Filtered by Topic: Monetary Policy Use setting Monetary Policy
Vietnam’s decision to cut interest rates today is something of a surprise given that growth appears to be holding up well at the moment. Given the decent outlook for the economy, we don’t think the central bank will rush into cutting rates again soon. The …
13th September 2019
Having mirrored the ECB’s 10bp interest rate cut this afternoon, we now expect the Danish Nationalbank to reduce its Certificates of Deposit rate again by the end of the year. Meanwhile, although the SNB is likely to stick with FX interventions for a …
12th September 2019
With today’s policy decision, Mario Draghi appears to have locked the ECB into QE for several years beyond his time in office. While the move was initially welcomed by financial markets, we doubt that it will be enough to re-invigorate the euro-zone …
The Turkish central bank delivered another larger-than-expected interest rate cut today and we now expect the one-week repo rate to reach a trough at 12.50% (previously 16.00%). But if we’re right in expecting inflation to start rising again and the lira …
The dovish statement which accompanied today’s decision by Bank Negara Malaysia (BNM) to leave its policy rate on hold at 3.00% suggests that the central bank is leaving the door open to further easing. We are sticking with our forecast that the Bank will …
President Donald Trump’s call for the Fed to slash interest rates to zero or “less”, so that the Treasury can lock-in low borrowing costs for the very long term, sounds appealing in a sustained low inflation environment. But the evidence from other …
11th September 2019
The more dovish-than-expected press conference following today’s MPC meeting confirmed that the Polish central bank is placing more weight on concerns about the weak external environment than domestic inflationary pressures. While we think that inflation …
The sharp fall in market interest rates over the past 12 months is starting to support the economy, with activity growth in rate-sensitive sectors like durables consumption and housing rebounding in recent months. With income growth slowing and the …
9th September 2019
Russian central bank governor, Elvira Nabiullina, used the post-meeting press conference to hint at a possible further rate cut by year-end, supporting our view that the easing cycle has further to run. For our part, we think slow growth and weak …
6th September 2019
The PBOC will release a portion of the reserves commercial banks’ hold at the central bank. While this will pull down interbank rates in the short run, the PBOC will need to cut its policy rate to make the lower interbank rates stick. But even if policy …
Headline consumer price inflation is likely to have risen in August, due in large part to a renewed pick up in food inflation. But it will remain comfortably below the RBI’s 4.0% target. And given the weakness of GDP growth in Q2, further rate cuts are …
The decision by the Riksbank to leave its repo rate on hold at 0.25% this morning was never really in doubt. However, its hawkish tone and cautious approach to cutting its forecasts for the repo rate poses serious risks to its credibility. Given that all …
5th September 2019
The Bank of Canada has become more concerned about deteriorating global conditions and, given our view that global growth will slow further, we continue to expect the Bank to cut interest rates in October. Alongside its decision to keep the policy rate …
4th September 2019
The fact that investors are now pricing in looser monetary policy in Sweden highlights the extent to which the Riksbank has fallen behind the curve. Anything less than a substantial dovish shift in the Bank’s tone and forecasts tomorrow would be a big …
Yesterday’s MPC statement suggested that Chilean policymakers will follow yesterday’s 50bp cut with more easing. The latest growth and inflation data have been weak, and there is a window for further rate reductions. We have now pencilled in an additional …
The RBA sounded a little more optimistic when it left interest rates unchanged at today’s meeting. But with external headwinds intensifying and the labour market set to weaken further, we still expect the Bank to cut interest rates to 0.5% over the coming …
3rd September 2019
The Bank of Korea sounded more bearish on the outlook for the economy even as it left rates on hold today. As such, we continue to expect more easing this year, with another 25bps cut in October. Today’s decision followed the first rate cut in three years …
30th August 2019
Given the deep downturn in the tourism sector, this morning’s decision by the Central Bank of Iceland (CBI) to cut interest rates by a further 25bps came as no surprise to us. We think that policymakers will continue the easing cycle at the next meeting, …
28th August 2019
Kenya’s drought will probably push inflation above the CBK’s target range in Q4. But bank will likely look through this spike, as it did in 2017. We think the next rate move will be a 50bp cut in Q4 2020. Inflation picked up again in July, rising from …
The Egyptian central bank cut its overnight deposit rate by a larger-than-expected 150bp last night (to 14.25%) and with inflation likely to fall further in the coming months, much more easing lies in store. We have revised down our year-end forecast to …
23rd August 2019
The Central Bank of Sri Lanka (CBSL) cut rates today, but given our view that the rupee will come under pressure again this year, we think this will probably mark the last cut in 2019. Today’s decision by the CBSL to cut both its deposit and lending rate …
The account of the Governing Council’s July meeting shows that there was broad support for further policy easing in September and perhaps for a change to the inflation target fairly soon. It leaves us comfortable with our forecast for a 10bp deposit rate …
22nd August 2019
Despite the recent weakness of the rupiah, Bank Indonesia (BI) today cut its benchmark interest rate for the second consecutive month to 5.50% and hinted that further easing is on the horizon. But the uncertain outlook for the currency means any further …
The minutes of the Reserve Bank’s August policy meeting suggest that the MPC’s larger-than-expected rate cut was intended in part to send a dovish signal rather than simply being a case of “front-loading” loosening. This supports our view that further …
While the Swedish krona and the Norwegian krone are now near the record lows they reached against the euro in 2008-09, we think that monetary policy and rising risk aversion will push them down further. The Swedish and Norwegian currencies have …
