Filtered by Topic: Monetary Policy Use setting Monetary Policy
Credit is growing at its strongest rate since the early 1990s. Given that investment growth has started to slow, the spike in private debt seems odd at first glance but much of it appears to have been driven by firms borrowing to seek higher rates of …
25th July 2019
If it is introduced (which is far from certain) a tiered deposit rate would reduce the cost of negative interest rates for banks, but it would do so by only a trivial amount. Its main purpose would be to help to build support for, or buy off opposition …
24th July 2019
Nigerian policymakers held their key rate at 13.50% today, and indicated that they will rely on unconventional policy tools to boost lending over the coming quarters. These are, however, unlikely to work, and we think that this will prompt another 50bp …
23rd July 2019
While recent market attention has been on the ECB and Fed, the rise in the Swiss franc has ratcheted up the pressure on the SNB. As a result, investors have come around to our view that the Bank will push the boundaries of monetary easing by cutting rates …
Despite the run of stronger activity data in recent weeks, the deterioration in the survey evidence, lingering uncertainty over trade policy and the prospect of a prolonged period of below-target inflation all suggest there is still a decent case for the …
18th July 2019
The Bank of Canada’s economic forecasts suggest it is closer to making a dovish tilt than is widely thought. The key relationship in the Bank of Canada’s forecasting models is the link between inflation and the output gap. Absent any other factors, such …
Policymakers in South Africa will probably follow today’s 25bp cut with another 25bp of loosening at their next meeting in September. We expect that South African inflation will ease in Q3, while cuts from key central banks elsewhere – notably the US Fed …
Bank Indonesia (BI) today cut its benchmark interest rate from 6.0% to 5.75% and hinted that further easing is on the horizon. But the uncertain outlook for the currency means that this is unlikely to be the beginning of a prolonged easing cycle. Today’s …
The Bank of Korea (BoK) today cut interest rates by 25bp to 1.50% and signalled that further easing is on the way. Given the poor outlook for growth and the change in sentiment by the central bank, we now think interest rates will be cut a further two …
Early indicators suggest that GDP growth slowed sharply across Emerging Asia in the second quarter. Although most countries should stage a gradual recovery over the coming year, growth is likely to remain much weaker than the consensus and the IMF expect. …
17th July 2019
Pakistan’s central bank (SBP) today raised its benchmark interest rates by a further 100bp amid continued concerns about high inflation and the country’s current account deficit. With inflation set to rise further over the coming months and the external …
16th July 2019
New regulations from the central bank will probably do little to encourage lending to the private sector. So long as government bond yields remain elevated, banks will prefer to park their money in treasuries. The Central Bank of Nigeria (CBN) has issued …
A lot has happened since the Governing Council’s policy meeting on 6 th June, so the account published today has arguably been superseded by events. But it does confirm that even five weeks ago the Bank was gearing up for action. The account also hints at …
11th July 2019
Activity data for May added to the evidence that the economy rebounded following its contraction in Q1. Even so, we think that the Reserve Bank will cut its policy rate from 6.75% to 6.50% next week. Figures released today showed that manufacturing output …
The large margin of victory for Brazil’s pension bill in its first vote in the lower house last night is likely to result in a rally in local markets later today, and makes an interest rate cut at the Copom meeting this month a done deal. We have also …
Although the tone of Bank of Canada’s monetary policy statement remained fairly neutral, its updated forecasts suggest that the Bank is losing faith in the economy’s short-term prospects. We continue to expect the Bank to cut interest rates in October. As …
10th July 2019
Chair Jerome Powell’s semi-annual testimony to Congress indicates that, despite the trade truce following the recent G20 meeting and the strength of employment growth in June, the Fed intends to push ahead with a rate cut at the FOMC meeting at the end of …
Bank Negara Malaysia’s (BNM) left interest rates unchanged at 3.0% today, but kept the door open to further easing. With growth set to slow in the second half of the year, we think the central bank will cut interest rates again soon. Today’s decision came …
9th July 2019
The dismissal of Turkey’s central bank governor over the weekend increases the chances of aggressive cuts in interest rates in the near-term. But it has also raised the risk of larger currency falls and is likely to make the country’s high inflation …
8th July 2019
Christine Lagarde’s nomination as ECB President makes us even more optimistic about the near-term outlook for government bonds in the euro-zone and reinforces our view that corporate bonds there will hold up better than elsewhere. We have argued for some …
5th July 2019
Broad money growth accelerated to a decade high in May, as past increases in interest rates boosted portfolio demand, but the more recent renewed slump in rates will trigger a slowdown in the second half of this year. (See Chart 1.) The decline in …
3rd July 2019
The relatively dovish stance adopted by Poland’s MPC in the communications accompanying today’s interest rate meeting supports our view that monetary policy settings will be left unchanged until the end of the Council’s term in early-2022. The decision by …
The decision by the Riksbank to leave its repo rate on hold at -0.25% this morning came as no surprise, but the fact that it left its (in our view) optimistic forecast for interest rates unchanged bucks the dovish trend by other central banks, notably the …
