Filtered by Topic: Monetary Policy Use setting Monetary Policy
The confirmation that Andrew Bailey will take over from Mark Carney as Governor of the Bank of England on 16 th March 2020 doesn’t change the outlook for monetary policy. But Bailey will face many challenges during his eight-year term, such as navigating …
20th December 2019
This Update was originally sent to clients as a Rapid Response immediately after the announcement by the PBOC. The Loan Prime Rate (LPR), the reference point against which banks now price loans, held steady in December. The one-year LPR was unchanged at …
The tone of December’s Monetary Policy Committee (MPC) statement and minutes was barely changed from November, indicating that the MPC is content to sit on its hands for the time being. As a result, we remain comfortable with our view that interest rates …
19th December 2019
The Bank of Japan didn’t surprise anyone by keeping interest rates unchanged today and we think it will remain on hold for the foreseeable future. The Bank’s decision to leave its short-term policy rate at -0.1% and its target for 10-year bond yields …
The Bank of Thailand (BoT) left its policy rate unchanged today, but further rate cuts are likely next year. Having cut interest rates twice this year already (in August and November) today’s decision to leave rates unchanged at 1.25% came as no surprise, …
18th December 2019
The People’s Bank has made another small downward adjustment to the rates it charges banks for short-run liquidity. We expect further cuts in the coming months, which will open the door to lower interbank rates and encourage banks to cut lending rates . …
Australia’s government pledged to increase spending in today’s Budget update. And its pessimistic forecasts for nominal GDP growth suggest that tax revenue may continue to surprise on the upside, leaving scope for additional fiscal stimulus in the …
16th December 2019
The Russian central bank governor’s post-meeting press conference was characteristically cautious, supporting our view that following today’s 25bp interest rate cut, there will probably be just one more 25bp reduction (to 6.00%) in the current easing …
13th December 2019
While Ms Lagarde’s assessment of the outlook in today’s press conference was slightly less gloomy than Mr Draghi’s in October, this does not change our view that the ECB will loosen policy again during 2020. After all, policy would need to be eased even …
12th December 2019
The 200bp interest rate cut (to 12.0%) by the Turkish central bank as well as other recent tweaks to boost lending suggest that policymakers will try to meet President Erdogan’s demand to bring rates down to single digits and bolster growth. As a result, …
Today’s decision by the Swiss National Bank to leave its policy stance unchanged came as a surprise to nobody. Five years on since the Bank first cut interest rates into negative territory, there is every chance that it will keep them below zero over the …
The statement accompanying the Brazilian central bank’s meeting last night did leave the door open for one more interest rate cut, but on balance we think the easing cycle is at an end. By the same token, the interest rate hikes that are now being priced …
The Philippines (BSP) left its main policy rate at 4.00% today, but with growth likely to disappoint and inflation set to remain below the mid-point of the BSP’s target, we expect more easing next year. Today’s decision to leave the main policy rate on …
The Fed called time on its easing cycle today by leaving the fed funds target range unchanged at 1.50%-1.75% and striking a more upbeat tone in the policy statement. With economic growth stabilising and inflation set to remain subdued, we expect interest …
11th December 2019
After cutting rates by 150bps since April, the Central Bank of Iceland kept its deposit rate at its current record low of 3.00% today. We suspect that in the absence of a sharp and sustained fall in inflation expectations, the Bank will keep rates …
We think that GDP growth in both Australia and New Zealand will fall short of expectations, forcing both the RBNZ and the RBA to cut interest rates more sharply than most expect. The consensus is that both the Kiwi and the Aussie dollar will strengthen …
10th December 2019
The continued weakness of core inflation that we expect in November’s consumer price data will probably give the MPC scope to ease policy again in the near term. But the big picture is that the inflation backdrop is set to turn more difficult over the …
9th December 2019
The statement accompanying the Chilean central bank’s decision to hold interest rates at 1.75% yesterday signalled that policy rates will be left unchanged over Q1, but we still think it’s most likely that rates will be lowered over the next 12 months. We …
5th December 2019
The Reserve Bank unexpectedly left interest rates unchanged for the first time this year, following five successive rate cuts. Nevertheless, the MPC has left the door open for further easing in the near term and a rate cut in February now looks likely. In …
The Reserve Bank of New Zealand’s decision to leave mortgage lending restrictions unchanged and tighten capital requirements means that lending and house prices are unlikely to surge in 2020. As such, concerns about financial stability won’t prevent the …
The RBA turned more optimistic when it kept rates unchanged today but we think that further stimulus will be required before long. We reiterate our long-held view that the Bank will cut rates to 0.25% next year and will launch quantitative easing in the …
3rd December 2019
The IMF has suggested that the Bank of Japan could target shorter bond yields in order to steepen the yield curve and support the profitability of financial institutions. But the benefits to insurance firms and pension funds wouldn’t compensate for the …
The Bank of Korea (BoK) left rates on hold today but kept the door open to further easing. With growth set to stay subdued and inflation likely to remain weak, we have pencilled in one more 25bp rate cut for early 2020. Today’s decision to leave the main …
29th November 2019
Calls for much looser fiscal policy in the euro-zone are falling on deaf ears. While the Netherlands and Germany have set out fiscal stimuli for 2020, each has past form for running tighter policy than planned. And any loosening in these countries is …
21st November 2019
South African policymakers left their key rate on hold at 6.50% today, and we expect that it will remain on hold going into 2020. But we do admit that the risk of a cut in the middle of next year has increased. South African policymakers’ decision to …
