Filtered by Topic: Monetary Policy Region: G10 Use setting G10 Use setting Monetary Policy
Underlying inflation picks up Headline inflation rose to 1.9% in January, from 1.8%, despite the partial GST/HST holiday that began in mid-December. (See here .) Excluding taxes, headline inflation climbed to 2.5%, providing a taste of what is to come now …
21st February 2025
Starts align for further rate hikes A recent Reuters survey showed that most economists expect just one more 25bp rate hike by the Bank of Japan this year. Even so, the financial markets are starting to come around to our view that the Bank will lift …
Risks are tilting towards less easing As most had expected, the Reserve Bank of Australia began its easing cycle with a 25bp cut this Tuesday. However, in her post-meeting press conference Governor Bullock took pains to rein in expectations for further …
The latest data suggest that, outside China, the world economy lost a bit of momentum heading into 2025. Around the turn of the year, manufacturing output kept treading water, retail sales weakened in advanced economies, and business survey indicators …
20th February 2025
Fed in no hurry to resume cutting rates The minutes of the Fed’s late-January policy meeting underline that, having cut rates by a cumulative 100bp, officials are in no hurry to resume loosening monetary policy, even though most still thought the current …
19th February 2025
This page has been updated with additional analysis since first publication. Climb in inflation to 3% will be uncomfortable for the BoE CPI inflation took another step up from 2.5% in December to 3.0% in January (consensus, BoE, CE 2.8%) and will probably …
Having handed down a third consecutive 50bp rate cut at its meeting today, the Reserve Bank of New Zealand is likely to slow the pace of easing going forward. That said, we still think there’s a compelling case for a lower terminal rate than most are …
RBNZ to cut further than most expect Having handed down its third consecutive 50bp cut today, the RBNZ is likely to slow the pace of easing going forward. That said, we still think there’s a compelling case for a lower terminal rate than most are …
Wage pressures continue to soften Although the RBA will welcome the continued slowdown in wage growth, we still think it will deliver only a shallow easing cycle. The 0.7% q/q rise in the wage price index last quarter was a touch softer than most had …
The economy continues to do well with GDP growing strongly and employment growth solid. We are concerned, however, that the Trump administration’s policies will weigh on GDP growth over the course of this year. Nonetheless, with downward progress on core …
18th February 2025
When the Reserve Bank of Australia handed down its inaugural 25bp cut today, it indicated that any further withdrawal of monetary restriction would be limited, given residual inflationary pressures. Accordingly, we’re comfortable with our view that the …
RBA starts easing, but tempers expectations for further cuts When the Reserve Bank of Australia cut rates by 25bp at its meeting today, it signalled that any further withdrawal of monetary restriction would be gradual. Accordingly, we’re comfortable with …
Bank of Canada navigating without tariff roadmap The Summary of Deliberations from the Bank of Canada’s January policy meeting confirmed that tariff uncertainty had a hand to play in its decision to cut interest rates by 25bp. In particular, members of …
14th February 2025
The potential tariffs that UK exporters could soon face for sending goods to the US became bigger this week. On Monday, Trump said that US imports of steel and aluminium from all countries would face tariffs of 25% from 12 th March. Then on Thursday he …
10-year JGB yield climbs to 14-year high Even though the 10-year US Treasury yield has been little changed, the 10-year JGB yield rose to a 14-year high of 1.35% this week and we think that it will climb further to 1.75% by year-end. See our Global …
Soaring food inflation has been the key driver behind the recent strength in headline inflation. Processed food inflation will remain high for a while yet but that won’t prevent overall food inflation from falling sharply as the surge in rice and fresh …
13th February 2025
The Reserve Bank of New Zealand will almost certainly cut rates by 50bp, to 3.75%, at its meeting on 19 th February. Although the Bank is likely to revert to 25bp cuts thereafter, we think it has much more work to do to reduce excess capacity in the …
12th February 2025
Our Japan Chart Pack has been updated with the latest data and our analysis of recent developments. With real household incomes rising the most in years and the savings rate rather high, the rebound in consumer spending will continue in 2025. And with …
Powell gives little indication of rate cuts this year Fed Chair Jerome Powell stuck to the line that the Fed was in no hurry to adjust its policy stance in his semi-annual testimony to Congress today. Given that inflation remains above target and the …
11th February 2025
Labour market remains tight and there are signs of green shoots in the economy But with inflation slowing markedly, RBA will cut by 25bp next Tuesday Scope for further policy loosening remains modest We expect the Reserve Bank of Australia to cut rates by …
The overall message from the Bank of England this week was decidedly dovish, raising the risk that interest rates will be cut further and faster than our forecast of a fall from 4.50% to 3.50% by early 2026. But as we unpacked in our reaction to the …
7th February 2025
Pickup in consumption won't nix RBA rate cut Data released this week suggest that the Australian consumer felt rather upbeat last quarter. To start with, we learnt that retail sales held steady in December, a better result than most had anticipated. As a …
Wage growth strongest since 1997 According to the preliminary estimate released this week, labour cash earnings rose by 4.8% y/y in December, the largest increase since 1997. But while those strong gains boost household incomes, on their own they don’t …
The threat of US tariffs will hang over the economy for the foreseeable future, weighing on confidence and reducing investment. We have therefore revised down our GDP growth forecast for 2025 to 1.5%, from 1.8%. We still expect the Bank of Canada to cut …
6th February 2025