Yesterday’s announcement that Christine Lagarde will succeed Mario Draghi leaves us even more confident that the ECB will loosen monetary policy in the coming months. We think the Bank is likely to cut its deposit rate in September and re-launch QE before …
Swiss pension funds and life insurers have been among the losers from negative interest rates, but the SNB is unlikely to follow the Bank of Japan’s example of targeting long-term bond yields to limit the damage on the sector. Given that we now expect …
2nd July 2019
A rise in inflation has led five of the ten Polish MPC members to suggest that interest rates may soon need to be raised. But we doubt that any of the five more dovish members, including Governor Glapinski (who has the deciding vote in the event of a …
While the RBA lowered the cash rate to 1.0% at today’s meeting, it signalled that it won’t ease policy any further for now. However, we think that the Bank remains too optimistic about the outlook for the labour market and inflation. Accordingly, we’ve …
While the performance of the US stock market in the Fed’s last four easing cycles was varied, our view remains that it will fall in the next one, which we expect to span from late-summer 2019 to spring 2020. The S&P 500 soared by nearly 15% in the …
27th June 2019
Following this morning’s decision by the Central Bank of Iceland (CBI) to cut its key interest rate by 25bps, we now think that further cuts are in the pipeline. However, to the extent that a rumoured fiscal stimulus and a weaker króna help to steady the …
26th June 2019
The RBNZ’s dovish tone supports our view that the Bank will cut rates again before the year is out. In fact, we now think the Bank will cut at its next meeting in August, and once more at its November meeting. The Bank’s decision to hold rates unchanged …
The People’s Bank has pushed down overnight interbank rates to multi-year lows. This is partly a response to market jitters following the Baoshang Bank takeover and may partially reverse in the coming days. But we think that the broader shift toward …
25th June 2019
The surprise resignation of RBI deputy governor Viral Acharya – one of the most hawkish members of the MPC – boosts the chances of further rate cuts in the near term. But it should once again raise questions over the RBI’s credibility and its …
29th March 2019
The key takeaway from today’s policy announcements at the opening of the National People’s Congress is that the leadership are still trying to balance efforts to support growth with concerns about financial risks. Officials pledged some moderate policy …
5th March 2019
In advanced economies, monetary and credit conditions remain supportive. But bond issuance has been declining sharply in recent months, and credit growth in China is still slowing. … Monetary Indicators Monitor …
1st February 2019
EM inflation increased to its highest level in more than a year and a half in August, and we think that this has further to run over the coming months. One consequence is that the monetary policy in much of the emerging world is likely to tighten. … EM …
28th September 2018
In previous EM currency crises, real interest rates have increased (on average) by around 10.5%-11.0%-pts in the following year and remained more than 6.5%-pts above pre-crisis levels over the subsequent two years. In Argentina, real interest rates are …
13th September 2018
In March, broad money growth slowed a bit in the euro-zone, UK and Japan. Indeed, in the euro-zone it dropped to its slowest rate since the ECB started its Asset Purchase Programme in early 2015. However, in all of these cases, the pace of money growth is …
11th May 2018
China’s retention of an “about 6.5%” growth target for GDP in 2018, while expected, undermines the argument that growth is being demoted as a central policy concern. Growth is likely to slow we believe, not least because the finance ministry is today …
5th March 2018
The willingness of the People’s Bank to sell over $100bn of foreign exchange reserves last month is a measure of its belief that a stable currency is in China’s interests and that current downward pressure is driven by speculative rather than fundamental …
7th January 2016
The main significance of today’s announcement by the People’s Bank (PBOC) that it is cutting standing lending facility (SLF) interest rates is that it is experimenting with a new monetary policy framework. This shift in itself does not constitute monetary …
19th November 2015
Although there has been a surge of speculation in the wake of China’s exchange rate move that Hong Kong could abandon its US dollar peg, we expect the peg to remain in place well into the next decade. … Little chance of a Hong Kong …
27th August 2015
Panic about China is overblown Investors are overreacting about economic risks in China. The collapse of the equity bubble tells us next to nothing about the state of China’s economy. In fact, recent data have been more positive than the headlines might …
24th August 2015
A second downward adjustment to the renminbi reference rate today suggests that policymakers are now more willing to give in to market forces than we had previously thought. That said, we still think the changes to the reference rate primarily reflect …
12th August 2015
By setting a lower mid-point for the renminbi’s trading band the People’s Bank has sparked speculation that it is embarking on a competitive devaluation of the currency in order to shore up exports. In reality, the move was largely the result of a …
11th August 2015
Unconfirmed reports that the People’s Bank is considering buying local government bonds have sparked talk of impending QE in China. That’s wide of the mark: unlike with asset purchase programs elsewhere, the goal in China may actually be to avoid …
28th April 2015
The Swiss National Bank’s (SNB) decision last week to abandon its exchange rate ceiling has put Hong Kong’s peg to the US dollar under fresh scrutiny. While the peg creates a number of problems, it remains the best option for Hong Kong. We expect it to …
20th January 2015
China is seeking to rein in bank lending and hold to a conservative fiscal stance while maintaining rapid economic growth. It cannot do all three. … China’s impossible …
27th July 2010
