Filtered by Topic: Monetary Policy Use setting Monetary Policy
Proposed changes to Bank Indonesia’s mandate, which include a shift to focus more on growth and unemployment, could lead to major changes in how the central bank operates. However, given the country’s high level of foreign currency debt, policymakers …
2nd September 2020
Ongoing virus-related supply disruptions as well as one-off factors such as phone tariff hikes have kept inflation higher than we had anticipated over recent months. But with food inflation set to drop sharply and demand set to remain depressed, we are …
The Fed’s switch to an average inflation targeting regime and revised interpretation of its full employment goal are a response to challenges which are common to many economies, including the euro-zone. We think the ECB will move in a similar direction …
1st September 2020
The 11% q/q drop in GDP in Turkey in Q2 was smaller than we had expected and we now forecast the economy to slump by 3% this year (previously 5.8%). But the recovery over the coming quarters will be held back by weakness in the tourism sector as well as …
The RBA today expanded its Term Funding Facility which should contribute to continued strong growth in the money supply. And while it didn’t indicate that additional stimulus is forthcoming, we still expect it to expand its bond purchases before long . As …
Chair Jerome Powell announced this morning that the Fed will be adopting what he described as a “flexible form of average inflation targeting”, which we expect will trigger additional policy stimulus in the form of stronger forward guidance and possibly …
27th August 2020
Broad money growth accelerated to a 12-year high in July, but we think that this will prove to be temporary and is not likely to push up inflation. Meanwhile, growth in bank lending to firms has returned to more normal levels, while consumer credit …
Both Korea and Japan are experiencing second waves, but a stronger shift in consumer behaviour in Korea means the outbreak there is likely to have a larger impact on growth. As such, we’ve revised down our GDP forecast for Korea but kept it the same for …
The Bank of Korea (BoK) left its policy rate on hold at 0.50% today but gave hints at the press conference that fresh rate cuts were on the table. We have pencilled in a cut in Q3 as a result and are sticking with our view that the BoK will expand …
The minutes of the Reserve Bank’s August policy meeting show that the MPC – of which three members are now due to step down – has turned notably more hawkish on the inflation outlook. But there are reasons to think that inflation pressure will ease and, …
21st August 2020
The account of the ECB’s last monetary policy meeting suggests that there was a strong consensus in favour of the current policy settings. Absent a big surprise in the economic data or fresh financial market turmoil, the Bank is likely to leave policy …
20th August 2020
Turkey’s central bank kept its key policy interest rates on hold today and, while the accompanying statement acknowledged growing upside risks to inflation, it looks like that the focus will remain on tightening monetary conditions via the use of the …
The central bank of the Philippines (BSP) left its main policy rate on hold at 2.25% today, but with the pandemic weighing heavily on the economy, we doubt the Bank has finished easing. Today’s decision to hold follows a 50bp cut at the BSP’s last meeting …
This morning’s decision by the Norges Bank to leave its key interest rates on hold at zero was never really in doubt. We still think it more likely than not that the Bank will leave rates on hold throughout our forecast horizon. Today’s announcement was …
The Central Bank of Sri Lanka (CBSL) left both its deposit and lending rates on hold at 4.50% and 5.50% respectively at its meeting today, but given the poor outlook for the economy and mounting political pressure, we think the easing cycle has further to …
Commercial banks left the Loan Prime Rate (LPR) on hold today. Given signs that the focus of monetary policy has shifted to containing financial risks on the back of the relatively rapid economic recovery, we think the LPR will be unchanged for the …
Bank Indonesia’s (BI) decision to leave interest rates unchanged at 4.0% suggests that it is waiting to see if the recent stabilisation in the rupiah holds. Provided it does, we think further easing is likely over the coming months as the economic …
19th August 2020
The Central Bank of Egypt (CBE) kept interest rates on hold for a fourth consecutive meeting on Thursday as policymakers remained cautious about delivering more monetary stimulus. That said, with the CBE accepting that inflation will undershoot its …
14th August 2020
Growing pressure on South Africa’s Reserve Bank (SARB) to do more to support the economy and finance the government is unlikely to result in a major shift in policymaking over the next year or two. But it’s a distinct possibility further out and, while …
12th August 2020
The Reserve Bank of New Zealand (RBNZ) further expanded its quantitative easing programme at today’s meeting and we think the Bank will cut rates into negative territory next year. The Bank’s decision to keep rates on hold was correctly anticipated by all …
If strains in Turkey’s balance of payments fail to ease, the central bank will probably tighten monetary conditions more aggressively within the interest rate “corridor”. But use of the corridor alone would not allow real interest rates to return to …
10th August 2020
The Monetary Policy Committee (MPC) left its interest rate and quantitative easing (QE) policies unchanged today and its new projections appear to suggest that no further loosening is required. But its dovish language is more important for the future path …
6th August 2020
The only new step taken by the RBI today was the introduction of a new framework to help struggling borrowers manage their bank debt. The MPC voted unanimously to keep the repo and reverse repo rates on hold. But, with the growth outlook worsening amid …
The 25bp cut in the Selic rate, to 2.00%, at last night’s Brazilian central bank meeting probably marks the last reduction in the cycle, but the accompanying statement supports our view that rates will remain at rock bottom levels into 2022. The reduction …
The Bank of Thailand’s (BoT) decision to leave interest rates unchanged at 0.5% despite the very poor outlook for the economy suggests further rate cuts are unlikely. In its statement, the BoT hinted at further measures it could take to support growth, …
