Filtered by Topic: Monetary Policy Region: G10 Use setting G10 Use setting Monetary Policy
While we think sticky core inflation will mean that the Bank of England keeps interest rates at their peak of 5.25% until late in 2024, we think the markets have gone too far in concluding that rates will still be as high as 4.50% by the end of 2025. We …
30th October 2023
It's Fed week and Deputy Chief US Economist joins David Wilder to discuss what to expect from the Tuesday-Wednesday FOMC meeting, including how the recent surge in long bond yields could influence the decision and accompanying language. Andrew also …
29th October 2023
The Bank of Canada’s insistence that inflationary risks have increased seems at odds with its new forecasts, which show a large degree of economic slack opening up next year. Our view that the Bank is still overestimating the near-term outlook for both …
27th October 2023
Note: We’ll be discussing the latest Fed, ECB and Bank of England policy decisions in a Drop-In at 3pm GMT on Thursday 2 nd November . (Register here .) In the last few months there has been more concern over the accuracy of key economic data. The recent …
In line with our upwardly revised forecasts for the 10-year US Treasury yield, we’ve raised our projections for 10-year government bond yields in most other developed market economies. But we still expect those yields to fall, in general, by the end of …
BoJ probably won’t tweak Yield Curve Control Media reports suggest that the Bank of Japan may tweak Yield Curve Control yet again at next week’s Board meeting. That’s certainly possible: 10-year JGB yields have risen sharply since the launch of the new …
RBA has more work to do Most of the data published this week highlight the imperative for the RBA tighten policy. To start with, Wednesday’s CPI release showed that Australia’s inflation problem is far from over. In fact, there are two pieces of …
Norges Bank is almost certain to leave its policy rate unchanged at 4.25% next week. And we suspect that, given September’s weak inflation data, it will also soften its language about implementing one final rate hike in December. Next year, we think the …
26th October 2023
Strong immigration is unlikely to be enough to prevent a mild recession, with GDP contracting recently and the business surveys consistent with further declines. As house prices are falling again, household debt is elevated and high interest rates are …
25th October 2023
Although the Bank of Canada maintained its tightening bias today, the rest of its communications suggest that the Bank is growing more confident it has done enough to eventually get inflation back to 2%. We continue to expect the Bank to cut interest …
Fed to hold rates at 5.25%-5.50%, and keep further tightening on the table… …but surging long-term Treasury yields reducing appetite for final hike Sharp decline in core inflation to see rates cut to 3.25%-3.50% by end-2024 We don’t expect a significant …
This page has been updated with additional analysis since first publication. RBA to hike again as inflation surprises on the upside With price pressures being slower to abate than the RBA had anticipated, we think the Bank will deliver one final 25bp …
The October flash PMI surveys suggest that economic activity got off to a weak start in Q4, especially in Europe. And with weak activity taking some of the steam out of labour markets and inflation, we are growing more confident in our view that the Fed, …
24th October 2023
Overview – Global headline inflation has fallen sharply from its peak a year ago and, despite a temporary setback due to higher fuel inflation, we expect it to fall a lot further over the coming year. The huge drag from energy inflation is now largely in …
Board will revise up FY2023 inflation forecasts but signal below-target inflation in 2025 We don’t expect any tweaks to Yield Curve Control but the policy is effectively over Negative rates will end in early-2024, YCC will formally be abandoned by …
The apparent strength of third-quarter GDP growth won’t convince the Fed to resume hiking its policy rate, particularly with the ongoing surge in long-term bond yields presenting a growing threat to the economy. Q3 GDP growth strong Despite the recent hit …
20th October 2023
The renewed surge in long-term Treasury yields illustrates that the full impact of Fed tightening is still feeding through, and we continue to expect economic growth to slow sharply over the coming quarters. With core inflation still looking on course to …
One more hike for the road Labour market data published yesterday showed that Australia's unemployment rate fell anew, from 3.7% to 3.6% in September, due largely to a pullback in workforce participation. As we explained in this Update , it increasingly …
Export values hit record high in September Export volumes bounced back by 4.6% m/m in September following the 6.1% m/m plunge in August. However, that left them a touch below the record high reached in July and means that export volumes have largely tread …
Japan’s trade unions are demanding an even larger pay hike in the upcoming spring wage negotiations and we believe that the talks will result in a base pay hike of around 2.5%. While the Bank of Japan may wait until the first round of results of the talks …
Senior economists from across our euro-zone, US and UK services held an online briefing on the October/November meetings of the Fed, ECB and Bank of England and the latest messaging from their policymakers. During this 20-minute briefing, the team …
19th October 2023
We'll be discussing the implications of the end of the ultra-low interest rates era and the rise in r* in an online Drop-In at 12:30 GMT on Tuesday 31st October. (Register here .) As our new higher estimate of the real neutral interest rate, or r*, for …
