Filtered by Topic: Monetary Policy Region: G10 Use setting G10 Use setting Monetary Policy
Rapid growth in unit labour costs poses an upside risk to core inflation in many advanced economies. However, firms’ pricing power is weakening and we think that it will continue to do so. As a result, higher labour costs will not be passed on in full and …
2nd May 2024
We’ll be discussing the outlook for Bank of England policy in a 20-minute online briefing at 3pm BST on Thursday 9 th May. (Register here .) Rates on hold at 5.25% and Bank unlikely to provide a strong hint first cut will be soon Faster fall in inflation …
Swiss CPI jumps, but will fall in the coming months The jump in Switzerland’s inflation rate in April was largely due to increases in the volatile food and fuel components. While the data increase our confidence that the SNB will not cut interest rates at …
Fed biding its time Fed Chair Jerome Powell argued in his post-FOMC press conference that, despite the stickiness of inflation in recent months, additional interest rate hikes were still “unlikely”. Moreover, while he admitted that the strong start to the …
1st May 2024
Fed statement acknowledges inflation rebound; announces QT taper The Fed admitted in the statement issued after today’s FOMC meeting that “in recent months, there has been a lack of further progress toward the… 2% inflation objective”. Otherwise, today’s …
This interactive dashboard allows you to explore all of our forecasts and key data for major economies. If you have subscriber access to the data underlying this redesigned dashboard, you can download it via the menu options in the top right of each chart …
Is progress stalling on efforts to get inflation under control? Why are price pressures proving more stubborn than expected? When will central bankers get the genie back in the bottle? Our Global Economics team hosted an online briefing about the global …
30th April 2024
Underlying inflation remains stubborn, labour market still running hot RBA to hand down a final 25bp hike to mitigate upside risks Rate cuts unlikely before early next year, with only limited room for easing We expect the Reserve Bank of Australia to hike …
Despite global panic about the DM inflation outlook, we still think that price pressures in the UK are set to fade faster than most assume, opening the way for the Bank of England to cut rates more aggressively than indicated by the consensus. Our UK …
29th April 2024
Trump, the Fed, and the dollar Most of the major policy initiatives being suggested by Donald Trump’s campaign would be inflationary; whether it’s narrowing the trade deficit via tariffs or a dollar devaluation, curbing immigration or, now we learn, …
While expectations for interest rate cuts in the UK have been pared back in recent months amid growing inflation concerns in the US, we think the markets have gone too far in concluding that UK interest rates will still be as high as 4.00% by the end of …
The Ministry of Finance may have intervened earlier today by selling FX reserves to halt the sharp fall of the yen. However, the economic case for foreign exchange intervention is much weaker now than it was in 2022, when the MoF last sold dollars to …
This interactive dashboard allows you to explore all of our forecasts and key data for the UK economy. If you have subscriber access to the data underlying this redesigned dashboard, you can download it via the menu options in the top right of each chart …
The latest Summary of Deliberations showed division among the Governing Council about when it will be appropriate to cut interest rates. The data released since the April meeting favour the doves, however, so we are sticking to our view that the first cut …
26th April 2024
Recovery in activity won’t stop ECB rate cuts This week brought some more evidence that the euro-zone economy is coming out of recession. The euro-zone Composite PMI rose more than expected in April, to a level consistent with GDP expanding slightly. …
The continued decline in core inflation will make it difficult for Norges Bank to stick to its current guidance that it will leave interest rates unchanged until Q4. We suspect that the Bank will change its forward guidance next week to acknowledge the …
The Bank of Japan is getting more confident in meeting its inflation target on a sustained basis and signalled that inflation wouldn’t have to overshoot for policy to be tightened further. Nonetheless, policy rate hikes will become difficult to justify …
Wage increases becoming more widespread The Bank of Japan’s measures of underlying inflation suggest that the case for further policy tightening is diminishing as two out of three indicators fell below the Bank of Japan’s 2% target in March. (See Chart …
Bank of Japan will hike rates further in July The Bank of Japan signalled growing confidence in meeting its inflation target at today’s meeting and we’re sticking to our forecast that it will increase its policy rate further to 0.3% in July. As widely …
The plunge in inflation in Tokyo in April was mostly due to a sharp fall in high school tuition fees and the provision of free school meals. The impact of those policy changes on nationwide inflation will be much smaller and they won’t affect the Bank of …
The last mile will be the hardest The release of Australia’s quarterly CPI data this Wednesday made for grim reading. With price pressures proving more stubborn than most had anticipated, markets have now given up any hopes that the RBA will cut rates …
Hot inflation data dash hopes for rate cuts anytime soon Will take longer for the Fed to get “greater confidence” about path to 2% inflation. Nevertheless, cuts in 2024 still plausible The recent run of stronger inflation and activity data has …
24th April 2024
The latest activity data suggest that GDP contracted at the start of the year, but a rebound is very likely over the coming quarters. Goods inflation should keep slowing rapidly, but strong wage growth will keep inflation above the BoJ’s target for most …
Upside inflation surprise bodes poorly for rate cuts With price pressures proving inordinately resilient, there is little scope for the Reserve Bank of Australia to start loosening policy in the near future. The 1.0% q/q rise in consumer prices in Q1 was …