5th August 2020
The RBA turned more pessimistic about the outlook for the economy when it kept policy settings unchanged today and we think it will engage in additional asset purchases before long . As widely anticipated, the RBA kept both its cash rate as well as the …
4th August 2020
Policy measures from governments and the ECB to keep banks lending during lockdowns appear to have been successful, but as we have argued was likely to happen, loan growth is now slowing. Consumers’ and firms’ ability and willingness to borrow will be …
27th July 2020
Russia’s central bank cut its policy rate by 25bp, to 4.25%, today and continued to provide signals that further easing lies in store. But the communications suggest that the pace of easing will slow. We maintain our forecast for the policy rate to be …
24th July 2020
Divisions on South Africa’s MPC suggest that some policymakers are keen for the easing cycle to be brought to an end following today’s 25bp cut (to 3.50%). And that seems to be the view priced into markets. Even so, with growth and inflation likely to be …
23rd July 2020
Following today’s decision to keep interest rates on hold, we think that Nigerian policymakers will cut interest rates once more this year as inflation stabilises and the economic recovery proves weaker than the central bank expects. Following a surprise …
20th July 2020
Commercial banks left the Loan Prime Rate (LPR) on hold today. Further rate cuts seem increasingly unlikely as the focus of monetary policy appears to be shifting from stimulating activity to containing financial risks. The one-year rate was unchanged at …
The detailed breakdown of China’s Q2 GDP data published today raises some questions about the purported speed of the recovery. Generally though, it is consistent with broader evidence of a sharp rebound, led by industry and construction. Conditions in the …
17th July 2020
At the press conference following today’s Governing Council meeting, ECB President Christine Lagarde dampened any suggestion that the Bank may not use the full €1.35 trillion in its emergency purchase programme. In fact, we still think it is likely to …
16th July 2020
Bank Indonesia’s (BI) decision to cut interest rates today suggests that for now at least it is prioritising the economy over supporting the rupiah. We think further rate cuts are likely over the coming months, but the pace of easing is set to be gradual. …
The Bank of Korea (BoK) left its policy rate on hold at 0.50% today and while it did not unveil any further unconventional policy measures, the Bank gave hints it could employ them in future. With growth likely to disappoint, we still expect a more …
The Bank of Canada’s pledge today to keep the policy rate unchanged until the “2 percent inflation target is sustainably achieved” implies that it has no plans to raise interest rates until at least 2023. The Bank reiterated in its statement that the …
15th July 2020
The Bank of Japan kept policy settings unchanged today as widely anticipated and we think it won’t announce major new measures over the coming months . The Bank’s decision to keep both its short-term policy rate as well as its target for 10-year …
Several EMs in Latin America, as well as South Africa, Nigeria, India and Turkey could use financial repression policies to deal with the legacy of higher public debt burdens resulting from the coronavirus crisis. This Update explains what form these …
9th July 2020
The Central Bank of Sri Lanka (CBSL) cut both its deposit and lending rates by 100bps to 4.50% and 5.50% respectively at its meeting today, and given the poor outlook for the economy, we think the easing cycle has further to run. The decision was …
Daily price data suggest that food inflation has eased over recent weeks and, with demand also likely to remain depressed, inflation does not appear to be a pressing concern. The focus of policymakers should therefore be to support the economy as much as …
Bank Negara Malaysia (BNM) cut its main policy rate by 25bps to 1.75% today, and with the economic recovery still in its infancy, we doubt this marks the end of the central bank’s easing cycle. The decision to cut was no surprise, 18 of the 25 analysts …
7th July 2020
The RBA sounded more optimistic when it left policy settings unchanged today. But with the recovery set to remain bumpy and inflation likely to weaken more sharply than the Bank is anticipating, we still expect the Bank to resume its bond purchases before …
Online sales surged during the lockdown and rose further even as the Australian and New Zealand economies were opening up again. We suspect online sales will remain high which means measures of physical location may understate the resilience of …
6th July 2020
Poland’s central bank appears to have become concerned about the strength of the zloty recently and the negative impact this could have on the pace of the economic recovery, suggesting that it is likely do more to loosen policy this year. We think that …
2nd July 2020
The decision by the Colombian central bank to slow the pace of easing from 50bp to 25bp at last night’s meeting suggests that the rate-cutting cycle is approaching its conclusion. We remain comfortable with our forecast for two more 25bp cuts in the …
1st July 2020
The Riksbank has put its money where its mouth is when it comes to expanding its balance sheet, but in our view all roads still lead to a return to negative interest rates, either in late-2020 or early-2021. While the Riksbank’s decision to leave the repo …
The current burst of bank lending suggests that governments’ loan guarantees and the ECB’s TLTROs are having the desired effects. Now that economies are re-opening, corporate revenues should begin to recover, making firms less reliant on state-backed …
26th June 2020
The ECB has used the minutes of this month’s policy meeting to try to defuse the dispute in Germany over the legality of its asset purchase programmes. Helped by the Bundesbank, this should be enough to smooth things over for now. But future court cases …
25th June 2020
Turkey’s central bank unexpectedly left interest rates on hold today and it’s difficult to see how economic conditions will change in such a way over the coming months to justify renewed easing. We now expect rates to be left on hold over the rest of this …
The central bank in the Philippines (BSP) today cut its policy rate by a larger-than-expected 50bps, to 2.25%, and with economic activity unlikely to recover fully anytime soon, we expect further easing. The timing of today’s decision was a surprise given …
