Filtered by Topic: Monetary Policy Region: G10 Use setting G10 Use setting Monetary Policy
Although the RBA left rates on hold today, it poured cold water on market expectations that it will loosen policy later this year. With the economy still running above its speed limit, we continue to believe that rate cuts won’t be on the agenda until Q2 …
6th August 2024
Japan’s government has intervened in the FX markets to weaken the yen far more often than to strengthen it. But FX interventions have become very rare over the past two decades and our sense is that the government is welcoming a stronger exchange rate in …
With RBA retaining its tightening bias, rate cuts will have to wait Although the RBA continued to strike a cautious tone when it left rates on hold today, we still believe that the Bank’s next move will be down. That said, contrary to market pricing, we …
Fears about US recession are fuelling volatility in financial markets, sending stock prices and bond yields sharply lower. But how justified are these fears? And do moves in asset prices point to a fundamental shift or a temporary blip in the market …
5th August 2024
With that grim July payrolls report triggering fresh selling in US stocks and bond buying on Friday, Group Chief Economist Neil Shearing and Deputy Chief Markets Economist Jonas Goltermann join David Wilder to talk about whether there's anything to …
2nd August 2024
Labour market cracks raise risk of hard landing Things went from bad to worse after the Fed’s policy announcement mid-week, with the data on Thursday revealing a further fall in the ISM manufacturing index and a rise in initial jobless claims to a near …
This week was a good example of a “hawkish cut” from the Bank of England. The cut bit; the first 25 basis point (bp) fall in interest rates since March 2020. The hawkish bit; the Bank stated very clearly that it doesn’t expect to cut rates too much or too …
Near-term outlook for consumption brightening As we had anticipated , the Bank of Japan’s decision to halve its JGB purchases over the next couple of years didn’t deter it from also raising interest rates further at this week’s meeting . Press reports …
RBA will remain data dependent The main event this week was the publication of Australian CPI data , which showed that underlying inflation in Q2 was softer than most had anticipated. To be clear, trimmed mean inflation was only 0.1%-pt lower than the …
The Bank of England kick-started a loosening cycle today by cutting interest rates from 5.25% to 5.00%, but the accompanying guidance and forecasts suggest it will proceed cautiously. Accordingly, we suspect the Bank will keep rates on hold in September …
1st August 2024
Rates cut to 5.00%, but BoE in no rush to cut again The Bank of England kick-started a loosening cycle today, cutting interest rates from 5.25% to 5.00%, but the accompanying guidance and forecasts suggest it will proceed cautiously. Accordingly, we now …
Fed lays the groundwork for September rate cut There was no surprise rate cut from the Fed today, with the fed funds target range left unchanged at between 5.25% and 5.50%, but the changes in the accompanying statement – which included a shift from a …
31st July 2024
Fed lays groundwork for September rate cut There was no surprise rate cut from the Fed today, with the fed funds target range left unchanged at between 5.25% and 5.50%, but the changes in the accompanying statement – which included a shift from a …
We still think that a fading in services inflation and below-target CPI inflation will prompt the Bank of England to cut interest rates from 5.25% now to 3.00% by the end of 2025, rather than to 4.00% as investors anticipate. That explains why we think …
The Bank of Japan outlined a plan for reducing its bond purchases and hiked its policy rate by 20bp today. We think it will follow up with another 20bp hike at its October meeting . Only one-third of analysts polled by Reuters, ourselves included, had …
The Reserve Bank of Australia is likely to leave policy settings unchanged when it meets next week. Although there has been little progress on disinflation in recent months, the Board is likely to pin that on the long and variable lags of monetary policy. …
Bank will hike rates once more in October The Bank of Japan hiked its policy rate by 20bp today and we think it will follow up with another 20bp hike at its October meeting. Only one-third of analysts polled by Reuters, ourselves included, had expected …
With underlying inflation edging lower, RBA will refrain from tightening Although underlying inflation is running too high for the RBA’s liking, it is at least heading in the right direction. Therefore, although the Board will probably reiterate the need …
In detailed analysis last year, we concluded that equilibrium nominal interest rates would settle at between 3% and 4% in advanced economies in the next ten years. We maintain that opinion and in fact some of the forces boosting equilibrium rates seem to …
30th July 2024
Chinese PMI, Australian CPI, euro-zone GDP, the new UK chancellor’s statement to Parliament, the Bank of Japan, the Bank of England, the Fed…it’s a packed week of releases and central bank meetings and Group Chief Economist Neil Shearing talks through …
27th July 2024
The Bank of Canada was already first off the mark compared to other G7 central banks and the second 25bp interest rate cut this week, to 4.50%, puts it further ahead in its loosening cycle. Governor Tiff Macklem said in his opening statement that “we are …
26th July 2024
GDP growth not quite as rosy as it seemed The acceleration in GDP growth to 2.8% annualised in the second quarter, from 1.4%, was stronger than the consensus estimate of 2.0% but not a big surprise given the Atlanta Fed GDPNow was pointing to a 2.6% gain …
Weak Tokyo CPI may prompt BoJ inaction While we expect the Bank of Japan to lift its policy rate to 0.3% at next week’s meeting (see our BoJ Watch ), only one-third of analysts polled by Refinitiv expect a rate hike at that meeting. The financial markets …
Case for RBNZ to ease strengthens According to a new survey released by Retail NZ this week, things are going from bad to worse for the domestic retail industry. Indeed, more than two-thirds of retailers reported that they had failed to meet their sales …
