Filtered by Topic: Monetary Policy Use setting Monetary Policy
The proposed change to the mortgage stress tests could put even more upward pressure on house prices over the next 12 months, by increasing the amount that buyers can borrow by more than 3%. With the Bank of Canada already concerned about the impact that …
19th February 2020
While we suspect that the SNB has intervened to slow the rise of the franc in recent weeks, it has not prevented it from reaching a multi-year high against the euro. At the margin, an increased tolerance for a stronger currency argues against the Bank …
18th February 2020
The People’s Bank (PBOC) has taken yet another step to help banks and borrowers weather the economic disruption from the coronavirus outbreak. But more easing will probably be needed. The PBOC has just cut the one-year rate at which it lends to banks via …
17th February 2020
We think that a recent string of on-target inflation data and a less accommodating external environment will delay further interest rate cuts in Ghana. But monetary loosening will probably resume in 2021. Data released this week showed that headline …
13th February 2020
Given the rising economic toll from the coronavirus, worries about rising property prices and high levels of household debt are unlikely to stop the Bank of Korea (BoK) from cutting interest rates at the end of the month. With the economic costs of the …
12th February 2020
This morning’s decision by the Riksbank to leave its repo rate on hold at zero percent was never in doubt. While policymakers appear happy to stay in wait-and-see mode for the time being, we suspect that they will come under pressure to loosen policy …
The Reserve Bank of New Zealand sounded confident when it left rates on hold today and we think the improvement in underlying economic conditions means the RBNZ’s easing cycle is now over. The Bank’s decision to keep rates on hold was correctly …
The economic disruption from the coronavirus outbreak will lead to further rate cuts in much of Emerging Asia. And in those countries where currencies have fallen sharply, the moves have not been big enough to worry policymakers. As thing stand then, this …
11th February 2020
The RBA may yet cut rates to 0.25% in response to the drag on economic activity from the bushfires and the coronavirus. But with domestic demand rebounding as the housing slump has turned to boom, the urgency to support the economy has diminished. The RBA …
10th February 2020
The Russian central bank governor’s post-meeting press conference reinforced the message that, following today’s 25bp interest rate cut to 6.00%, further easing lies in store. We maintain our view that there will be another 50bp of rate cuts in the …
7th February 2020
Headline consumer price inflation is likely to have edged up in January, in large part due to a continued increase in food inflation. Further ahead, food inflation is likely to ease, but we expect core inflation to rise over the coming quarters as the …
The Brazilian government’s plans to enshrine full central bank independence in law would help to both keep longer-term inflation expectations low and bring down real interest rates. This adds to the reasons to think that local currency bond yields will …
6th February 2020
The statement and press conference following today’s Czech MPC meeting confirmed that the surprise decision to hike interest rates by 25bp, to 2.25%, will be a one-off. Policymakers will probably maintain a hawkish tone over the next few months but, as …
While several central banks are undertaking reviews of their monetary policy frameworks this year, the result is likely to be only small tweaks to the existing inflation-targeting frameworks. But this doesn’t rule out a potential widening of central …
The Philippines (BSP) cut its main policy rate by 25bp to 3.75% today and with growth likely to disappoint and inflation set to remain well within the BSP’s target, we expect more easing later this year. Today’s decision to cut was correctly predicted by …
The statement accompanying the Brazilian central bank’s meeting last night gave a clear steer that the easing cycle is now over. With growth likely to stay weak and inflation low, we expect that the Selic rate will be left unchanged for much longer than …
While keeping rates on hold today, the RBI has kept the door open for further policy loosening over the coming months. But we doubt this will materialise, and expect the central bank to shift to tightening mode before the end of the year . All six member …
Policymakers have loosened both monetary and fiscal policy in an effort to soften the economic blow from the coronavirus. Further easing is likely in the coming weeks. But if the virus peaks soon then activity may rebound quickly, with stimulus now coming …
This morning’s decision by the Central Bank of Iceland (CBI) to resume its easing cycle came as no surprise to us following the recent fall in inflation. Given the potential for the coronavirus to exacerbate the deep downturn in the tourism sector, the …
5th February 2020
The Bank of Thailand (BoT) cut interest rates today, and with the economy being hit hard by a slump in tourist arrivals as well as disruption to its industrial sector as the coronavirus continues to spread, we think more easing is likely. We have …
The Bank of Canada has implied that it would be willing to accept below-target inflation during periods when financial vulnerabilities are elevated. Accelerating house price inflation means financial risks are, if anything, increasing. So the bar to an …
4th February 2020
The Reserve Bank of Australia (RBA) sounded cautious when it left rates on hold today and we think persistent weakness in the underlying economy will force the Bank to cut interest rates to 0.5% in April. The decision to leave rates on hold at 0.75% was …
The People’s Bank has lowered the rates it charges banks for short-run liquidity. Given the mounting toll of the Coronavirus outbreak, we expect more cuts in the coming months. The People’s Bank (PBOC) has just cut its 7-day reverse repo to 2.40% from …
3rd February 2020
Even though house prices in Sydney and Melbourne plunged during the housing downturn, the house price to earnings ratio in both cities is still 40% higher than it was a decade ago. However, we think that housing is only moderately overvalued at the moment …
The MPC kept interest rates on hold at 0.75% today but left the door open to a rate cut in the coming months. Nonetheless, with the economy turning a corner and a big fiscal stimulus approaching, we suspect the next move in interest rates will be up not …
