Filtered by Topic: Monetary Policy Use setting Monetary Policy
While the Swiss National Bank left its key policy rate on hold at -0.75% this morning, it made all the right noises by making its exemptions to the banking sector from negative interest rates even more generous, and pledging to provide liquidity to the …
19th March 2020
The Brazilian central bank’s (BCB’s) statement accompanying last night’s decision to cut the Selic rate by 50bp was surprisingly cautious and suggested that further easing isn’t on the cards. With the effects of the coronavirus on Brazil’s economy likely …
The ECB announced late yesterday evening a new €750bn programme of bond purchases which is intended to contain borrowing costs for southern economies. This gives it a lot more firepower which should help to contain financial stress in the near term, but …
The central bank in the Philippines is likely to ease further in the months ahead after opting to cut its main policy rate by 50bps today. The BSP has not yet introduced loan programmes or targeted support for financial institutions and businesses …
The RBA today announced a comprehensive set of measures to combat the disruptions to economic activity and financial markets caused by the coronavirus outbreak. If credit markets remain impaired for longer, the Bank may eventually have to purchase private …
Activity data from January suggest that the economy was already contracting before the coronavirus reached South Africa. The outbreak will add to economic headwinds. Policymakers are likely to spring into action by cutting their key rate on Thursday, but …
18th March 2020
In response to the rapidly worsening outlook for the economy, Pakistan’s central bank (SBP) today slashed its key policy rate by 75bp to 12.5%. With growth likely to slow sharply this year and inflation set to fall back further, more rate cuts are likely. …
17th March 2020
The Bank of England can’t prevent the economy from falling into recession. But like the Fed, we think it will soon throw everything in its policy arsenal at the coronavirus crisis to try to prevent the markets from seizing up and to reduce the risk of a …
While the New Zealand government’s large stimulus package will soften the blow from the coronavirus outbreak, it will not prevent a recession. As such, we still expect the RBNZ to launch quantitative easing in the coming weeks. The government today …
Last week’s ECB decision gave it more ammunition to combat the fallout from the coronavirus, but it will not be enough. We now think the Bank will soon make an explicit commitment to keep sovereign bond yields low for all governments at least for the …
16th March 2020
The RBI announced some measures to boost bank liquidity in a hastily-arranged press conference today but disappointed the bond market by not lowering policy rates. With the coronavirus a growing threat to domestic activity, we think rates will be trimmed …
The Fed’s decision to slash interest rates to near-zero won’t stop the economy falling into a recession, but the package of liquidity-boosting measures will help prevent credit markets seizing up, reducing the risks a deeper downturn. We expect the Fed to …
The Bank of Korea today finally responded to the coronavirus outbreak by cutting the policy rate by 50bp and introducing a number of other measures to ease financing constraints. Further measures, including the adoption of quantitative easing, are now …
The measures announced by the Bank of Japan today lack teeth and we still expect policymakers to cut the short-term policy rate over the coming weeks. The Bank of Japan brought forward the meeting scheduled to end on Thursday to today but decided not to …
New comprehensive restrictions on travel mean that both Australia and New Zealand are headed for recession. We expect the Reserve Bank of New Zealand to follow up today’s emergency 75bp rate cut with quantitative easing before long. And the Reserve Bank …
The People’s Bank has taken another step to push down borrowing costs. China’s economy is still operating far below its normal capacity but, with only eight new infections reported nationally in the latest daily figures, the central government is now …
13th March 2020
The Fed has already slashed interest rates and flooded the markets with liquidity, but it will have to go further in the coming weeks, with a return to near-zero interest rates and a resumption of large-scale quantitative easing now likely . Following the …
The measures unveiled by the ECB today were as substantial as expected. But, along with Ms Lagarde’s comments, they underlined that the ECB has little firepower left, that there has been no coordinated fiscal response, and that the Bank is reluctant to …
12th March 2020
The Bank of England’s 50bps emergency interest rate cut, from 0.75% back to the record low of 0.25%, and other measures aimed to support loans to businesses announced this morning is the first salvo in a day of coordinated action designed to cushion the …
11th March 2020
We think that the coronavirus outbreak and the related disruptions in China and to tourism more broadly will push the New Zealand economy into recession. That’s why we expect the RBNZ to slash rates by 75bp to help offset the impact of the coronavirus …
Based on the continuing slump in stock markets and the global spread of the coronavirus, we agree with the view in markets that the Fed will cut interest rates to near-zero within the next couple of months. Fed officials would prefer to wait for evidence …
9th March 2020
On top of the rapidly spreading coronavirus outbreak, the slump in oil prices raises the risk of recession this year and suggests that the Bank of Canada will slash its policy rate to just 0.25%. Saudi Arabia’s decision to start an all-out price war, …
Against a backdrop of rising pressure on major central banks to loosen policy in response to coronavirus, we now forecast the Riksbank to cut its repo rate back into negative territory at its 28 th April decision, if not before. However, as in other …
Most central banks that have introduced quantitative easing in recent years have done so by pledging to buy a certain amount of government bonds. Our base case is that the RBA will do the same when it launches QE over the coming months, but a yield target …
China is easing monetary policy and lining up fiscal stimulus measures worth at least 2% of GDP. The impact will be muted as long as the workforce is still facing major disruption. But these measures should help restore output to a normal level in the …
