Filtered by Topic: Monetary Policy Region: G10 Use setting G10 Use setting Monetary Policy
The Fed wasn’t as hawkish as we had expected this week and, assuming the recent upturn in core inflation proves temporary, there is still a good chance that interest rate cuts will begin in June. Fed content with more gradual inflation fall Despite recent …
22nd March 2024
The surprise fall in February leaves CPI inflation on track to average 2.8% this quarter, well below the Bank of Canada’s forecast of 3.2%. As the decline in inflation pressures was broad-based, there is a growing likelihood that the Bank of Canada will …
The Bank of England was never going to do anything except keep interest rates at 5.25% this week, but we and the financial markets were surprised that it took further steps in preparing the ground for the first interest rate cut. (See here .) As a result, …
Rate cut in August remains plausible At its meeting earlier this week, the RBA dialled down its hawkish bias, with Governor Bullock noting that “the risks to the outlook are finely balanced”. However, her statement may well have been a little premature. …
Run-off in bond holdings will accelerate The Bank of Japan didn’t disappoint at this week’s meeting as the Bank ended negative interest rates, Yield Curve Control and its ETF purchases. Even so, 10-year JGB yields declined and the yen weakened to as low …
The flash PMIs for March suggest that the euro-zone economy is still flatlining, while the UK and Japan seem to be pulling out of recession heading into Q2. The survey indicators of price pressures moved in different directions, but in general remain a …
21st March 2024
Overview – Although we expect GDP growth to slow to a below-potential pace over the next few quarters, we then anticipate a pick-up late this year, as monetary policy flips from a headwind to a tailwind. Our forecasts are based on the assumption of no …
With the Bank of England striking a slightly more dovish tone whilst keeping interest rates at 5.25% and inflation likely to fall further and faster than the Bank expects, we still think a rate cut in June is possible and that rates will fall to 3.00% in …
Slight dovish tilt, and fast fall in inflation will make BoE more dovish before too long The Bank of England sprung no surprises, leaving interest rates at 5.25% for the fifth time in a row and, despite no MPC members no longer voting to raise interest …
This page has been updated with additional analysis since first publication. Stagnation continues, price pressures still high The flash PMIs for March suggest that the euro-zone economy is still flatlining, in line with our forecast. Meanwhile, the price …
Despite upward revisions to the median projections for both GDP growth and core PCE inflation, the Fed’s median forecast for interest rates still shows a cumulative 75bp of policy loosening this year. In contrast, we continue to believe that …
20th March 2024
Fed officials still see rate cuts, despite higher core inflation projections Despite upward revisions to the median projections for both GDP growth and core PCE inflation, the median forecast for interest rates – released at the end of the Fed’s two-day …
The global economic outlook is subject to various uncertainties which have left forecasters split over the possibilities of a hard landing, soft landing or even renewed recovery. Are the worst effects of previous interest rate hikes yet to be felt? Or …
19th March 2024
The Bank of Japan today called time on more than a decade of ultra-loose policy settings, but we don’t think it will lift its policy rate any further over the coming months. A Reuters survey conducted at the end of last week still showed that a majority …
The RBA sounded a touch less hawkish at today’s meeting and we think the Bank will start to lower interest rates by August. The Bank’s decision to keep the cash rate unchanged at 4.35% was correctly anticipated by all analysts polled by Reuters, ourselves …
BoJ won’t embark on tightening cycle as inflation momentum waning The Bank of Japan ended ultra-loose monetary policy today but we don’t think it will raise its policy rate any further. A majority of forecasters polled by Reuters last week were still …
RBA will ease policy in the second half of the year The RBA stuck to its hawkish guns at today’s meeting but we think it will pivot towards policy easing by August this year. The Bank’s decision to keep the cash rate unchanged at 4.35% was correctly …
A few hot(ish) US inflation prints and the market has become spooked about how easily the Federal Reserve can get back to its 2% target. In this latest episode of The Weekly Briefing from Capital Economics, Group Chief Economist Neil Shearing discusses …
15th March 2024
Fed to stress caution amid inflation uncertainty We still expect the Fed to cut interest rates in June, although we don’t expect officials to provide a strong steer either for or against at next week’s FOMC meeting. The updated Summary of Economic …
January’s GDP figures received the most attention this week, mainly as they suggested the economy may have exited recession. (See here .) But while there was better news on demand, the same cannot be said for the supply-side of the economy. The rise in …
BoJ set to unwind negative rates next week A preliminary tally published by the Japanese Trade Union Confederation (RENGO) today showed that pay hikes in this year’s spring wage negotiations (Shunto) reached 5.28%, up sharply from 3.6% last year and the …
Interest rates unchanged at 5.25% and BoE to keep hawkish guidance But data not the guidance counts We think rates will fall to 3.00% in 2025 rather than to 4.00% as investors expect At the policy meeting on Thursday 21 st March, the Bank of England will …
14th March 2024
Inflation in Norway has fallen more quickly than Norges Bank expected, so at next week’s meeting it is likely to signal that it will cut interest rates sooner than it previously expected, perhaps in Q3. And we think there’s a good chance that it will make …