30th January 2020
The Central Bank of Sri Lanka (CBSL) unexpectedly cut interest rates today but given our view that the rupee will come under downward pressure again this year, the scope for further loosening is limited. The CBSL’s decision to cut both its deposit and …
The almost unchanged statement issued at the conclusion of this week's FOMC meeting suggests that Fed officials currently don’t believe the disruption caused by the new coronavirus warrants the type of “material reassessment” to the economic outlook that …
29th January 2020
We expect that Chile’s central bank will cut interest rates later this year, and that this will push local currency bond yields down over the next 12 months. But with the demands of protestors likely to result in looser fiscal policy and a larger rise in …
After the SARS outbreak, the Bank of Canada shifted from raising to cutting rates in just three months. Other factors were also at play, however, and the Wuhan virus is less likely to tip the scales this time. The Bank was in the middle of a tightening …
The Swedish economy appears to have stabilised in recent months, but we doubt that this will mark the start of a sustained pick-up in growth. While the Riksbank will stay in wait-and-see mode for the time being, we think it is only a matter of time before …
We expect that the broad-based EM easing cycle has further to run in the coming months but, as growth and inflation in many countries rise, it will be less widespread than in 2019. More importantly, we think that there will be some dovish surprises …
23rd January 2020
The ECB left its policy settings unchanged today, made little change to its assessment of the economic outlook and said nothing new about the strategy review. While the markets are pricing in no policy changes this year, we still suspect that the Bank …
This morning’s decision by the Norges Bank to leave its key policy rate on hold at 1.50% was widely expected. We suspect that the Bank will leave rates on hold until 2022 though, if anything, our forecast for oil prices to rise suggests that the balance …
Bank Indonesia (BI) today left interest rates unchanged at 5.0% but kept the door open to further cuts. With the economy struggling, inflationary pressures low and the rupiah continuing to appreciate against the US dollar, we think further easing is …
We are not convinced the Bank of Canada made a sharp dovish turn today as many suggest. As the data are likely to surprise the Bank to the upside before its next meeting, we continue to see it on hold in 2020. The initial reactions to the policy statement …
22nd January 2020
The Fed’s recent asset purchases and repo auctions have reversed more than half of the earlier quantitative tightening. Even so, it is the Fed’s interest rate cuts that have been the far more important factor driving money & credit aggregates . (See Chart …
Bank Negara Malaysia (BNM) today cut its policy rate from 3.00% to 2.75%, and with growth set to slow further over the next couple of quarters, we think the central bank will ease policy again later this year. Only two of the 26 analysts polled by …
While we have altered our forecasts for ECB policy this year, we are still more dovish than investors about the outlook for interest rates in the euro-zone. As such, we continue to think that government bond yields in the region will fall back and that …
21st January 2020
The Bank of Japan shocked no one in leaving its major policy settings unchanged today. And with obstacles to further easing high, the slight fall in capacity shortages we are expecting this year won’t be enough to push the Bank into cutting its policy …
PBOC on hold, for now The Loan Prime Rate (LPR) was unchanged in January. The one-year rate remained at 4.15% (both the Bloomberg consensus and our forecast was 4.10%), and the five-year rate stayed at 4.80%. The LPR replaced the PBOC’s traditional …
20th January 2020
In a surprise move, the Central Bank of Egypt (CBE) left interest rates on hold yesterday even though policymakers don’t seem to be worried by the recent rise in inflation. We think that the easing cycle will be resumed in the coming months and forecast …
17th January 2020
The Bank of Korea (BoK) left policy unchanged today, but with the economy struggling for momentum and price pressures set to remain weak, we expect the Bank to resume its easing cycle later this year. Today’s decision marks the second consecutive meeting …
South African policymakers surprised the markets by cutting the repo rate, but with inflation set to rise there is limited room for further easing. We expect just one further 25bp cut. Policymakers at the South African Reserve Bank unanimously voted to …
16th January 2020
The account of December’s ECB meeting confirmed that the Governing Council is content to leave monetary policy unchanged for some time. But it left the option of further easing on the table – an option that we think it will take up in the second half of …
The Turkish central bank (CBRT) cut interest rates by another 75bp today as policymakers bowed to pressure from President Erdogan for looser policy. More rate cuts are likely in the next few months. But the strong economic recovery will cause inflation to …
We have argued for some time that a near-term interest rate cut is a strong possibility. The market has now come around to this view. While the decision is a toss-up, at least until we see the next batch of data, our hunch remains that interest rates will …
15th January 2020
This decade is likely to be marked by slower growth and softer inflation in emerging markets. One consequence is that interest rates will probably be lower than most currently anticipate. A broad-based monetary easing cycle has been underway in emerging …
13th January 2020
Five years after the so-called Frankenshock, the SNB is near the end of the road for conventional monetary easing. Accordingly, the Bank may be forced to make another radical policy choice if there is a substantial appreciation in the franc in the coming …
The recent rise in inflation to multi-year highs across most of Central Europe has only a little further to run, but it will stay above central banks’ targets across the region this year. Policymakers will probably look through this and keep interest …
9th January 2020
Another surge in headline CPI inflation in December – most likely to a five-year high – would almost certainly bring an end to the RBI’s easing cycle. And a rise in core inflation over the coming quarters should prompt the central bank to switch to …
