Filtered by Topic: Monetary Policy Use setting Monetary Policy
Asia will be – contrary to consensus expectations for widespread hikes – the only EM region in which the median central bank isn’t tightening this year. 2021 was a year of hits and misses in terms of our forecasts . We correctly forecast that most central …
10th January 2022
While we don’t think the stock market’s falls this week mark the start of a sustained rout, we do expect Fed tightening to curb the upside for mid- and large-cap US equities over the next couple of years. And tighter monetary policy might also weigh a bit …
7th January 2022
We expect GDP to grow strongly once the current restrictions are eased, but we are sceptical that either GDP growth or inflation will be as high this year as widely anticipated. This leads us to think the Bank of Canada will hike interest rates by 75 bp …
6th January 2022
As hinted at in the December FOMC minutes, we expect the Fed will begin shrinking its balance sheet later in 2022. They would start by allowing maturing assets to run off, but if longer-term bond yields were to remain unusually low, we expect officials …
We think that GDP growth in Switzerland and the Nordics will be slower than most anticipate this year, and the boosts to inflation from energy prices will subside over the year. But while the SNB will keep interest rates on hold at a record low, …
Our new forecasts for 2022 envisage CPI inflation rising further than most expect to a peak of 7% and the Bank of England raising interest rates quicker, from 0.25% now to 1.25% by the end of the year. COVID-19 has the capacity to spring more surprises. …
We think euro-zone GDP growth will be lower than most anticipate this year, at around 3.5%, while inflation will come down towards 2% by year-end allowing the ECB to leave interest rates unchanged and continue net asset purchases. The big risk is that …
5th January 2022
As long as recurrent large waves of COVID are avoided, we think that Indian GDP growth will accelerate this year. At the same time, inflation is likely to rise more sharply than generally expected. The result is that policy rates will be hiked by more …
We expect GDP to return to its pre-virus path in the second half of the year as services spending finally returns to near-normal. However, the risks to that forecast remain tilted to the downside as consumers may remain cautious for longer. Meanwhile, we …
The National Bank of Poland (NBP) raised its policy rate by another 50bp, to 2.25% today and we expect at least another 75bp of tightening, to 3.00%, in the next few months. But with energy bills set to surge and wage pressures strengthening, the risks …
4th January 2022
The Czech National Bank (CNB) hiked rates by 100bp (to 3.75%) today and Governor Rusnok struck an incredibly hawkish tone after the meeting. The tightening cycle clearly has further to run and we now think the CNB will bring interest rates to 4.50% by …
22nd December 2021
The Bank of Thailand (BoT) left interest rates on hold today at 0.5% and hinted in its statement that it was in little rush to tighten monetary policy. The setback to the tourism sector caused by the spread of Omicron means rates are likely to remain at …
The closure of many high-contact services in Quebec yesterday is likely to soon be matched by tighter coronavirus restrictions elsewhere. That said, if other provinces also allow stores and restaurants to stay open, then the hit to GDP will be smaller …
21st December 2021
The People’s Bank has taken another modest easing step with a 5bp reduction to the One-Year Loan Prime Rate, although it kept the Five-Year rate on hold. We expect more easing to follow in the coming months. The one-year rate decreased from 3.85% to …
20th December 2021
Following yesterday’s interest rate cut in Turkey, the lira has plunged again and is now faring worse than other Emerging Europe currencies have done during recent sudden stops. There are some signs of stress emerging in the banking sector. These aren’t …
17th December 2021
Russia’s central bank (CBR) stepped up the pace of its tightening cycle today with a 100bp interest rate hike, to 8.50%, and the hawkish communications reinforce the message that it will not hesitate to raise interest rates further. We now expect a 75bp …
We expect growth in almost every major economy to slow next year, with the US and China in particular falling some way short of current expectations. At the same time, while headline inflation will drop sharply, core inflation will remain higher than most …
Banxico added to this week’s global central banking bonanza with a surprise 50bp hike, to 5.50%, and the widespread hawkish shift on the Board suggests that policymakers will act more aggressively to tame above-target inflation. We now expect a further …
While central banks elsewhere are becoming increasingly hawkish, the Bank of Japan kept policy loose today and is set to remain among the most dovish central banks for the foreseeable future . The Bank left its interest rate targets unchanged as widely …
The ECB confirmed today that it will reduce the pace of its monthly asset purchases to €40bn by April next year. It plans to reduce them to €20bn by October and then continue as long as necessary. We have brought forward our forecast of the first rate …
16th December 2021
The surprise hike in interest rates by the Bank of England today, from 0.10% to 0.25%, could just be a case of the Bank moving a bit quicker than expected, but the hawkish tone of the commentary suggests to us that it is now also willing to move a bit …
Yesterday’s Fed meeting confirmed a hawkish shift. Turkey aside, we doubt that this is likely to cause major strains in the balance of payments of most EMs. But the Fed’s hawkish turn may cause domestic monetary policy to be tightened slightly more …
Turkey’s central bank shrugged off a currency crisis, rising inflation as well as the recent hawkish turn from the Fed and remained obedient to President Erdogan by cutting its one-week repo rate by another 100bp, to 14.00%, today. The accompanying …
While the Swiss National Bank maintained the status quo once again this morning (yawn), the Norges Bank continued its tightening cycle, as expected, and opened the door to another rate hike in March. We are sticking to our hawkish forecast that rates will …
Taiwan’s central bank (CBC) today left interest rates unchanged at 1.125% and despite rising inflation, surging property prices and the strong economy, we don’t think policymakers will be in any rush to tighten policy. Today’s decision was unanimous and …