5th March 2020
The Central Bank of Sri Lanka (CBSL) left interest rates unchanged today, and while it kept the door open to loosening, high inflation and the CBSL’s concern over the rupee limits the scope for further cuts. Having cut rates three times since last May, …
Headline consumer price inflation is likely to have dropped sharply in February, in large part due to a moderation in food inflation. This should further embolden the RBI to follow its global peers and cut interest rates over the coming weeks in response …
With the coronavirus outbreak spreading across Europe and its disruption to economic activity likely to mount, we think that the Polish central bank will ease policy this year. But the tone of the MPC’s post-meeting press conference today suggests that …
4th March 2020
The growing risk of COVID-19 to the outlook suggests that the Bank of Canada will follow today’s 50 bp cut in interest rates with an additional 25 bp cut in April. Given the Governing Council’s lingering concerns that looser policy will boost an already …
The continued spread of the coronavirus and the Fed’s emergency rate cut will result in more aggressive loosening in EMs than we previously envisaged. We expect central banks in much of Emerging Asia to continue cutting interest rates, and have now …
In a change to our previous forecast, we now think that the economic effects of the coronavirus will result in GDP growth slowing to just 0.7% this year and will soon prompt the Bank of England to cut interest rates from 0.75% to 0.50%. That said, we …
3rd March 2020
In a dramatic turnaround from last week, when even the most dovish of Fed officials didn’t appear to support any additional policy loosening, the Fed announced an emergency inter-meeting 50bp rate cut this morning – lowering the fed fuds target range to …
It is now likely that the central banks of major developed markets (DMs) will follow Australia in loosening monetary policy to help their economies weather the impact of the coronavirus. But there is a limit to what this can achieve; more effective will …
Two developments over the past couple of days have caused us to change our thinking on the outlook for monetary policy in Japan. We now assume that the coronavirus will spread widely across most of the world’s economies including Japan and that this will …
Bank Negara Malaysia (BNM) today cut its policy rate from 2.75% to 2.50%, and with headwinds to growth worsening, we think the central bank will ease policy again at its next policy meeting in May. 15 of the 24 analysts polled by Bloomberg, including …
With the impact of the coronavirus on economic activity set to intensify, we expect the RBA to follow up today’s 25bp rate cut with another 25bp cut in April. It looks increasingly likely that the disease will weigh on the labour market, which raises the …
We suspect that the BoJ’s response to the coronavirus will mostly consist of liquidity provision to banks and a renewed acceleration of its ETF purchases. We are not forecasting a cut in the Bank’s short-term policy rate. The Bank of Japan today issued a …
2nd March 2020
The slump in China’s PMIs in February and the continued spread of the coronavirus beyond China has raised the odds that the RBA will cut interest rates at tomorrow’s meeting. On balance though, we still think the Bank will wait until April before cutting …
The possibility of the Olympics and/or the European Football Championships being cancelled as a result of the coronavirus poses downside risks to headline Swiss GDP growth this year. Nonetheless, this will not trouble the SNB, whose focus will remain on …
27th February 2020
The Bank of Korea (BoK) unexpectedly left its main policy rate on hold at 1.25% today. But with the economic cost of the coronavirus mounting, policy support will have to be ramped up soon – we are forecasting a cut in April. Today’s decision was the …
The slightly more hawkish tone of the Hungarian central bank’s post-meeting statement supports our view that the central bank will deliver a 10bp hike in the overnight deposit rate next month. However, the MNB is a dovish institution and, with inflation …
25th February 2020
Hungary’s central bank will probably use Tuesday’s meeting to flag a shift towards tightening and we expect a small hike in the overnight deposit rate in March. But this is likely to be a symbolic gesture more than anything else. Monetary policy will stay …
24th February 2020
The Central Bank of Egypt’s (CBE) decision to keep interest rates unchanged last night for a second consecutive meeting suggests that policymakers are more concerned by the recent uptick in inflation than we had originally thought. As a result, we’ve …
21st February 2020
While we agree with investors’ general view that monetary conditions will be accommodative in DMs this year, there’s a group of countries – including the US – where the markets look too dovish. At the same time, we think too little easing has been …
20th February 2020
The account of the ECB’s January meeting suggests that the ECB was becoming a little more positive on the economic outlook. But weak data and the spread of the coronavirus since then will have surely added to the downside risks. We are sticking to our …
With the number of confirmed coronavirus cases in Korea jumping sharply over the past few days, the Bank of Korea is almost certain to cut interest rates at its meeting next week. The number of confirmed cases of the coronavirus in Korea doubled on …
Bank Indonesia (BI) today cut its main policy rate by 25bp to 4.75%, but we doubt this will be the start of a prolonged easing cycle given the country’s relatively limited exposure to the slowdown in China and the central bank’s concern over the rupiah. …
Commercial banks cut the Loan Prime Rate (LPR) today in response to moves by the People's Bank earlier in the month to lower their funding costs. While more easing is likely in the coming weeks, this alone won’t change the fortunes of the millions of …
In contrast to market expectations, we are still sceptical that the Fed will cut interest rates this year, but we agree with Treasury investors that rates are more likely to fall than rise over the next few years. Over the past six weeks, futures markets …
19th February 2020
The Turkish central bank (CBRT) shrugged off rising inflation and lowered interest rates by another 50bp today, but the accompanying statement was a little more cautious and we think that the easing cycle is nearing an end. With inflation set to surprise …
