Filtered by Topic: Monetary Policy Region: G10 Use setting G10 Use setting Monetary Policy
With its assessment of the balance of risks broadly unchanged, the Reserve Bank of New Zealand left rates on hold at its meeting today. Although the Bank will likely retain its tightening bias, we continue to believe that the official cash rate is at its …
4th October 2023
RBNZ’s next move will be down Although the RBNZ will retain its tightening bias, we believe that the official cash rate is at its cyclical peak. All 27 of the analysts polled by Reuters, including ourselves, had expected the Bank to leave the OCR …
While new RBA Governor Michelle Bullock didn’t spring any surprises at her first interest rate decision today, we think that the Bank will hike interest rates to a peak of 4.35% at its next meeting in November . However, we expect the RBA to pivot towards …
3rd October 2023
RBA will deliver final rate hike next month While new RBA Governor Michelle Bullock didn’t spring any surprises at her first monetary policy decision today, we think that the Bank will hike interest rates to a peak of 4.35% at its next meeting in …
By putting upward pressure on JGB yields and the yen, tighter monetary policy could lead to falls in the value of bonds and overseas assets held by Japanese investors. Insurance companies and pension funds have the most to lose. However, we do not think …
Overview – We expect GDP growth to slow from 2.1% this year to only 0.8% in 2024, with the economy still likely to experience a near recession around the end of this year. Core inflation will continue to fall back to the 2% target by mid-2024, with much …
29th September 2023
Sustainable 2% inflation coming into sight The minutes of the Bank of Japan’s July meeting revealed that Board members had a lively debate on the outlook for inflation and monetary policy. One member noted that “close attention was warranted on the risk …
Economic data flash mixed signals The big news out of Australia this week was the strong rise in consumer prices in August. Moreover, with underlying price pressures showing few signs of relenting, we’ve revised up our forecast for the RBA’s terminal cash …
The direct hit to the economy from even an extended government shutdown beginning next week would be modest. But it could also result in delays to key data releases, including the September employment and CPI reports due over the next couple of weeks. At …
28th September 2023
We suspect the pound will fall from $1.22 now to $1.20 by the end of this year. That’s not due to lower interest rate expectations in the UK compared to the US or the euro-zone, as we think the UK will be the last to cut rates. Instead, it’s due to the …
Strong immigration and the resilience of the housing market raise the chance that the economy will avoid recession but, with the Bank of Canada keeping further rate hikes on the table, we still judge that GDP will contract later this year. Even if …
27th September 2023
Overview – 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. Lower energy prices and improved global supply chain conditions should keep headline inflation on a …
Activity is holding up better than expected, while disinflation is stalling Another 25bp rate hike now seems more likely than not Policy easing pushed back to mid-2024 Stronger-than-expected GDP and inflation data should cement the case for the RBA to …
This page has been updated with additional analysis since first publication. Resurgent price pressures raise risk of tighter policy With Australia’s disinflationary process stalling, there’s a growing risk that the Reserve Bank of Australia will resume …
Overview – We expect another few quarters of near-zero GDP growth to lead to an annual gain of just 0.7% next year. Even with higher oil prices, the weakness of economic growth leaves scope for CPI inflation to fall back to the 2% target in 2024. That …
26th September 2023
The sharp slowdown in broad money growth since late last year suggests that higher interest rates are working by reducing households’ and firms’ demand for borrowing, which should lead to softer activity and lower inflation. This supports our view that a …
RBNZ to reassert its tightening bias as activity surprises on the upside Given the noise in the recent data, we don’t expect further rate hikes However, policy will remain restrictive for longer, with rate cuts only in Q3 2024 Although economic activity …
Given clearer signs of economic weakness in recent weeks, we think the surprise increase in underlying inflation pressures in August means the Bank of Canada is more likely to keep interest rates at their current level for longer than to raise rates …
25th September 2023
The abandonment of Yield Curve Control would probably prompt the Bank of Japan to reduce its bloated holdings of government bonds, which could push up long-term bond yields. However, there are good reasons to think that the fiscal consequences wouldn’t be …
The September Flash PMIs add to evidence that economic activity in the US and Europe is weakening. This supports our view that the Fed, ECB, and Bank of England have finished hiking interest rates. Our estimate of the DM average composite PMI edged down …
22nd September 2023
This week’s news that interest rates are probably at their peak (see here ) and the news that public borrowing in the current fiscal year is £11bn below the Office for Budget Responsibility’s forecast has raised the pressure on the Chancellor to deliver …
The new projections published by the Fed this week signalled that officials are fully onboard with the idea of interest rates staying ‘higher for longer’, but that is based on forecasts for real economic growth and inflation which we believe are …
We held a Drop-In yesterday to discuss the latest policy meetings of the Fed, ECB, and Bank of England and what they might mean for the future path of policy and financial markets. (See the recording here .) This Update answers several of the questions …
Higher inflation lowering deficit and debt/GDP Even though inflation excluding fresh food and energy remained stubbornly high at 4.3% in August, the Bank of Japan didn’t drop any further hints that it might tighten policy anytime soon at its meeting …
The Bank of Japan still sounded dovish when it kept policy settings unchanged today. But with inflation proving stickier than expected, we expect the Bank to lift its policy rate in January and have pencilled in the full-fledged dismantling of Yield Curve …
