Filtered by Topic: Monetary Policy Use setting Monetary Policy
Mexico’s central bank hiked interest rates by 25bp, to 4.50%, yesterday but the split vote suggests that the tightening cycle will continue to proceed slowly despite the growing inflation risks. This reinforces our view that the policy rate will continue …
13th August 2021
Turkey’s central bank (CBRT) left interest rates on hold at 19.00% today and, with inflation likely to remain elevated over the coming months and the economy having bounced back quickly from May’s lockdown, an easing cycle is unlikely to commence until …
12th August 2021
The Philippines’ central bank (BSP) left its main policy rate on hold at 2.00% today, but with inflation fears receding, more rate cuts to support the beleaguered economy are likely soon. The BSP has kept the policy rate on hold so far this year after …
The worsening prospects for the Thai economy and the shift in the current account from a huge surplus to a sizeable deficit mean the Thai baht is likely to weaken further over the coming year. The baht has fallen again over the past week and is now down …
6th August 2021
The Central Bank of Egypt (CBE) kept its policy rate on hold on Thursday, and we continue to hold a non-consensus view that a fall in inflation later in the year will allow the CBE to resume its easing cycle in Q4. The decision to keep the benchmark …
The Reserve Bank kept the repo rate on hold at a record low today and announced plans to ramp up government bond purchases on the secondary market, underlining its commitment to supporting the economic recovery. We don’t expect policy normalisation to …
The Reserve Bank of Australia signalled today that it’s unlikely to reverse the tapering of its bond purchases even as Sydney’s virus outbreak is getting worse. We still expect the tight labour market to deliver stronger wage growth and inflation than the …
The Czech National Bank (CNB) raised its two-week repo rate by 25bp to 0.75% at today’s meeting, and its communications signalled that policymakers will raise rates more quickly than they had previously signalled to tackle above-target inflation. We …
5th August 2021
The Monetary Policy Committee’s (MPC) policy statement sent a clear signal that higher interest rates are on the horizon. But there were few signs that it is preparing to hike rates soon. What’s more, we continue to envisage inflation dropping back more …
The hawkish statement accompanying yesterday’s 100bp rate hike by the Brazilian central bank (to 5.25%) means that the Selic rate will increase further than we had anticipated. We now expect it to be raised to 7.50% by year-end (previously 6.50%). The …
The Bank of Thailand (BoT) left its policy rate on hold at 0.5% today as expected. Given the deteriorating outlook for the economy and with two of the six MPC members voting for a rate cut, we now think the central bank will loosen policy further this …
4th August 2021
The Reserve Bank of Australia delivered a hawkish surprise by not delaying the tapering of its bond purchases. And by predicting that it will hit its full employment mandate and make further progress towards its inflation target, it has opened the door …
3rd August 2021
The Fed took a small step toward the eventual tapering of its asset purchases by altering the language in the statement released today, but officials appear to be in no rush. We still expect an announcement in August or September, with the taper itself …
28th July 2021
Policymakers in Nigeria kept their benchmark rate on hold at 11.50% at today’s MPC meeting and, if we’re right in expecting the economic recovery to disappoint, policy settings are likely to remain unchanged for some time. Meanwhile, the announcement on …
27th July 2021
The larger-than-expected 30bp interest rate hike by Hungary’s central bank (MNB) today was accompanied by hawkish comments that send a strong message about its intention to bring inflation back to its target. The tightening cycle is likely to be sharper …
We believe that the slump in net migration is holding back supply more than demand. Unless the government allows net migration to overshoot its pre-virus level for a prolonged period once the border reopens next year, we think that staff shortages will …
Russia’s central bank (CBR) opted for a larger 100bp interest rate hike, to 6.50%, at today’s meeting and the accompanying communications provided clear guidance that the tightening cycle is nearing an end. With inflation likely to rise further and …
23rd July 2021
The ECB followed through on its strategy review today by raising the bar for interest rate hikes in language which was probably a touch more dovish than expected. The Bank made no change to its guidance on asset purchases, but we think it will continue …
22nd July 2021
Policymakers in South Africa kept their benchmark rate unchanged at 3.50% today and the dovish tone of the communications supports our view that interest rates won’t rise until the middle of next year. Today’s decision by the South African Reserve Bank …
Bank Indonesia (BI) left interest rates unchanged today at 3.5%, and despite the worsening near-term outlook caused by a surge in COVID-19 cases, the central bank made clear further cuts are unlikely. We expect interest rates to remain unchanged until the …
The Bank of Japan today unveiled the details of its green lending facility, underlining that its focus is now moving away from addressing the pandemic towards longer-term structural issues . As universally anticipated, the Bank of Japan kept its interest …
16th July 2021
Chile’s central bank fired the starting gun on a gradual tightening cycle yesterday as it hiked its policy rate by 25bp, to 0.75%. While it signalled that monetary policy will remain accommodative over the next two years, we think that Chile’s strong …
15th July 2021
The Bank of Korea (BoK) left its main policy rate on hold at 0.50% today and signalled that a rate hike is still very much on the table this year. While the worsening virus situation has made things more uncertain, comments from the press conference …
The Bank of Canada’s decision to continue tapering its asset purchases today came as little surprise and we continue to expect the Bank to bring the QE program to a close by the end of this year. With the Bank’s new GDP forecasts looking too optimistic to …
14th July 2021
The RBNZ today sent a hawkish signal by announcing the end of its bond purchases. While we currently expect the Bank to start hiking rates in May next year, the risk is that it will happen earlier . The Bank’s asset purchases have fallen very sharply in …
