Filtered by Topic: Monetary Policy Use setting Monetary Policy
The unanimous decision by Banxico’s Board to keep its policy rate at 4.00% is a clear signal that its easing cycle is done and dusted. While this indicates a cautious shift at the central bank, we think that investors have gone too far in expecting that a …
26th March 2021
Policymakers in South Africa kept their benchmark rate unchanged at 3.50% today, breaking a recent wave of EM central bank decisions to tighten policy. We suspect that the country’s weak economic recovery and subdued inflation means that policy will stay …
25th March 2021
The central bank in the Philippines (BSP) left its main policy rate on hold at 2.00% today, and while a temporary rise in inflation means interest rates are set to remain on hold for the next few months, the dire economic outlook means the Bank is still …
The Bank of Thailand (BoT) left interest rates on hold at 0.5% today and made clear in its accompanying statement that rates will stay low for the foreseeable future. We think the that the policy rate will remain unchanged until at least the end of next …
24th March 2021
A rise in headline consumer price inflation over the coming months will do little to temper growing market expectations of imminent rate hikes. But it will largely be driven by fuel price inflation, which the RBI should look through. Further ahead, a …
The Bank of Canada seems to have signalled that it will reduce the pace of its government bond purchases at its next meeting in April. We now expect it to bring its net purchases to zero by the end of the year. In a speech today, Deputy Governor Toni …
23rd March 2021
Hungary’s central bank (MNB) left its key interest rates on hold today but the tone of the communications could not have been much more hawkish without raising interest rates. The MNB is defending its view that inflation will settle back to the 3% target …
Policymakers in Nigeria opted to keep their benchmark rate unchanged at 11.50% at today’s MPC meeting in the face of rising inflation and a weak recovery. We don’t think that a hawkish minority will turn into a majority in the coming months and, if …
Commercial banks left the Loan Prime Rate (LPR) unchanged today. We have been forecasting the PBOC to hike rates this year but the likelihood of that is diminishing – the PBOC appears to favour quantitative controls on lending instead. Either way, credit …
22nd March 2021
The shock decision by Turkey’s President Erdogan to sack central bank governor Naci Agbal late on Friday is likely to trigger large falls in the lira when markets open on Monday. It looks like the central bank’s (CBRT’s) efforts to fight the country’s …
20th March 2021
South Africa’s Reserve Bank (SARB) is unlikely to be in a rush to follow other EM central banks in tightening monetary policy. We think the policy rate will be on hold this year and probably in 2022 too. This week has seen central banks in Brazil, Russia …
19th March 2021
The Bank of Japan’s policy review today contained various nudges to policy levers but ultimately marked neither a tightening nor an easing of policy. Governor Kuroda was keen to emphasise in the press conference that widening the target band for 10-year …
We expect inflation to hit 3.5% in April and then to sit at the upper end of the Bank of Canada’s 1% to 3% target range for most of the rest of the year. Given the likelihood that inflation will drop back to less than 2% in 2022, however, we do not expect …
18th March 2021
The Monetary Policy Committee (MPC) did not follow in the ECB’s footsteps by stepping up the pace of its QE purchases. Instead, it echoed the message of the Fed by emphasising that rate hikes are still a long way away. This suggests that rates won’t rise …
Turkey’s central bank didn’t disappoint investors, delivering a larger-than-expected 200bp interest rate hike (to 19.00%) today, and we think that it will keep monetary conditions tighter than most expect over the next couple of years. That will provide a …
Taiwan’s central bank appears in little hurry to raise interest rates despite the strong performance of the economy, and today’s decision to leave the policy rate unchanged at 1.125% came as no surprise. With growth set to ease and inflation low, we …
Recent volatility in financial markets meant Bank Indonesia (BI) was never likely to cut interest rates for a second consecutive month at its meeting today, and further rate cuts look off the agenda for the time being. However, fears of a repeat of the …
Housing finance commitments have surged in recent months pointing to a rise in credit growth before long. But we don’t think lending standards have been eroded so this shouldn’t stop the RBA from announcing an extension to its QE again in June. Household …
17th March 2021
Turkey’s central bank (CBRT) looks set to hike interest rates further this week, and the experience from other EMs suggests that it will need to keep real interest rates elevated for several years to bring inflation down on a sustained basis. Lowering …
15th March 2021
Recent currency falls and rises in inflation have all but guaranteed interest rate hikes in Turkey and Brazil next week, and Russia’s central bank is likely to lay the groundwork for tightening too. More broadly however, low inflation and still-large …
11th March 2021
A series of strong inflation readings in Russia have put the central bank’s ability to meet its inflation target over the next year under threat and brought forward the prospect of monetary tightening. We think the central bank will use its meeting on 19 …
10th March 2021
Today’s dovish speech by RBA Governor Lowe supports our view that the RBA is set to keep monetary policy accommodative for a long time to come. But concerns about the functioning of the bond market may force the RBA to stop QE by the end of the year. …
The annulment of left-wing former President Lula’s criminal convictions has significantly increased the likelihood of a looser fiscal stance, which could put Brazil’s public debt back onto an unsustainable path. The central bank is more likely to hike …
9th March 2021
The reports delivered at today’s opening of the National People’s Congress (NPC) confirm that with the COVID-19 downturn now in the rear-view mirror the focus of China’s leadership has shifted away from shoring up near-term growth towards putting the …
5th March 2021
Bank Negara Malaysia (BNM) left its main policy rate on hold at 1.75% today, and we have taken out the cut we had pencilled in for this year. However, with the economic recovery likely to be slow, policy is set to remain loose for a long time to come . 19 …
4th March 2021