We expect corporate bond yields in the UK and euro-zone to fall as rate cuts in those economies push down risk-free rates and strong risk sentiment narrows spreads further. In contrast to the weaker-than-expected PMI data out of the US today, PMIs for …
23rd April 2024
In the previous Weekly we said “the risks are tilted towards inflation proving sticker and rate cuts happening a bit later”. This week’s global and domestic events have left our forecast that interest rates will first be cut from 5.25% in June and will …
19th April 2024
RBNZ to watch and wait for longer On Wednesday we learnt that inflation in New Zealand moderated from 4.7% in Q4 to 4.0% in Q1. At first glance, that outturn was only a touch stronger than the 3.8% the RBNZ had predicted. However, the details of the CPI …
The recent upturn in activity and employment growth and the resilience of core inflation suggest that the Fed won't start cutting interest rates until later this year. But although it is taking a little longer than expected, we still believe that core …
18th April 2024
On the face of it, core disinflation seems to have stalled or even reversed in the US but not in Europe, suggesting that Fed cuts will come much later than those by the ECB and BoE. However, there are definitional issues at play that exaggerate the recent …
This page has been updated with additional analysis since first publication. Upside surprise, but big drop to below 2% still coming in April The smaller-than-expected fall in CPI inflation from 3.4% in February to 3.2% in March (BoE and consensus 3.1%, CE …
17th April 2024
This page has been updated with additional analysis since first publication. Upside inflation surprise raises “higher for longer” risks Although the Q1 CPI print was a touch stronger than we had predicted, we still expect inflation to return to the RBNZ’s …
16th April 2024
The resilience of Swiss GDP over the past two years has been largely due to the merchanting sector, which buys and sells goods without them ever entering Switzerland. Excluding that sector, the economy was smaller at the end of 2023 than it was two years …
Our analysis shows that for CPI inflation to get stuck above 2.0% it would require oil prices and UK wholesale gas prices to rise to $110 per barrel and 150 pence per therm respectively. And for CPI inflation to return to 5.0%, it would require increases …
15th April 2024
The third consecutive 0.4% m/m increase in core CPI in March, coming on the heels of the 303,000 surge in non-farm payrolls, fuelled fears that a pick-up in the real economy is now translating into a resurgence in inflation too. We are not convinced. …
12th April 2024
Finance Minister Chrystia Freeland’s pledge to create the conditions needed for lower interest rates means the government is unlikely to announce much new near-term spending in Budget 2024 next week. Providing that core inflation pressures remain muted, …
Ben Bernanke didn’t pull any punches in his review of the Bank of England’s forecasting/communications and recommended a full revamp of the Bank’s main forecasting model, using alternative scenarios to express uncertainties rather than fan charts and …
Where the US leads, the UK often follows. So the rebound in the US CPI inflation rate from 3.2% in February to 3.5% in March and the unchanged core CPI inflation rate of 3.8% has spurred fears that the downward trend in UK inflation will soon stall. In …
Global Economics Chart Pack (April 2024) …
Markets fret inflation risks The RBNZ’s meeting this Wednesday went by without much ado, with the Bank leaving rates unchanged as everyone had expected. If anything, the Committee sounded a touch dovish, as it no longer mentioned its limited tolerance for …
Yen falling to fresh 34-year low Following a hotter-than-expected US inflation print, the yen has now weakened to 153 against the dollar for the first time since 1990. Bank of Japan Governor Ueda explicitly ruled out responding to the weakness of the …
Today’s ECB policy announcement and press conference support our forecast for a June rate cut. Given that we expect more rate cuts than the money market discounts, we think that Bund yields will fall back towards 2.25% by the end of the year. Today’s …
11th April 2024
Even if the US Federal Reserve leaves its policy rate unchanged for longer than we expect, our forecast that inflation in the UK will be lower than in the US suggests this won’t prevent the Bank of England from cutting rates from 5.25% to 5.00% in June …
Fed looking to slow QT by half from June According to the minutes of the Fed’s mid-March policy meeting “almost all participants judged that it would be appropriate to move policy to a less restrictive stance at some point this year if the economy evolved …
10th April 2024
Governor Tiff Macklem sounded relatively dovish in the Bank of Canada’s press conference today, leaving the door open to an interest rate cut at the next meeting in June. While the Bank left the policy rate at 5.0% today, the policy statement and …
The Reserve Bank of New Zealand didn’t drop any hints as to when it might pivot to looser policy at its meeting today. However, as inflation risks recede, we still expect the Bank to start cutting rates by August. The RBNZ’s decision to leave rates on …
RBNZ remains on the sidelines The RBNZ didn’t drop any hints as to when it might pivot to looser policy at its meeting today, but we still think that it will start cutting rates by August. The RBNZ’s decision to leave rates on hold at 5.50% was correctly …
The bigger-than-expected fall in CPI inflation in February was the second in as many months, and together with the Bank of England’s clearer hints that it is getting close to cutting interest rates, it gives us a bit more confidence in our forecast that …
9th April 2024
The Bernanke review of the Bank of England’s forecasting and communications will probably recommend the Bank illustrates the risks around its forecasts using alternative scenarios rather than fan charts and places greater emphasis on supply and monetary …
8th April 2024
No rush to cut rates The minutes of the RBA’s March meeting, published earlier this week, revealed that the Bank has now abandoned its tightening bias. Indeed, for the first time since May 2022, the Board didn’t discuss the option of raising rates higher. …
5th April 2024