Bank Indonesia (BI) today left interest rates unchanged, but the cut to the reserve requirement ratio (RRR) and dovish comments from Governor Perry Warjiyo suggest that further interest rate cuts are likely. The decision by Indonesia’s central bank to …
The latest Loan Prime Rate (LPR) reductions confirm that banks are lowering lending rates on new loans in response to the recent cuts to the PBOC’s lending facilities. And policymakers’ willingness to embrace lower rates on long-term loans hints at a …
20th November 2019
For the first time this easing cycle, the People’s Bank has cut the rate it charges banks for short-run liquidity. We expect further cuts in the coming months, which will open the door to lower interbank rates and make banks less reluctant to cut lending …
18th November 2019
After loosening policy again yesterday, Mexican policymakers will probably cut rates by another 75bp over the coming six months. Given that the US loosening cycle now seems to be at an end, market expectations – which point to 150bp of cuts – seem to have …
15th November 2019
The 100bp interest rate cut delivered by Egypt’s central bank today is likely to be followed by further easing in the coming months. While we expect inflation to edge up in the near term, it will remain below the central bank’s target. As such, we …
14th November 2019
While policy loosening has caused a marked easing of financial conditions around the world, lending growth is still quite subdued. We doubt that this will change, particularly since demand for loans is now weakening again. This is another reason to expect …
It was no surprise that the central bank in the Philippines (BSP) left its main policy rate at 4.00% today, and it is unlikely to adjust rates at its December meeting either. But with growth likely to disappoint and inflation set to remain subdued, we …
The Reserve Bank of New Zealand sounded cautious when it left rates on hold today and we believe that a deterioration in the economy will force the Bank to 0.5% by early next year. We were one of the five forecasters polled by Bloomberg who correctly …
13th November 2019
The People’s Bank is powerless to stop consumer price inflation jumping above its target without undermining its broader mandate to support growth and employment. Given this trade-off we expect the central bank to prioritise the latter and ease monetary …
11th November 2019
The statement accompanying yesterday’s decision by Peru’s central bank to cut interest rates made it clear that this did not mark the beginning of a prolonged easing cycle. With inflation and economic activity likely to gradually rise, we expect the …
8th November 2019
By signalling that inflation will remain below the lower end of its 2-3% target band for the foreseeable future, the RBA signalled that further easing is on the cards. Our view remains that the Bank will cut rates to 0.25% and launch quantitative easing …
The statement following today’s MPC meeting confirmed that the Czech central bank is still concerned about above-target inflation and the need to hike interest rates. But with the economy likely to slow sharply next year and inflationary pressures to …
7th November 2019
The Monetary Policy Committee’s (MPC) dovish shift at its November meeting leaves the Committee unsure in which direction the next change in interest rates will be. As well as softening its language on the chances of rate hikes if there were a Brexit …
Against a backdrop of stubbornly-low inflation and rising unemployment, we now think that the RBA will launch quantitative easing (QE) in 2020. Here, we consider the implications for Australia’s assets. Assessments of the impact of QE elsewhere are not …
Headline consumer price inflation is likely to have risen above the RBI’s 4.0% target for the first time in 15 months in October due to another jump in food inflation. This won’t dissuade the central bank from loosening policy further in the near term. …
The Bank of Thailand (BoT) cut its key policy rate to 1.25% today, and with economic growth set to remain weak and concerns about the strength of the baht mounting, we think the central bank will loosen policy again next year. Today’s decision was …
6th November 2019
The Fed’s latest Senior Loan Officer survey points to a continued drop off in demand for commercial and industrial loans, consistent with business equipment investment contracting again in the fourth quarter. And while looser policy has prompted a surge …
5th November 2019
Bank Negara Malaysia (BNM) left its policy rate unchanged at 3.00% today, but with growth set to slow sharply over the next few quarters and inflation likely to remain subdued, we think the central bank will ease policy again early next year. 16 of the 25 …
The RBA reiterated its view that the economy had reached a gentle turning point when it left rates unchanged today. However, we think that the Bank’s forecasts for GDP growth and the labour market remain too optimistic and we expect the Bank to cut rates …
After keeping interbank rates broadly stable for most of this year, the People’s Bank (PBOC) is starting to take more direct steps to push down borrowing costs. We think this could mark the beginning of a series of PBOC rate cuts. Today, the PBOC cut the …
The statement accompanying last night’s Copom meeting gave a clear signal that there will be just one more 50bp interest rate cut in the current cycle (to 4.50%), which should temper expectations in the market for more aggressive rate cuts in the next few …
31st October 2019
The Bank of Japan left policy rates unchanged today and reiterated its readiness to ease policy if required. However, the background material to its “re-examination of economic and price developments“ was fairly upbeat. And by anticipating a further …
The Fed cut interest rates for a third time as expected today, to between 1.5% and 1.75%, but changes in the statement suggest it is trying to dissuade the markets from pricing in any further loosening. Nevertheless, we still anticipate that a further …
30th October 2019
While the Bank of Canada kept policy unchanged today, it cut its growth forecasts and delivered a more dovish policy statement. This supports our view that the Bank will cut its policy rate before long. Alongside its decision to keep the policy rate …
The Russian central bank’s decision to opt for a 50bp rate cut today (to 6.50%) and the dovish tone of the accompanying statement support our view that the easing cycle has further to run. As things stand, we expect the one-week repo rate to be lowered to …
25th October 2019
