Filtered by Topic: Monetary Policy Use setting Monetary Policy
A worrying divergence is emerging in the policy response across the region. Policymakers in Central Europe imposed lockdown measures early which have succeeded in containing the outbreak. And the scale of economic policy support will bolster recoveries as …
5th May 2020
The German constitutional court ruling today will not bring the ECB’s asset purchase programme to a sudden end. But it highlights that a successful legal challenge to the its policies in the future could contribute to increased tensions in the bond …
Bank Negara Malaysia (BNM) today cut its policy rate from 2.50% to 2.00%, and with the outlook for growth very poor, we think the central bank will ease policy again in the coming months. Of the 20 analysts polled by Bloomberg, 14, including ourselves, …
The Reserve Bank of Australia (RBA) today left its interest rate targets unchanged but an easing of collateral requirements should provide some support to corporate bond markets. While the financial markets expect the Bank to hike rates in about three …
Tiff Macklem to take the wheel This Update was originally sent to clients as a Rapid Response immediately after the Bank of Canada’s announcement on 1 st May. The confirmation that Tiff Macklem will take over from Governor Stephen Poloz when he steps down …
1st May 2020
The statement accompanying the Colombian central bank’s decision to cut the policy rate by 50bp to 3.25% left the door open for more easing. Given the scale of the economic hit that we expect, the policy rate will likely be lowered by at least an …
The ECB’s failure to step up its asset purchase programmes at today’s monetary policy meeting will leave investors with nagging doubts about its commitment to underwrite government borrowing during the coronavirus crisis. Eventually, however, the lack of …
30th April 2020
Since the Fed had already gone all-in on its monetary policy stimulus, it was little surprise that there no major policy announcements in today’s statement. Over the next few months the Fed will continue to expand its balance sheet toward $10trn, albeit …
29th April 2020
Hungary’s central bank didn’t disappoint at today’s MPC meeting in announcing its bond purchase programme and it’s clear that policymakers have shifted their attention from keeping short-term rates low to pushing down long-term rates. But unlike bond …
28th April 2020
This morning’s decision by the Riksbank to leave its repo rate and crisis-related policy settings unchanged did not come as a big surprise. Nonetheless, it kept the door open for a rate cut, and we think that a return to negative interest rates is likely …
The Bank of Japan today scaled up its measures to ease corporate and household financing strains significantly. However, the Board didn’t cut the policy rate even though all members expect a slump in activity. With our forecasts not miles away from the …
27th April 2020
The Russian central bank abandoned its cautious approach to the coronavirus outbreak by cutting its key policy rate by 50bp, to 5.50%, today and the accompanying communications gave the clearest possible indication that further easing is on the cards. …
24th April 2020
PBOC continues to align its policy rates This Update was originally sent to clients as a Rapid Response immediately after the Targeted Medium-term Lending Facility was cut on 24 th April 2020. The People’s Bank (PBOC) has cut rates on yet another one of …
The Turkish central bank responded to signs of a clear downturn in the economy by cutting interest rates by a further 100bp today but, with downward pressure on the lira continuing to mount, we think that the scope for further monetary easing is limited. …
22nd April 2020
The ECB’s record pace of asset purchases is proving insufficient to bring bond spreads down. We think that it will need to step up the pace of purchases further, as well as expand the overall size of the Pandemic Emergency Purchase Programme well beyond …
The scale of the Fed’s purchases of Treasury securities in the first few weeks of the pandemic, in addition to the sheer size of the broader expansion in its balance sheet, arguably suggests that the Fed is not just monetising the deficit, but has …
20th April 2020
Commercial banks lowered the Loan Prime Rate (LPR) today in response to last week’s policy rate cut. With economic conditions still weak, we expect further rate declines in the coming months. The one-year rate fell from 4.05% to 3.85% (both the Bloomberg …
The RBI has taken further steps to help banks and borrowers weather the collapse in economic activity from the coronavirus and containment measures in another emergency announcement today. The central bank also left the door open for further loosening, …
17th April 2020
The central bank in the Philippines (BSP) today cut its policy rate by 50bp at an emergence meeting, and with economic activity in the country collapsing, we doubt this will be the last move from the Bank. Today’s decision came unannounced, but it was no …
16th April 2020
The Bank of France floated the idea recently that the ECB could use “helicopter money” to channel funds to companies after the worst of the current crisis has abated. While this idea has some attractions, there would be substantial political and practical …
15th April 2020
The People’s Bank (PBOC) has taken yet another step to help banks and borrowers weather the ongoing economic weakness and is preparing to lower interest rates further in the coming months. The PBOC has just cut the one-year rate at which it lends to banks …
Bank Indonesia (BI) today left interest rates unchanged at 4.5%, but the cut to the reserve requirement ratio (RRR) and dovish comments in the press conference suggest that further rate cuts are likely. The decision was a surprise. Having cut rates at its …
14th April 2020
We won’t know until the future whether or not the Bank of England has launched helicopter money as it depends if the rise in the money supply is temporary or permanent. But more important is whether it leads to much higher inflation. The markets don’t …
9th April 2020
The Bank of Korea’ (BoK) left rates on hold at 0.75% today and announced plans to purchase government bonds. There is scope for quantitative easing to have an impact, but there are limits to how effective it can be. As such, the role of supporting the …
With the Central Bank of Chile’s policy rate at its effective lower bound, we think that its next easing measure would be a quantitative easing programme aimed at flattening the long end of the yield curve. Chile’s central bank has eased policy …
