Filtered by Topic: Monetary Policy Region: G10 Use setting G10 Use setting Monetary Policy
Overview – The next government, which the polls ahead of the election on 4 th July suggest will be a Labour one, will benefit from a combination of lower inflation, lower interest rates and faster economic growth than most are expecting. We think that a …
25th June 2024
Are signs of recovery sustainable? Is inflation receding enough for more central banks to join the global easing cycle? Do upcoming elections pose a risk to the economic outlook? Our senior economists for held two special briefings on Monday, 1st …
24th June 2024
The recent encouraging inflation data reinforce our view that the Fed will cut interest rates in September. We remain confident that core inflation is heading back to the 2% target, which should allow the Fed to cut rates again in December and by even …
The Summary of Deliberations from the Bank of Canada’s June meeting reiterated that further interest rate cuts are likely but gave little away about how quickly the Bank will move. With another two CPI releases before the July meeting, our sense is that …
21st June 2024
The latest flash PMIs suggest that GDP growth in most major advanced economies slowed at the end of Q2. But weaker services activity hasn’t translated to softer price pressures, meaning central banks will take a gradual approach to loosening policy. Our …
Inflation slowdown creates dilemma for BoJ The minutes of the Bank of Japan’s April meeting released this week confirmed that many Board members were concerned about a renewed strengthening of price pressures caused by the weak exchange rate. Those …
The proposal to save governments money by ending interest payments on commercial banks’ reserves is a lot more complicated than some of its advocates suggest. The extreme version could either cause central banks to lose control of monetary policy or …
20th June 2024
The Bank of England predictably left interest rates unchanged at 5.25% today but continued to give the impression that the pieces of the puzzle are almost in place for it to cut rates. This lends some support to our view that the Bank will first cut rates …
BoE leaves the door open to an August rate cut The Bank of England predictably left interest rates unchanged at 5.25% today but continued to give the impression that the pieces of the puzzle are almost in place for it to cut rates. As a result, we still …
This page has been updated with additional analysis since first publication. Stubborn services inflation still a point of concern for BoE We’ll be discussing the outlook for Bank of England, ECB and Fed policy in a 20-minute online briefing at 3pm BST on …
19th June 2024
While the economy has only narrowly avoided a recession, activity should rebound over coming quarters as real household incomes recover. Indeed, with inflation set to remain above the Bank’s 2% target this year and wage growth accelerating, we expect the …
18th June 2024
The RBA discussed another rate hike at today’s meeting and an upside surprise to Q2 inflation could force its hand at its August meeting. However, with capacity constraints easing and government rebates pushing inflation into the Bank’s target band by Q3, …
RBA’s next move will be a cut but only next year The RBA probably debated another rate hike at today’s meeting and we only expect the Bank to start easing policy next year. The Bank’s decision to keep interest rates unchanged today was correctly …
Fed split, but better data point to two rate cuts The Fed’s updated projections indicated that a slim majority of officials favour fewer than two interest rate cut this year but, in response to the soft May CPI, PPI and import price data, the markets …
14th June 2024
The Bank of Japan disappointed markets today by announcing that it will only present a detailed plan for reducing its bond purchases at its July meeting. We think it will also deliver a final policy rate hike then . Today’s BoJ meeting was a damp squib . …
BoJ pledges to unveil taper plans next month With the Bank of Japan today disappointing financial markets by delaying any announcement on the reduction of its bond purchases to its July meeting, 10-year JGB yields initially dropped by around 5bp and …
Underlying price pressures will abate only slowly When Queensland Treasurer Cameron Dick unveiled the state government’s 2024/25 Budget, he made no pretence about his desire to prime the pump in the run the up to local elections in October. The Budget …
Bank will deliver a final rate hike in July The Bank of Japan announced today that it will present a detailed plan for reducing its bond purchases at the upcoming meeting in July and we think it will also deliver a final policy rate hike then. Around …
BoE watching and waiting for more evidence that inflation will settle at the 2% target But a summer rate cut is more likely than investors expect We think rates will be cut to 3.00% next year, below current market pricing of 4.00% Far more interesting …
13th June 2024
The SNB is likely to keep rates on hold at 1.5% at its meeting next week as inflation in Q2 so far has been in line with the its forecast in March. Moreover, the latest data on wage growth were much stronger than ahead of the March meeting, which we think …
Fed projects one cut this year, but notes inflation progress The median FOMC projection now shows only one 25bp rate cut this year, but it was a relatively close run thing. Four officials expect no cut this year, a further seven anticipate one cut, while …
12th June 2024
Fed forecasts one rate cut this year, but notes inflation progress This publication was resent to correct the error in the headline in an earlier version. The median FOMC projection now shows only one 25bp rate cut this year, but it was a relatively close …
Global Economics Chart Pack (June 2024) …
RBA to stay put at its June meeting Inflation remains high, but spare capacity is starting to open up in the economy Forthcoming easing cycle will be modest in scope, with rates returning to neutral We expect the Reserve Bank of Australia to leave rates …
11th June 2024
This page has been updated with additional analysis since first publication. S ticky wage growth a lingering concern for the BoE The stickiness of wage growth in April will be a lingering concern for the Bank of England. But with employment falling …