Recession risks rising and inflation falling again Bank to remain on hold but stress too soon to declare victory Bank’s latest analysis implies QT could continue until as late as 2026 The business surveys point to rising recession risks and core inflation …
18th October 2023
The ongoing outflow of funds from the Fed’s reverse repo facility has completely offset the downward pressure on bank reserves from quantitative tightening (QT), suggesting that the Fed could continue to let its asset holdings run down for longer than …
The weakness of GDP growth in the second and third quarters means that the Bank of Canada is likely to make a marked re-assessment of its output gap estimates in its October Monetary Policy Report (MPR). Some indicators suggest that output has already …
Economists from our ANZ and Markets teams held an online briefing following the release of Australian Q3 inflation data. During this discussion, Asia-Pacific head Marcel Thieliant, ANZ Economist Abhijit Surya and Senior Markets Economist Tom Mathews …
17th October 2023
What will a world of structurally higher interest rates look like? How will central bank behaviour change in the coming years? What will this mean for market returns? Our senior economist team hosted a special online briefing all about their new work …
Chapter 3: Where will inflation (and nominal rates) settle? …
Chapter 2: How will the savings/investment balance affect r*? …
Chapter 1: Will stronger potential growth boost r*? …
Introduction and framework …
r* and the end of the ultra-low rates era: executive summary …
RBA will probably hike rates in November The minutes of the RBA’s October meeting support our view that the Bank will deliver a final 25bp rate hike at its November meeting. While the Bank decided to keep rates unchanged at that meeting, it kept …
This page has been updated with additional analysis since first publication. RBNZ to remain on hold as inflation continues to soften With price pressures on track to moderate further, we think that Reserve Bank of New Zealand won’t lift rates any higher. …
16th October 2023
The Bank of Canada’s quarterly surveys show that businesses’ inflation expectations continue to decline, albeit slowly, and point to a growing risk that the economy will fall into recession. Accordingly, we continue to doubt that the Bank will raise …
There appears to be growing support at the Fed for the idea that the recent sell-off in long-term Treasuries reduces the need for further policy rate hikes, but the more persuasive reason for the Fed to pause is that inflation is continuing to ease …
13th October 2023
Almost as fast as gilt yields rose (see here ) they have subsided. After surging from 4.68% on 2 nd October to a 21-year high of 5.11% last Friday, the 30-year gilt yield dropped to 4.72% on Thursday, although it has since ticked up to 4.85% on the back …
The latest activity and survey data have provided even more evidence that the resilience in activity in advanced economies over the first half of 2023 is now fading. High interest rates are clearly weighing on credit growth, and a further rise in debt …
Minutes stress uncertainty over economic outlook Despite the ‘higher for longer’ message from the Fed’s updated rate projections last month, the minutes from the September FOMC meeting suggest that officials’ confidence in those forecasts is limited, with …
11th October 2023
Any fall in bond prices resulting from higher bond yields won’t affect the BoJ’s balance sheet unless the Bank decides to sell its holdings. By contrast, rising interest payments on commercial banks’ reserve holdings could create losses, though those …
10th October 2023
Central banks in both Australia and New Zealand are likely to retain their hawkish bias in the near term, given that inflation is far from tamed in either country. While we think the RBNZ's tightening cycle is over, we expect RBA to hand down one final …
Welcome to a world of higher interest rates. This in-depth analysis shows you how the structural forces that have weighed on equilibrium real interest rates over the past two decades have faded, and the powerful new drivers that are likely to push them …
9th October 2023
Our latest Chart Pack on Japan's economy is embedded below. With the economy growing at an above-trend pace, the labour market should soon start to tighten again. There are mounting signs that a virtuous cycle between wages and prices is starting to form …
We expect the euro-zone economy to struggle over the next 18 months, and a mild recession in the coming quarters looks more likely than not. Headline and core inflation should keep falling, but the labour market will remain tight, keeping wage growth …
6th October 2023
One more hike for good measure On Tuesday new RBA Governor Michele Bullock began her tenure not with a bang but with a whimper, by leaving the cash rate unchanged at 4.10%. What’s more, the statement accompanying the policy decision gave few indications …
Bond market sell-off pushes yen to one-year low The big event this week was the sharp fall in the yen after it breached 150 against the dollar while Tokyo was asleep in the early hours of Wednesday. Government officials have refused to comment on …
The ‘higher for longer’ narrative on interest rates that is baked into market pricing is at odds with evidence of widespread falls in inflation. Higher oil prices mean that fuel inflation will be a bit higher than seemed likely a few months ago. But the …
5th October 2023
Slowing momentum in activity, the recent decline in employment, and the sharp falls in core CPI and services inflation in August are clear signs that higher interest rates are weighing more heavily on the economy. This strengthens our view that the mild …
4th October 2023