8th April 2020
The ECB is using its balance sheet aggressively to provide cheap funding to banks and support peripheral government bond markets. But there is no guarantee that banks will maintain their volume of lending to the real economy, and there is a risk that the …
The Reserve Bank of Australia (RBA) didn’t announce additional measures at today’s meeting and given the easing in tensions on financial markets we think it won’t adjust policy settings over the coming months. Looking further ahead though, the case for …
7th April 2020
Chile’s central bank suggested that, having cut its policy rate to 0.5% yesterday, rates will remain at this low level for an extended period of time. But given the scale of the economic hit from the coronavirus, we think that the policy rate will, …
1st April 2020
Policymakers in Peru and Chile have been quick to introduce economic policy and containment measures in response to the coronavirus, but peers elsewhere – particularly in Brazil and Mexico – have made less progress. This increases the risk that regional …
31st March 2020
While the SNB clearly favours using FX interventions to weaken the franc at present, persistent concerns about the size of its balance sheet would make it reticent to step in on an ever-greater scale. With no easy choices, we think that, if push came to …
30th March 2020
The People’s Bank (PBOC) has taken another step to loosen monetary conditions by lowering the rate at which it lends to banks. But the central bank’s job isn’t done yet and we anticipate continued efforts to reduce bank funding costs in the coming months. …
Concerns over Japan’s rising debt burden may prevent the government from pulling all the stops if the coronavirus outbreak escalates much further. As such, the chance that the Bank of Japan will provide a helping hand by directly financing public …
The Monetary Authority of Singapore (MAS) loosened policy today by reducing the slope of its policy band, and even though the outlook for growth and inflation is very downbeat, we don’t expect further loosening in the months ahead, given the limitations …
The RBI has emphatically stepped up its response to the economic and financial market fallout from the coronavirus outbreak with another emergency announcement today. It has also left the door wide open for further monetary loosening. A similarly-bold …
27th March 2020
The Czech central bank followed up last week’s emergency interest rate cut with further easing today and opened the door to use other measures to support the economy and stabilise the financial system. With the economic damage from the coronavirus …
26th March 2020
The Bank of Canada announced further credit easing measures this week and the government’s will expand its fiscal package to $109 bn, from $82 bn, but there are still widespread signs of stress in funding markets and there have been few direct measures to …
If the Bank of England is going to build on the unprecedented policy support it has unleashed in recent weeks to counteract the economic effects of the coronavirus, it won’t be because of concerns over how far inflation or GDP will fall. Instead, it would …
It now seems likely that euro-zone policymakers will exploit the European Stability Mechanism’s lending capacity to offer financial help to all member states to tackle the hit from the coronavirus. This should be fairly easy to do, but on its own it is …
25th March 2020
The measures to contain the spread of the coronavirus announced by PM Modi last night will be hard to fully implement but will still have severe economic repercussions. We now expect the economy to grow by just 1% this year, the weakest pace of annual …
Hungary’s central bank announced a range of measures to increase liquidity in the banking system at today’s MPC meeting. But the economic effects of the coronavirus are likely to be much more damaging than policymakers currently think, suggesting that …
24th March 2020
This Update was originally sent to clients as a Rapid Response immediately after the Fed’s policy statement on 23 rd March. The Fed’s expansion of its open-ended QE, together with new measures to lend directly to firms shows the Fed is moving beyond …
New Zealand is set to enter a near-total lockdown this week which will cause economic activity to all but stop. The RBNZ launched quantitative easing today, but we think that more monetary stimulus will be needed. We expect the Bank to cut the OCR into …
23rd March 2020
While the ECB’s extra €750bn in bond purchases has reduced financial market stress, governments also need to deliver a large fiscal response without triggering a fresh sovereign debt crisis. In our view, a good way to do so would be to adapt the ESM to …
20th March 2020
With the growth outlook deteriorating rapidly, the Bank of Thailand today became the sixth central bank in the region to cut interest rates this week. The 25bp emergency rate cut takes the policy rate to a new all-time low of just 0.75%. The decision to …
The Russian central bank’s decision to keep the policy rate unchanged at 6.00% today made it one of the few major central banks that has yet to cut rates to support the economy in response to the coronavirus. The central bank announced a series of …
The big package of measures announced by the Bank of England today in its second emergency meeting in just over a week is designed to ease the stress in the financial markets and to support the recovery once the full economic hit from the coronavirus has …
19th March 2020
The Fed’s revival of financial crisis-era programs and a huge ramp-up in the pace of its open-ended Treasury purchases in recent days could help to stem some of the bleeding in financial markets. But with broader financial conditions still tightening, …
South African policymakers appear to have decided that the current grave economic situation requires a bold response, and have moved away from their traditional hawkishness. We expect that they will follow today’s 100bp cut with another 75bp of loosening …
Bank Indonesia cut interest rates today, but the slump in the rupiah in recent days means policymakers in the country will need to act more cautiously than other central banks in the region over the coming weeks and months. Today’s 25bp rate cut takes the …
In response to the rapidly worsening outlook for the economy, Taiwan’s central bank (CBC) today cut its key policy rate today by 25bps to 1.125% and announced other measures to support the economy. However, with growth slowing sharply, further rate cuts …
