inflation expectations picking up, we reiterate our long-held …
Concerns about inflation in Korea are rising, just as those about financial stability risks are starting to recede. Despite the worsening growth outlook caused by the surge in energy prices and war in Ukraine, we expect the Bank of Korea (BoK) to continue …
14th March 2022
We estimate that the impact of higher fuel, food and potentially goods prices triggered by the war in Ukraine will add roughly 1.0%-pt to headline inflation rates across major Latin American economies this year. One key lesson from the past year is that …
10th March 2022
In today’s monetary policy statement, the ECB said the Russian invasion of Ukraine was a watershed moment for Europe, but it concluded that it does not require a big change in monetary policy. Indeed, the Bank announced an acceleration in the pace at …
The latest surge in global commodity prices has intensified the dilemma facing the world’s major central banks: on the one hand it will push headline inflation (and inflation expectations) even higher, but on the other there’s little monetary policy can …
Surging commodity prices have led us to substantially increase our forecasts for consumer price inflation, but the negative impact of higher prices on household purchasing power, and therefore real consumption, should be more than offset by stronger …
9th March 2022
The National Bank of Poland (NBP) stepped up the pace of tightening today with a 75bp interest rate hike, to 3.50%, and the marked deterioration in the inflation outlook due to the war in Ukraine is likely to mean that rates rise much further in the …
8th March 2022
The State Bank of Pakistan (SBP) today left interest rates on hold at 9.75%, but the surge in oil prices mean it is likely to resume its tightening cycle soon. The consensus ahead of today’s meeting was split. Of the 46 analysts polled by Bloomberg, 21 …
This Update discusses three ways in which the outbreak of war in Ukraine has called into question our asset allocation views. While the situation is fluid and the outlook especially uncertain, it also provides our initial thoughts on how things might play …
4th March 2022
With inflation surging, the currency coming under downward pressure and the country on the verge of a sovereign default, today’s 100bp rate hike in Sri Lanka won’t be the last in the current cycle. We have long said that the Central Bank of Sri Lanka …
Bank Negara Malaysia (BNM) today left its main policy rate on hold and the dovish tone of its statement supports our non-consensus view that rates will remain on hold throughout 2022. We think the market and consensus are wrong to expect hikes this year. …
3rd March 2022
Chair (pro tempore) Jerome Powell indicated in his congressional testimony today that, with Russia's attacks on Ukraine roiling markets and creating additional uncertainty, he was inclined to support a 25bp hike later this month and that the Fed should …
2nd March 2022
The Bank of Canada’s decision to raise interest rates by 25bp today was widely expected and the statement supports our view that it will follow up with another hike next month, but there was little indication that the Bank intends to start quantitative …
The spread of Russian interbank interest rates over the central bank’s policy rate – which was hiked aggressively on Monday – has widened pointing to some stress in the banking sector. But for now it is far from the levels recorded during 2008/09 and …
The RBA still sounded dovish when it kept interest rates unchanged today. However, we suspect that another upside surprise in Q1 inflation will convince the Bank that tighter policy is needed even if wage growth remains modest and have pencilled in the …
1st March 2022
The sanctions imposed on Russia’s central bank freeze a significant portion of its foreign currency assets, rendering at least half largely unusable. The sharp tightening of capital controls today will remain the order of the day for some time, but …
28th February 2022
The ratcheting up of Western sanctions over the weekend has left Russian banks on the edge of crisis. They face both large deposit withdrawals and the prospect of a rise in non-performing loans, which are likely to cause credit conditions to tighten and …
This briefing note is intended to bring clients up to speed with developments over the weekend in the conflict in Ukraine. On the military front, while events remain in flux, the Russian advance has proceeded more slowly than had been anticipated . Kyiv, …
A large upwards revision to the Bank of Korea’s (BoK) inflation forecast as it left rates on hold today signals that more tightening is just around the corner. We still expect three more 25bp hikes in 2022, taking the policy rate to 2.00%. Today’s …
24th February 2022