Overview – Both economies have dodged a recession so far, but we still consider it more likely than not that output will shrink across the second half of the year. With inflation softening and labour markets loosening, both central banks are done hiking …
Negative rates will end in early-2024 The Bank of Japan didn’t provide any hints that it will abandon loose monetary policy anytime soon when it kept policy settings unchanged today, but Governor Ueda may do so later today. We think the Bank will lift its …
Second-round effects set to be small The minutes of the RBA’s September meeting revealed that the Bank kept discussing another 25bp rate hike. One argument in favour was that the recent rise in petrol prices could make the process of returning to target …
Note: We’ll be discussing September’s Fed, ECB and Bank of England policy decisions in a Drop-In at 3pm BST today. Register here to join. The surprise decision by the Bank of England to leave interest rates unchanged at 5.25% today probably means that …
21st September 2023
The Bank’s job is done The surprise decision by the Bank of England to leave interest rates unchanged at 5.25% today probably means that rates are already at their peak. We think rates will stay at this peak of 5.25% for longer than the Fed, the ECB and …
This page has been updated with additional analysis since first publication. Strong pickup in growth puts rate hikes back on the table The unexpectedly strong rebound in activity last quarter means that the RBNZ may well judge it has more work to do. All …
20th September 2023
The Fed doubled down on its mantra that interest rates will remain higher for longer, with its updated projections suggesting that the economy will enjoy the softest of soft landings and core inflation will still take some considerable time to return to …
Fed wants us to believe in “higher for longer” The Fed left its policy rate unchanged at 5.25% to 5.50% and, while the median forecast still shows one more 25bp rate hike this year, the FOMC appears to be more evenly split, with 12 in favour of that hike …
The prevalence of fixed-rate debt suggests the Fed’s aggressive rate hikes will continue to deal less damage to the economy than they might have done in the past. But higher rates are still likely to take a further toll on consumption and business …
Despite the recent rebound in energy prices, the downward trend in core inflation remains firmly intact. And with a growing number of indicators suggesting the labour market is not much tighter than it was in 2019, we expect wage and price inflation to …
It’s a sign of our inflationary times that even the Bank of Japan could soon consider raising interest rates in what would be the first such move in 16 years. But how supportive are conditions for a rate hike, how far could the Bank go to lift rates, and …
On Tuesday 19th September, our Energy and Global Economics teams discussed the oil market outlook and its implications for inflation and monetary policy in an online briefing for clients. Watch the recording here . We are not convinced that the increase …
19th September 2023
The wage-setting behaviour of Japanese firms has changed over the last couple of years and to reflect this we’re revising our long-run inflation forecast from 0.5% to 1.0%. However, that would still mean that inflation will settle well below the BoJ’s 2% …
RBA’s pause to continue Although the RBA won’t be dropping its guard in the fight against inflation anytime soon, we still believe its tightening cycle is at an end. The minutes of the RBA’s September meeting showed that the Board did once again discuss …
Overview – A slower fall in core inflation than in the US or the euro-zone will mean that the Bank of England keeps interest rates on hold at the probable peak of 5.50% for longer than the US Fed or the ECB. But our non-consensus forecast that higher …
18th September 2023
The sustainability of above-target inflation is still in doubt However, Bank seems keen on getting rid of negative interest rates We now expect the Bank to lift its policy rate from -0.1% to +0.1% in January Even though the sustainability of …
Ueda signals tighter policy Bank of Japan Governor Ueda’s comments over the weekend that the Bank may have enough information by the end of this year to call time on negative interest rates sent 10-year JGB yields above 0.7% for the first time since 2014. …
15th September 2023
While economic activity was generally more resilient than feared in the first half of 2023, there are growing signs that many major economies are losing momentum. We expect most advanced economies to experience mild recessions in the quarters ahead as …
14th September 2023
Although central banks in both Australia and New Zealand are unlikely to drop their hawkish bias anytime soon, we suspect that their tightening cycles are now over. The RBNZ has already succeeded in sending New Zealand into a recession, which is likely to …
Fed to keep rates unchanged at 5.25%-5.50% next week New SEP to show officials less convinced of need for further hikes Rapid decline in inflation will see rates cut to 3.25%-3.50% by end-2024 The Fed is set to keep rates unchanged at 5.25%-5.50% at the …
13th September 2023
We no longer expect the economy to enter a recession. But with real disposable incomes falling, we expect domestic demand to remain sluggish. Meanwhile, falling import prices and extension of energy subsidies should bring inflation down before long. While …
11th September 2023
In his speech this week, Governor Tiff Macklem sounded much more confident that the Bank will be able to meet its 2% inflation target. The latest labour market and local housing data suggest that may still be possible without a recession. Policy rate has …
8th September 2023
The recent rise in oil prices to $90 per barrel means CPI inflation is likely to rise from 6.8% in July to 7.1% in August, but it won’t prevent inflation falling to the 2% target by the middle of next year. Even if oil prices climbed to $100 per barrel, …
MoF signaling some concern over weaker yen As the yen weakened to nearly 148 against the dollar this week, the government has signalled its readiness to intervene in foreign exchange markets to stop its slide. Masato Kanda from the Ministry of Finance …