The People’s Bank (PBOC) has just announced a 50 basis point cut to the required reserve ratio (RRR) for most banks. This is less of a lurch towards monetary easing than it might seem at first glance – it is partly intended to offset tightening elsewhere. …
9th July 2021
Poland’s central bank left interest rates on hold today and, while it revised up its GDP growth and inflation forecasts, there was little sign in the accompanying press statement that the balance on the MPC has shifted further away from the ultra-dovish …
8th July 2021
The details of the monetary strategy review were slightly less radical than had been suggested in parts of the financial media. But the changes announced today still amount to a historic shift away from Bundesbank orthodoxy and towards the mainstream. We …
If confirmed, the ECB’s decision to adopt a 2% inflation target and allow room to overshoot it if needed would mark a historic shift towards the mainstream for the ECB. It would have no immediate implications for monetary policy, but in the longer run may …
The fact that Bank Negara Malaysia (BNM) left its policy rate on hold at 1.75% today despite the poor economic outlook means any further loosening is unlikely. But with the recovery set to be slow and fitful, we think BNM will leave interest rates at …
By tapering its bond purchases and watering down its commitment to keep its policy rate unchanged until 2024, the RBA is paving the way for interest rate hikes in 2023 . The Bank's decision to shift to a flexible form of quantitative easing that doesn't …
6th July 2021
Israel’s strong economic recovery prompted the central bank to phase out one of its emergency support programmes at today’s meeting and Governor Yaron’s comments suggest that the next step towards policy normalisation may involve the end of the bond …
5th July 2021
The Riksbank was always likely to maintain the status quo this morning, but against the backdrop of recent hawkish shifts by other central banks, notably the Fed, the focus was on how its thinking had shifted. The short answer is: not a lot. You did not …
1st July 2021
The further tightening of virus containment measures in South Africa for at least the next two weeks is unlikely to inflict severe damage on the economy. But it reinforces our view that the Reserve Bank will be in little rush to follow other EM central …
28th June 2021
The next EM central banks likely to raise interest rates are those whose economic recoveries are relatively advanced and can focus on inflation and/or financial risks. Chile and Korea fit into this group and we expect rate hikes from both in August. …
The surprise 25bp rate hike by Mexico’s central bank (to 4.25%) suggests that its reaction function is less dovish that we had expected, as it is now reacting to quell high inflation. With the headline and core rates set to remain above target over the …
25th June 2021
Other than the Monetary Policy Committee (MPC) noting the growing upside risks to inflation alongside today’s policy decision, there were no real signs that it is thinking about tightening policy sooner, à la the Fed. We think policy will be tightened …
24th June 2021
The central bank in the Philippines (BSP) left its main policy rate on hold at 2.00% today, but with inflation fears receding, more rate cuts to support the beleaguered economy are only a few months away. The BSP has been on hold so far this year after …
The surge in consumption in Q1 resulted in the savings rate falling to a 15-year low. While we expect households to respond to falling house prices with higher savings, the rebound in GDP could be even stronger than we currently assume if households keep …
The Czech National Bank (CNB) raised its two-week repo rate by 25bp to 0.50% at today’s meeting and the accompanying communications support our view that this marks the start of what will be the most aggressive tightening cycle in Europe. We expect that …
23rd June 2021
Last week’s surprise change in the Fed’s guidance about how soon it is likely to raise its key policy rate raises the question of whether the ECB will follow suit. In our view, although the euro-zone faces similar inflationary pressures in the coming …
The Bank of Thailand (BoT) today left interest rates unchanged at their all-time low of just 0.5%, dovish comments from the press conference support our view that rates will be on hold for a long time to come. Interest rates have now been left unchanged …
We now expect the unemployment rate to approach 4% by late-2022. Even though the reopening of the border should ameliorate staff shortages a bit next year, we expect wage growth to accelerate markedly. As such, we’re bringing forward our forecast for the …
Hungary’s central bank (MNB) raised interest rates by 30bp today and with inflation set to remain above the MNB’s 4% upper tolerance level well into 2022, we expect an additional 60bp of tightening at the next three Inflation Report meetings. This would …
22nd June 2021
While policymakers in Hungary and Czechia look set to lift interest rates from their pandemic lows later this week, we doubt that Poland’s central bank will follow suit this year. That said, with inflation in Poland set to be higher than we had previously …
21st June 2021
Commercial banks left the Loan Prime Rate (LPR) on hold again today. The PBOC has now fully reversed last year’s credit acceleration using quantitative controls. Accordingly, policy rate hikes that could prompt LPR increases are unlikely in the near …
The yields of 10-year US Treasuries and German Bunds have moved in lockstep since the latest Fed meeting, but we doubt that this will continue. While we expect the Treasury yield to rise sharply between now and the end of 2022, we think that the Bund …
18th June 2021
Wednesday’s hawkish surprise from the Fed adds weight to our views that i) the US stock market will see only limited gains between now and the end of 2023, even as the economy generally continues to power ahead and ii) the stock market ‘rotation trade’ …
The Central Bank of Egypt (CBE) announced it kept interest rates on hold on Thursday evening and, with inflationary pressures building, the CBE is likely to refrain from cutting rates in the near term. Even so, very high real interest rates and the …
While the Bank of Japan kept its major policy settings unchanged today and will continue to do so for the foreseeable future, it extended the deadline for applications to its emergency lending facility from end-September 2021 to end-March 2022. And it …