21st August 2019
Quasi-rate cut still leaves the PBOC with work to do The newly revamped Loan Prime Rate (LPR), intended to replace the traditional benchmark lending rate as the reference point against which banks price loans, was launched today. The one-year LPR was set …
20th August 2019
A long-awaited shake-up of how China’s banks price loans should in time give policymakers much finer control of bank lending rates and could open the door to a quasi-rate cut as soon as tomorrow. But it won’t immediately clear the roadblocks that have …
19th August 2019
While the imminent change in leadership at the Central Bank of Iceland (CBI) is unlikely to affect its current easing bias, the new Governor will have a bigger role in shaping policy than his predecessors. Having been named as the new Governor of the …
While this morning’s decision by the Norges Bank to leave its key policy rate unchanged at 1.25% was in line with expectations, the dovish shift in its tone suggests that the last bastion of hawkishness among advanced economies has fallen. In contrast to …
15th August 2019
Having seen investors move in line with our previously uber-dovish view on Swedish interest rates in recent months, we now expect the Riksbank to cut the repo rate to -0.50% by the end of the year. With news on the economic front going from bad to worse, …
14th August 2019
An official from the Monetary Authority of Singapore (MAS) today confirmed that it is not considering an unscheduled policy adjustment, but given the poor outlook for the economy loosening in October is still very likely. Singapore’s Ministry of Trade and …
13th August 2019
The statement accompanying the decision by Peru’s central bank to cut interest rates left the door open for further easing. And with the incoming growth and inflation data still weak, there is a window for further rate reductions. We’ve pencilled in 50bp …
9th August 2019
Today’s 25bp cut from the central bank in the Philippines (BSP) came as no surprise, and with inflation set to fall back further and growth only likely to stage a moderate recovery over the coming months, we expect another 25bp cut before the year is …
8th August 2019
Headline inflation is likely to have remained below the RBI’s 4.0% target in July and will be used by the central bank as vindication of its decision to reduce interest rates for the fourth consecutive meeting yesterday. But with policy now being loosened …
The Reserve Bank delivered a (slightly) larger-than-expected rate cut today and has left the door open for further easing. If soft surveys are correct in suggesting that there is limited slack in the economy, further policy loosening could lead to higher …
7th August 2019
The Reserve Bank of New Zealand cut rates dramatically to 1.0% at today’s monetary policy meeting. But given our more pessimistic forecasts of the New Zealand economy, we don’t think that the Bank is done easing and now expect it will cut rates again in …
While Japan’s government will almost certainly refrain from direct intervention on the foreign exchange markets to stem the recent appreciation of the yen, we can’t rule out that the government’s pension fund will buy more foreign assets. The key point …
6th August 2019
The RBA adopted an easing bias when it left interest rates unchanged today. With the labour market set to loosen further, we expect the Bank to slash rates to 0.5% by early-2020. The RBA’s decision to leave interest rates unchanged at 1.0% was correctly …
Investment growth collapsed to a near four-year low in Q1. While a spectacular rebound will remain elusive, investment should recover gradually over the coming quarters as election-related uncertainty clears and funding costs drop following the RBI’s cuts …
5th August 2019
The manufacturing PMIs for July suggests that growth in EM industry remained soft at the start of Q3, with activity in Emerging Europe weakening sharply. The surveys also provide further evidence that price pressures are easing, supporting our view that …
1st August 2019
The communications following today’s meeting suggest that Czech policymakers are trying to temper the market’s view that interest rates will be cut in the coming months. Nonetheless, the Bank’s projections have moved closer to our view that rate cuts will …
Much like the Fed, the Monetary Policy Committee today blamed a lot of its more downbeat assessment of the outlook on the global economy. But unlike the Fed, the MPC still thinks it will probably need to raise interest rates (if there’s a Brexit deal). …
The Brazilian central bank’s larger-than-expected 50bp reduction in the Selic rate last night to 6.00%, and hints of more stimulus, have prompted us to pencil in an additional two 25bp rate cuts this year. We now expect the Selic rate to end this year and …
The Fed reduced the fed funds rate by 25bp — to between 2.00% and 2.25% — at today’s FOMC meeting, but it was arguably a “hawkish” rather than “dovish” cut, which supports our view that the next reduction won’t arrive until much later this year. According …
31st July 2019
There has been mounting speculation that the Monetary Policy Committee (MPC) will join the global loosening cycle by cutting interest rates. We think it will if there is a no deal Brexit. But if there’s a Brexit deal or many more delays, the UK could buck …
The Bank of Japan projected a dovish tone today, promising further easing if needed. But unlike other major central banks the BoJ still seems a long way from following that up with action. We think it will refrain from lowering interest rates for the …
30th July 2019
The relatively dovish statement accompanying the Russian central bank’s decision to cut the policy rate today supports our view that the easing cycle has a lot further to go. We expect an additional 75bp of cuts over the next 9-12 months, whereas the …
26th July 2019
The apparent confirmation this afternoon that the ECB is inching towards loosening policy lends further support to our view that more rate cuts are on the cards in Denmark and Switzerland too. As we had expected, the ECB left its policy settings unchanged …
25th July 2019
The market reaction to today’s ECB press conference suggests that President Draghi was not as dovish as some investors had hoped for. But the big picture is that it seems clear that policy loosening is coming. We expect the Bank to cut its deposit rate in …
The Turkish central bank’s new governor, Murat Uysal, delivered a sharp 425bp interest rate cut at today’s MPC meeting and pressure from President Erdogan means that further aggressive easing lies in store over the coming months. But this is likely to …