Bank Indonesia (BI) left interest rates unchanged at 3.5% at its meeting today, and despite the prospect of the US Fed raising interest rates soon, we don’t think BI will be in any rush to tighten. The decision to leave rates unchanged came as no surprise …
The central bank in the Philippines (BSP) today left interest rates unchanged at 2.00%, and with inflation set to ease further over the coming months we think the central bank will keep monetary policy loose for the foreseeable future. Today’s decision …
The Fed delivered an even more hawkish shift at the December meeting than we had anticipated, with the pace of tapering doubled and officials now forecasting three rate hikes next year. Reflecting that new tone, we now expect the Fed to raise rates three …
15th December 2021
Chile’s central bank raised its policy rate by another 125bp yesterday, to 4.00%, and the accompanying statement, alongside today’s Monetary Policy Report , suggest that its tightening cycle will be more aggressive than we’d previously thought. We now …
The decision by Hungary’s central bank (MNB) to raise its base rate by 30bp, to 2.40%, at today’s meeting is largely symbolic. The key point is that the central bank struck a clear hawkish tone and will continue to push up interbank interest rates …
14th December 2021
The State Bank of Pakistan (SBP) today raised interest rates by a further 100bp, which came as little surprise. What was unexpected, however, was the sudden shift in tone in the statement. Despite the worsening inflation outlook and the widening external …
The Bank of Canada’s updated policy framework will not have a material effect on policy over the next couple of years, but it does support our forecast that inflation will be slightly higher on average over the rest of this decade than it was in the …
13th December 2021
The recent batch of GDP figures showed that growth in Latin America as a whole picked up in Q3, but the region’s recovery so far has been one of the weakest in the emerging world. And growth prospects are only deteriorating, suggesting Latin America will …
Brazil’s central bank gave a clear steer that, even though the economy entered recession in Q3 and shows little sign of growth in Q4, it will follow the 150bp hike in the Selic rate yesterday (to 9.25%) with further aggressive tightening. We now think …
9th December 2021
The National Bank of Poland’s decision to slow the pace of its tightening cycle with a 50bp interest rate hike (to 1.75%) seems a bit inconsistent with its more hawkish tone on inflation in the accompanying press statement. Even so, we think the backdrop …
8th December 2021
The Bank of Canada’s unchanged policy rate guidance implies it could wait until the third quarter before raising rates but, given wage growth is now picking up sharply, we expect it to pull the trigger in April. As the Bank updated its forward guidance …
The MPC voted to keep policy rates on hold today, opting only to introduce further small measures to withdraw liquidity from the banking sector. With the RBI still focusing primarily on supporting the fragile economic recovery, we continue to think that …
This Update answers some of the most common questions that we have received from clients during Turkey’s recent turmoil. In short, the economic fallout doesn’t look like it will be as bad as it was after the 2018 crisis. However, policymakers look less …
7th December 2021
The RBA still sounded dovish when it kept policy unchanged policy. We think that rates will rise earlier than the Bank anticipates but later and by less than what the financial markets price in. As widely anticipated, the Bank kept its policy rate …
We expect the Bank of Korea to continue raising interest rates next year, but the worsening near-term prospects for growth mean the outlook for monetary policy has become less clear cut. Recent economic data from Korea make for disappointing reading. The …
6th December 2021
The People’s Bank (PBOC) has just announced a cut to the required reserve ratio (RRR) for most banks, shortly after Premier Li and the Politburo each separately hinted at an increase in policy support. There is already evidence of fiscal easing, and we …
The South African rand has rallied over the past few days after reaching its lowest level against the US dollar in more than a year following last week’s news about the Omicron variant. Even if the new variant doesn’t lead to a major round of renewed …
1st December 2021
The restrictions announced by the government on Saturday in response to the new Omicron COVID-19 variant increase the downside risks to our GDP forecasts and the chances that the Bank of England delays increasing interest rates until next year. And …
29th November 2021
With cases of the new Omicron variant being reported on several continents now, there is a good chance that it is already present in the United States. We still know almost nothing definitive about whether Omicron is more transmissible or deadly than …
28th November 2021
The account of October’s ECB meeting suggests that it is by no means guaranteed that net PEPP purchases will end in March. And even if they do, the Bank may well leave open the possibility of re-starting PEPP purchases later in 2022 if needed. Meanwhile, …
25th November 2021
In comparison to the chaotic scenes in the Riksdag yesterday, the Riksbank’s November meeting was a more sedate affair. While the Bank is in no rush to raise the repo rate, the insertion of a rate hike into the end of its three-year projection period …
Today’s move by the Bank of Korea is likely to mark the second hike of at least five, in a tightening cycle that began in August and will extend well into next year. The Bank of Korea’s (BoK) decision to hike its policy rate from 0.75% to 1.00% was well …
The Turkish lira’s sharp fall yesterday looks similar to the experience of sudden stops elsewhere. In those instances, central banks usually responded with interest rate hikes of around 600bp as well as other regulatory measures, which supported a …
24th November 2021
The sharp tightening of financial conditions in Latin America and Emerging Europe will add to headwinds facing both regions and feeds into our view that recoveries there are entering a slower phase. Financial conditions in Asia have tightened too, albeit …
While the RBNZ only hiked rates by 25bps at today’s meeting, it is set to continue lifting rates next year. However, we think a slowdown in the economy will end the Bank’s hiking cycle with the OCR at 2.0%. Today’s 25bp hike in the OCR was correctly …