The Central Bank of Sri Lanka (CBSL) left policy on hold today amid continued volatility in global financial markets. Given the poor outlook for the economy, the CBSL will want to resume its easing cycle soon, but that will only happen if pressure on the …
The Polish central bank’s latest forecasts, published this afternoon, tell a story in which the economic recovery will strengthen over the coming years and inflationary pressures will pick up strongly. But we think that policymakers will tolerate higher …
3rd March 2021
The 14 th Five-Year Plan should provide a revealing view of the key challenges that China’s leadership believes it faces. High among them is a more hostile global environment. In the economic sphere, this will be reflected in calls to raise …
The Reserve Bank of Australia today doubled down on its commitment to keep monetary policy settings loose and we reiterate our view that it will expand its bond purchase program by another $100bn in June. The Bank kept its target for the cash rate and the …
2nd March 2021
We doubt that the Reserve Bank of New Zealand’s new obligation to consider house prices will drastically change the outlook for monetary policy. But given that house price growth remains very strong, there is a risk that the Bank tightens policy earlier …
26th February 2021
The Bank of Korea (BoK) left its main policy rate on hold at 0.50% today in a unanimous decision, and while further rate cuts are now very unlikely, we expect more intervention in the government bond market to curb rising long-term yields. The decision to …
25th February 2021
We think market participants are getting ahead of themselves by pricing in an interest rate hike from the Bank of Canada in 2022, particularly as Governor Tiff Macklem again signalled yesterday that the Bank will place greater emphasis on employment …
24th February 2021
The Reserve Bank of New Zealand (RBNZ) sounded dovish when it left policy settings unchanged today, but we still expect the Bank to begin increasing rates next year. As expected, the RBNZ did not adjust the OCR or its asset purchase program at today’s …
The minutes of the Reserve Bank’s February policy meeting – in which interest rates were left unchanged – show that the MPC remains cautious on the inflation outlook but that it is also committed to keeping policy accommodative to ensure that the economic …
23rd February 2021
The Bank of Japan is likely to widen the tolerance band around its 10-year yield target next month. The last time this happened, many saw it – wrongly in our view – as a form of policy tightening. It will be driven more by a desire to steepen the yield …
Commercial banks left the Loan Prime Rate (LPR) unchanged on Saturday. But monetary conditions have tightened in practice since the start of the year. We expect the PBOC to formalise the shift with policy rate increases in the next few months. The …
22nd February 2021
The account of the January ECB monetary policy meeting confirms that there was unanimous support for the policy agreed at the December meeting, when the PEPP envelope was increased to €1.85trn and more TLTROs were announced. We expect the ECB to stick to …
18th February 2021
The Long Run is a new subscription service offering insight into issues that will shape the global economy and financial markets over the next 30 years. This Update outlines our ten key calls for the coming decades. 1. Pandemic won’t permanently weaken …
17th February 2021
We forecast the Norges Bank to be the first advanced central bank to begin raising interest rates, in the second half of this year. This will further bolster the krone, which we expect to be the best-performing G10 currency in 2021, and will drive the …
The continued surge in growth of narrow measures of the money supply underline that the economy is awash with liquidity, but that will not trigger a surge in price inflation when growth in the broader money supply and bank lending are trending lower. (See …
16th February 2021
This morning’s announcement that the Riksbank left its policy settings unchanged will have come as a surprise to no one. Policymakers are in no rush to raise the repo rate from zero, but there are likely to be differences in opinion about how to proceed …
10th February 2021
There are fears that, by making the government’s debt servicing costs more vulnerable to short-term rises in interest rates, quantitative easing (QE) is storing up trouble for when Bank Rate rises. However, right from the onset of the scheme, it was clear …
The MPC voted to keep the repo and reverse repo rates on hold today but committed to keeping policy “accommodative” for the foreseeable future. We no longer expect any more rate cuts, but markets are too hawkish in expecting modest rate hikes within the …
5th February 2021
The Central Bank of Egypt (CBE) opted to keep interest rates on hold at its first meeting of the year and, with inflation set to rise over the next 6-9 months, we think policymakers will keep rates unchanged for much of this year. But a drop in inflation …
4th February 2021
We are more upbeat about the outlook for the economy than the Reserve Bank of Australia. But the RBA seems keen to err on the side of caution. With the latest extension of its QE programme already ending in August, we suspect the Bank will announce one …
3rd February 2021
The RBA today upgraded its labour market forecasts but noted that the recovery remained dependent on “significant fiscal and monetary support”. Indeed, the Bank extended its Bond Purchase Program by another $100bn and indicated that it won’t raise …
2nd February 2021
The Bank of Canada has signalled that it will wait until 2023 to raise interest rates and, despite our stronger forecasts for GDP growth, there are a few reasons why we expect it to stick to this pledge. Last week the Bank reiterated that it will “hold …
28th January 2021
The Fed acknowledged in its post-FOMC meeting statement today that the economic recovery weakened in the final couple of months of last year, but balanced that near-term pessimism with greater optimism that vaccines had reduced the medium-term risks to …
27th January 2021
The recent rise in inflation appears to have stayed the hand of Nigeria’s central bank from delivering more monetary easing at today’s MPC meeting. But, as price pressures drop back towards the end of this year, we think that policymakers will lower the …
26th January 2021
Our base case remains that the RBA will end quantitative easing in April. However, one risk to that forecast is the rising share of long-term unemployment. According to estimates by both the RBA and the OECD, the natural rate of unemployment rose after …
25th January 2021