While cutting interest rates from 4.75% to 4.50% today, which was the third 25 basis point (bps) cut in seven months, the Bank of England showed some signs that it may cut rates faster and further than our forecast of a decline to 3.50% by early 2026. …
For updated and more detail analysis see here . Dovish development adds downside risk to our forecast for Bank Rate to fall to 3.50% While cutting interest rates from 4.75% to 4.50% today, which was the third 25bps cut in seven months, the Bank of …
Despite the recent weak news on activity and the uncertainty around the global outlook due to Trump’s US import tariffs, the stronger news on domestic price pressures means the Bank of England will probably continue to cut interest rates only gradually. …
5th February 2025
Australia’s housing slowdown continued into the new year, as demand softened further. Although the prospect of imminent rate cuts could temporarily buoy buyer sentiment, we don’t expect a meaningful rally in the housing market given that affordability is …
3rd February 2025
Despite the best efforts of the Canadian government to convince US officials that the border is secure, President Trump reiterated on Thursday that his administration will impose a 25% tariff on imports from Canada this Saturday. That would be a big blow …
31st January 2025
BoJ may need to lift inflation forecasts further The economic data released this week support our non-consensus view that the Bank will deliver two more 25bp rate hikes this year. For a start, two out of the three measures of underlying inflation the Bank …
We still expect a shallow easing cycle Over the past few weeks, we’ve been flagging the risk that the Reserve Bank of Australia would loosen policy settings sooner rather than later. With CPI data released this week surprising materially to the downside, …
Bank to cut interest rates by 25bps at February’s meeting, from 4.75% to 4.50% The tail risks of both faster disinflation and slower disinflation have increased Rate cuts to stay gradual, but rates to fall to 3.50% in 2026 versus market pricing of 4.00% …
30th January 2025
Fed moves to the sidelines The Fed left its key policy rate unchanged at between 4.25% and 4.50% today and the accompanying statement suggests the FOMC is happy to remain on the sidelines, as it awaits more clarity on the potentially stagflationary mix of …
29th January 2025
Fed moves to the sidelines The Fed left its key policy rate unchanged at between 4.25% and 4.50% and the accompanying statement suggests the FOMC is happy to remain on the sidelines, as it awaits more clarity on the potentially stagflationary mix of …
Overview – Inflation has proved somewhat stickier than we had anticipated, but the outlook of lacklustre growth, softening labour markets, normalising supply conditions and falling energy costs is consistent with further falls to come. Tariffs are a fly …
With the economy doing better recently, the Bank of Canada’s decision to cut by 25bp today might have been a closer call were it not for the looming threat of tariffs. Admittedly, the Bank hinted that it might have to refrain from providing more policy …
Bank cuts by 25bp as 25% tariff threat hangs over the economy With the economy doing better recently, the Bank of Canada’s decision to cut by 25bp today might have been a much closer call were it not for the looming threat of US tariffs. Any tariffs could …
Soft CPI data paves the way for RBA to cut in February With underlying inflation on track to enter the RBA’s 2-3% target band this quarter, we now expect the Bank to begin its easing cycle at its next meeting in February. The 0.2% q/q rise in consumer …
The experience from other advanced economies is that there’s no hard and fast rule for how long it will take for the labour market to loosen in response to rate hikes by the Bank of Japan. But with the real policy stance set to remain loose, we expect the …
27th January 2025
An especially ‘Blue Monday’ for Canadians President Trump used his first week (back) in office to double down on threats to impose a 25% tariff on imports from Canada, with the added detail that this could come into effect on February 1 st . As we …
24th January 2025
At face value, the latest batch of flash PMIs suggest that economic activity remained weak in Europe at the start of the year and lost some momentum in the US. Meanwhile, price pressures seem to be increasing everywhere, meaning that most central banks …
In the first glimpse into how the economy has started the new year, this week’s data took another turn for the worse. First, according to the CBI Industrial Trends Survey (ITS) of the manufacturing sector, in Q1, the optimism, expected activity and …
Having hit a record high, we expect the trade-weighted US dollar to climb further in 2025. While the short-term danger that a strong dollar poses to the world economy tends to be overblown, the bigger risk is that is worsens external imbalances which …
The Bank of Japan signalled further tightening when it lifted its policy rate to 0.5% today. With inflation set to remain above its 2% target this year, we expect the policy rate to reach 1.25% next year. The Bank’s decision to lift interest rates to 0.5% …
BoJ signals further tightening As widely anticipated, the Bank of Japan resumed its tightening cycle with a 25bp rate hike to 0.5% at its meeting on Friday. And the Bank’s Outlook report suggests that there’s more to come: the Bank revised up its …
Bank of Japan will lift policy rate to 1.25% next year The Bank of Japan hiked its policy rate to 0.5% today and we think it will lift it to an above-consensus 1.25% by the middle of next year. The Bank’s decision to resume its tightening cycle with a …
Case for RBNZ to ease aggressively remains intact With data released this week showing that inflation in New Zealand remained subdued last quarter, it’s all but certain that the RBNZ will cut rates by another 50bp, to 3.75%, at its meeting next month. …
Economists from our US, Europe and UK teams hosted this online briefing all about the first rate decisions of 2025 from the Federal Reserve, European Central Bank and the Bank of England. During the session, the team addressed key issues, including: How …
23rd January 2025
Recent upside surprises to activity and core inflation could justify a pause However, with tariffs hanging over the economy, Bank will opt for a 25bp cut Bank set to call time on QT this year The recent pick-up in GDP growth and core inflation pressures …
22nd January 2025