Recent data leave Fed still seeking “greater confidence” that inflation is heading to 2% New SEP likely to be marginally more hawkish We still expect first rate cut in June and 200bp of easing in total Data dependence will remain the order of the day at …
13th March 2024
Global Economics Chart Pack (March 2024) …
We’ll be discussing the outlook for inflation, monetary policy and the implications of higher Japanese rates for domestic and global financial markets in a 20-minute online briefing at 8am GMT/4pm SGT on 19th March . (Register here .) Shunto results in …
The timeliest data support our long-held view that the euro-zone economy will remain close to recession in the first half of the year. Beyond that, we think growth will be much lower than the consensus or the ECB are forecasting. However, the labour …
12th March 2024
Inflationary pressures have eased further, while labour market slack has risen Economy not falling off a cliff, but interest rates are biting households As the flow of data remain soft, Bank will pivot to policy easing in August We expect the Reserve Bank …
Economists from our Japan and Markets teams held an online briefing shortly after the March decision to brief clients on the meeting outcome, talk through any market implications and take questions from the audience. During this session, the team …
11th March 2024
Further easing in core inflation sets up Q2 rate cut February’s inflation data from Norway strengthen our conviction that Norges Bank will cut interest rates much sooner than its forecasts suggest. The decline in headline inflation from 5.3% in January to …
Governor Tiff Macklem dropped a hint this week that the Bank of Canada may be ready to cut rates by June. There was little in the data to dissuade the Bank, with unemployment rising and bankruptcies surging, while a productivity rebound pulled down unit …
8th March 2024
Fed Chair Jerome Powell’s congressional testimony struck a notably less hawkish tone than we have heard recently from some of his colleagues. And with the economic data this week providing little support for the idea of a renewed upturn in inflation, we …
Much ink has been spilled on the Spring Budget this week. For our part, we discussed the macroeconomic and financial market implications in our UK Drop-In and in our UK Economics Focus . The main takeaway is that while the Chancellor was desperate to use …
The Bank of Canada gave little away about the potential timing of interest rate cuts today, although its communications suggest that it is gaining a bit more confidence that inflation is moving in the right direction. We continue to expect the first rate …
6th March 2024
Powell content to wait for more data Fed Chair Jerome Powell looks set to stick to his previous script in his testimony to Congress today and, assuming we are right that the January strength in core inflation will prove to be a blip, his remarks do not …
Overview – The economy isn’t in recession but GDP growth will slow towards trend this year. With a virtuous cycle between wages and prices now in full swing, we expect the Bank of Japan to end negative rates at its April meeting. However, price …
Money growth remains weak but is rebounding steadily, with our broader M3 measure recovering to its strongest since mid-2022. But there is no reason to expect this to drive a rebound in inflation. Although M1 continues to decline, the pace of contraction …
4th March 2024
Following the more hawkish speeches from Fed Vice Chair Philip Jefferson and Governor Christopher Waller last week, that tone continued this week – with regional Fed Presidents including New York’s John Williams repeating the suggestion that interest rate …
1st March 2024
Could there be a tax-cutting Budget bombshell? The rumours this week suggest that the Chancellor may have a bit less to play with in the Budget on Wednesday 6 th March than the £15bn we estimated. As a result, he seems to be considering more revenue …
Third contraction in GDP now likely We doubt that the slump in industrial output in January will prevent the Bank of Japan from ending negative rates over the coming months, but the recent string of disappointing data reinforces our view that this will …
Canada Chart Pack (Feb. 2024) …
29th February 2024
Despite renewed inflation concerns pushing interest rate expectations and gilt yields higher, our forecast that CPI inflation will fall below 1.0% later this year makes us think that the markets are wrong to price in interest rates falling from 5.25% now …
The Reserve Bank of New Zealand handed down another hawkish hold at its meeting today. However, with inflation on track to return to its 1-3% target by mid-year, we still expect the Bank to start cutting rates by August. The RBNZ’s decision to leave its …
28th February 2024
RBNZ holds rates steady while retaining hawkish bias As had been widely expected, the Reserve Bank of New Zealand left its official cash rate unchanged at 5.50% today. 28 out of 29 analysts polled by Reuters, including ourselves, correctly predicted the …
Inflation will continue to undershoot RBA's expectations The weaker-than-expected inflation print for January all but ensures that the RBA won’t hike rates any further, even if it does retain its hawkish bias at its next meeting in March. And with price …
This page has been updated with additional analysis since first publication. Inflation will jump above 2% in February Inflation at the national level held up better in January than the Tokyo CPI would have suggested, which brings a March rate hike back …
26th February 2024
The encouraging January CPI data mean that the Bank of Canada’s April policy meeting is back in play for a potential interest rate cut, although it still seems more likely that the Bank will wait until June – unless the economic and labour market data …
23rd February 2024
Fed to delay first rate cut until June Fed to wait until June Based on comments from Fed officials this week, we now expect the Fed to wait until June to begin cutting interest rates. Moreover, when it does begin to loosen policy, we suspect that the Fed …