The RBNZ sounded hawkish when it lifted rates today suggesting the OCR will rise further than we had previously anticipated. But a more aggressive hiking cycle will be an even bigger headwind to the economy next year, so we still think the RBNZ will …
23rd February 2022
The Russia-Ukraine crisis poses a challenge for central banks in advanced economies as they weigh the upside risks to inflation against the downside risks to activity. For now, we suspect that the two are finely balanced and have not changed our forecasts …
22nd February 2022
The economic and market consequences of a war between Russia and Ukraine will depend on the severity of the conflict, and the response of the West. But in most cases the economic impact on countries beyond Russia and Ukraine is likely to be limited. The …
If the Bank of Japan shortened the duration of its yield target, the impact on economic activity and inflation would probably be small but it could improve the long-term health of insurers and pension funds. It’s not clear though what could prompt such a …
The strength of the latest activity, labour market and inflation data prompted a shift in guidance from the Bank of Israel today in which it said that it may start a tightening cycle in the coming months. We think the firing gun will be started in April …
21st February 2022
After a series of aggressive interest rate hikes, tightening cycles in parts of Emerging Europe and Latin America may now be nearing an end. But inflation concerns mean that policy rates will remain above their neutral level there for some time. In …
17th February 2022
We think that the gap between the yields of 10-year German and Swiss government bonds will re-emerge over the next couple of years as the ECB tightens policy more quickly than the SNB. Prior to the pandemic, there was a spread between the yield of the …
The further rise in inflation to close to 50% y/y in January was clearly not enough to sway Turkey’s central bank (and crucially, President Erdogan) to shift back to orthodoxy as the one-week repo rate was left at 14.00% at today’s MPC meeting. We expect …
The central bank in the Philippines (BSP) left its main policy rate unchanged at 2.0% today and we expect rates to be left on hold throughout 2022. In contrast, the consensus is expecting 50bps of hikes. Today’s decision came as no surprise and was …
While the simmering tensions over Ukraine could keep euro-zone inflation higher for longer than most expect, we think that it is unlikely to put the ECB off plans to start normalising policy this year – provided that there is neither a drastic military …
16th February 2022
Business investment has been much weaker in Canada than the US since the pandemic, which helps to explain why productivity growth has lagged. There are reasons to be optimistic about the next couple of years, but we are doubtful of the Bank of Canada’s …
Quantitative tightening (QT), namely the shrinking of central banks’ balance sheets, is likely to play an active role alongside rising interest rates in the tightening of monetary policy over the coming months. However, central banks will have to play it …
15th February 2022
The People’s Bank (PBOC) has refrained from further policy easing for the time being. It left rates unchanged today when injecting liquidity via its reverse repo operations and medium-term lending facility (MLF). But the central bank’s latest monetary …
Russia’s central bank (CBR) maintained the pace of its tightening cycle today with another 100bp interest rate hike, to 9.50%, and the hawkish communications suggest that the cycle will not stop until the CBR has confidence that inflation has peaked. This …
11th February 2022
The second successive 50bp hike by Mexico’s central bank (to 6.00%), in another 4-1 split on the Board, suggests that it is maintaining its hawkish stance under the new Governor Victoria Rodríguez. And with inflation set to remain well above target in the …
We think upcoming “quantitative tightening” by the Fed will contribute to further increases in the yields of long-dated Treasuries this year and next. Investors have ramped up their expectations for Fed rate hikes lately, pushing Treasury yields to …
10th February 2022
While the Riksbank largely stuck to its dovish stance this morning, the fact that three of the six members of the Executive Board entered reservations and favoured reducing the size of the balance sheet this year leaves the direction of policy on a knife …
Bank Indonesia (BI) left interest rates unchanged at 3.5% at its meeting today, and the weakness of inflation means the tightening cycle is likely to be very gradual. The decision to leave rates on hold came as little surprise and was predicted by all 31 …
The recent hawkish turn by many major central banks did not faze the RBI today, which continued to project a dovish tone while keeping policy settings unchanged. But inflation risks are building and we expect them to force the MPC’s hand before long. We …