Almost ready to cut But economic resilience and sticky inflation will probably mean MPC waits until September We think rates will be cut to 3.00% next year, below current market pricing of 4.00% While it will be a very close call, the economy’s recent …
25th July 2024
Overview – Inflation still looks set to be in line with central banks’ targets next year (see Chart 1), but upside risks have increased outside the US. With the sharp falls in energy and food inflation behind us, disinflation has slowed amid …
Following a wobbly period around the turn of the year, the economy is on the mend and should gather further momentum as real wage growth turns positive in the second half of the year. With goods inflation still having strong momentum, we now expect the …
Alongside its decision to cut interest rates today, the Bank of Canada struck a more dovish tone than in June, supporting our forecast that another cut is coming at the next meeting in September. The Bank’s second 25 bp cut, taking the policy rate to …
24th July 2024
The latest flash PMIs suggest that while GDP growth probably slowed in Europe at the start of Q3, it continued to recover in Japan. Although the rise in shipping costs has caused manufacturers’ input prices to rise, central banks may take comfort from the …
Gradual loosening cycle continues and another cut in September looks likely Following its interest rate cut today, the Bank of Canada reiterated that further cuts are likely if inflation continues to ease in line with its expectations. Our forecast for …
Disinflationary trend broadening out Fed officials growing more concerned about labour market downside risks Interest rate cut likely in September With the disinflationary trend broadening out and the unemployment rate rising, recent comments from Fed …
Bank has pledged that it will keep tightening policy if inflation evolves as expected If anything, weak yen creates upside risks to Board’s inflation forecasts Bank will hike its policy rate by 20bp in both July and October At its upcoming meeting, we …
We doubt the independent pay review bodies’ recommendations for the government to give teachers and NHS staff a 5.5% pay rise will prevent wage growth from slowing to 3.0% by the end of next year. But if the government chooses to extend this pay rise to …
23rd July 2024
The recent set of mild inflation data and growing concerns among Fed officials about downside risks to the labour market reinforce our view that the first interest rate cut will come in September. We forecast that core PCE inflation will return to the 2% …
22nd July 2024
Despite some measures of monthly core price growth remaining above the rates consistent with 2% inflation, the June CPI release on the whole supported the case for another interest rate cut from the Bank of Canada next week. Downward trend in inflation …
19th July 2024
Shelter disinflation adds to case for September rate cut Fed officials back September rate cut In comments ahead of the pre-July FOMC blackout that begins this weekend, Fed officials appeared open to a September rate cut. On Monday, Chair Jerome Powell …
Mof intervenes again All signs are that Japan’s government sold US dollars to support the yen on Thursday and Friday last week. Bank of Japan data suggest that the intervention was a bit smaller than previous ones, perhaps because the yen was already …
A policy pivot is imminent If the RBNZ had any doubts that it had broken the back of inflation, they will have been quashed by the slew of weaker-than-expected data releases this week. Accordingly, we’re bringing forward our forecast for the Bank’s first …
DM central banks may not be done raising rates – a too-hot Australian Q2 inflation report on 31 st July could push the RBA to hike at its meeting the following week. Our ANZ and Markets teams still think there’s a case for the Bank to hold, and they …
18th July 2024
This page has been updated with additional analysis since first publication. Encouraging, but interest rates may not be cut in August While the easing in wage growth in May was broadly in line with what the consensus and the Bank of England expected, it …
This page has been updated with additional analysis since first publication. A loosening labour market should forestall further rate hikes Although job growth remained healthy last month, it didn’t prevent the unemployment rate from rising anew. And we …
Totality of the data supports another cut Downside risks to activity rising, upside risks to inflation falling Bank to cut interest rates by 25bp at each meeting until 2.50% Despite stronger core price pressures in May and June, the totality of the data …
17th July 2024
In the latest episode of The Weekly Briefing from Capital Economics, Chief North America Economist Paul Ashworth reflects on a couple of crucial inflation reports, explaining how they’ve shifted the disinflation narrative and could even lead to even more …
This page has been updated with additional analysis since first publication. With inflation falling rapidly, the RBNZ’s August meeting is now “live” Today’s CPI release confirms that inflation is all but certain to return to the RBNZ’s 1-3% target by Q3. …
16th July 2024
The Bank of Canada’s business and consumer surveys point to weak GDP growth, show that firms’ wage expectations are now lower than their pre-pandemic peak, and suggest that consumers are increasingly concerned about the health of the labour market. All …
15th July 2024
Global Economics Chart Pack (July 2024) …
The latest data indicate that capacity pressures have continued to ease, a trend that should continue over the coming quarters. However, it will be a while before policymakers can be confident that they have broken the back of inflation. Accordingly, we …
"More good data" needed There were mixed messages from Fed Chair Jerome Powell this week in his semi-annual testimony to Congress. Powell said in his opening remarks that the “economy continues to expand at a solid pace” and the unemployment rate is …
12th July 2024
Disinflation in the services sector seems to have stalled in several advanced economies this year. That’s partly because the easiest wins related to food and energy effects are behind us and also reflects some temporary factors. Much now depends on the …