The Bank of Canada kicked off its loosened cycle this week and the accompanying communications left the door open for another cut in July, although still-strong wage pressures are one reason why the Bank may opt to take a more gradual approach. “Let’s …
7th June 2024
We don’t think that the below-potential GDP growth implied by the recent activity data is a cause for concern yet, particularly while the labour market appears healthy. That will keep the Fed squarely focused on the inflation side of its mandate at its …
Regular earnings growth hits 30-year high At first glance, the jump in regular earnings growth to a 30-year high of 2.3% in April is a clear sign that the strong pay hikes agreed in this year’s spring wage negotiations (Shunto) are filtering through. …
Just as fixed mortgage rates have shielded homeowners from rising interest rates, they will prevent households’ interest costs from falling rapidly when interest rates are cut. While borrowers on tracker and two-year fixed rate deals will soon see their …
6th June 2024
Bank may reduce its bond purchases next week, though we think it will wait until July. Next rate hike should happen in July as BoJ increasingly worried about weaker yen. However, sharp slowdown in underlying inflation will forestall a series of rate …
Today’s interest rate cut from the Bank of Canada will be the first of many, and the dovish tone of the accompanying communications suggests another rate cut in July is nailed on. As Governor Tiff Macklem shrugged off any potential concerns about exchange …
5th June 2024
One down, many more to come Today’s interest rate cut from the Bank of Canada will be the first of many, and the dovish tone of the accompanying communications suggests that another rate cut in July is already nailed on. For now, our forecast is that …
Disinflationary trend gradually reasserting itself Economy and labour market losing momentum New projections should still show one or two rate cuts this year With no prospect of the Fed adjusting policy next week, the focus of the FOMC meeting will be the …
The European Central Bank is likely to become the first major advanced economy central bank to cut rates since the end of the pandemic when it meets this Thursday – easing policy ahead of the Federal Reserve and the Bank of England. It’s a move that’s …
2nd June 2024
The weaker-than-expected first-quarter GDP data and downward revision to fourth-quarter growth caused markets to price in a higher chance that the Bank of Canada will cut interest rates next week. With consumption growth strong, however, we still think …
31st May 2024
The stickiness of inflation in April has led us to shift back our forecast for the timing of the first interest rate cut from 5.25% from June to August. Even so, our view that CPI inflation will fall from 2.3% in April to below 1.5% by the end of this …
29th May 2024
Pieces almost in place for the Bank of Canada to cut But economic and labour market resilience means Bank can wait to be 100% sure Rates to be cut by 25 bp at each meeting from July, faster than markets pricing in The rapid easing in core inflation …
The further fall in headline inflation in April, to a three-year low of 2.6%, means the 2% target could be achieved as soon as August. Whether the Bank of Canada cuts interest rates in a couple of weeks or waits until July, our key message is that the …
24th May 2024
Fed in wait-and-see mode Fed to proceed with caution The minutes of the Fed’s early May policy meeting were, not surprisingly given the backdrop of data releases ahead of that meeting, somewhat hawkish. The resilience of economic growth and employment, …
Inflation rapidly losing momentum The economic data released over the last couple of weeks hardly suggest that the Bank of Japan should tighten monetary policy any further. After all, GDP plunged by 0.5% q/q in Q1 and the April inflation data released …
Households seem keen on saving more The minutes of the RBA’s May meeting confirmed that the Bank discussed a rate hike in response to the upside surprises in inflation and the labour market, but ultimately decided against it. One reason was that the …
The latest flash PMIs suggest that GDP growth in advanced economies has continued to gain momentum in Q2. And central banks may take comfort in the fact that services price pressures seem to be easing. Our estimate of the flash DM composite output PMI …
23rd May 2024
We still think inflation will fall faster than the Bank of England is expecting, but in the light of April’s CPI release we now expect the downward trend to be slower and smaller. As a result, we have shifted back our forecast for the timing of the first …
Survey provides support for summer rate cut Today’s May flash PMI survey will have provided the Bank of England with some comfort after yesterday’s stronger-than-expected inflation data for April. Crucially, the further fall in the services output prices …
FOMC stresses higher for longer The minutes of the Fed’s early May policy meeting are, not surprisingly given the backdrop of data releases ahead of that meeting, somewhat hawkish. The resilience of economic growth and employment, and particularly the …
22nd May 2024
Although it left rates unchanged at its meeting today, the RBNZ indicated that interest rates may have to stay higher for longer. However, we think the Bank is overstating the upside risks to the inflation outlook. Accordingly, we still think there’s a …
RBNZ signals rate cuts may have to wait Although the RBNZ suggested that there was a high bar for further policy tightening, the Committee stated that interest rates may have to remain at their current restrictive level well into 2025. In our view, the …
The slight easing of inflationary pressures in April and softer activity data are consistent with the Fed cutting interest rates in September. Although it is taking a little longer than expected, we believe that core inflation is on course to fall back to …
21st May 2024
RBA is done tightening policy The RBA continued to tout the line that all options are on the table as far as its next move is concerned. However, we still expect the Bank’s next move to be down, not up. The minutes of the RBA’s May meeting confirmed that …
20th May 2024
