Filtered by Topic: Monetary Policy Region: G10 Use setting G10 Use setting Monetary Policy
The timeliest data support our long-held view that the euro-zone economy will remain close to recession in the first half of the year. Beyond that, we think growth will be much lower than the consensus or the ECB are forecasting. However, the labour …
12th March 2024
Inflationary pressures have eased further, while labour market slack has risen Economy not falling off a cliff, but interest rates are biting households As the flow of data remain soft, Bank will pivot to policy easing in August We expect the Reserve Bank …
Economists from our Japan and Markets teams held an online briefing shortly after the March decision to brief clients on the meeting outcome, talk through any market implications and take questions from the audience. During this session, the team …
11th March 2024
Further easing in core inflation sets up Q2 rate cut February’s inflation data from Norway strengthen our conviction that Norges Bank will cut interest rates much sooner than its forecasts suggest. The decline in headline inflation from 5.3% in January to …
Governor Tiff Macklem dropped a hint this week that the Bank of Canada may be ready to cut rates by June. There was little in the data to dissuade the Bank, with unemployment rising and bankruptcies surging, while a productivity rebound pulled down unit …
8th March 2024
Fed Chair Jerome Powell’s congressional testimony struck a notably less hawkish tone than we have heard recently from some of his colleagues. And with the economic data this week providing little support for the idea of a renewed upturn in inflation, we …
Much ink has been spilled on the Spring Budget this week. For our part, we discussed the macroeconomic and financial market implications in our UK Drop-In and in our UK Economics Focus . The main takeaway is that while the Chancellor was desperate to use …
The Bank of Canada gave little away about the potential timing of interest rate cuts today, although its communications suggest that it is gaining a bit more confidence that inflation is moving in the right direction. We continue to expect the first rate …
6th March 2024
Powell content to wait for more data Fed Chair Jerome Powell looks set to stick to his previous script in his testimony to Congress today and, assuming we are right that the January strength in core inflation will prove to be a blip, his remarks do not …
Overview – The economy isn’t in recession but GDP growth will slow towards trend this year. With a virtuous cycle between wages and prices now in full swing, we expect the Bank of Japan to end negative rates at its April meeting. However, price …
Money growth remains weak but is rebounding steadily, with our broader M3 measure recovering to its strongest since mid-2022. But there is no reason to expect this to drive a rebound in inflation. Although M1 continues to decline, the pace of contraction …
4th March 2024
Following the more hawkish speeches from Fed Vice Chair Philip Jefferson and Governor Christopher Waller last week, that tone continued this week – with regional Fed Presidents including New York’s John Williams repeating the suggestion that interest rate …
1st March 2024
Could there be a tax-cutting Budget bombshell? The rumours this week suggest that the Chancellor may have a bit less to play with in the Budget on Wednesday 6 th March than the £15bn we estimated. As a result, he seems to be considering more revenue …
Third contraction in GDP now likely We doubt that the slump in industrial output in January will prevent the Bank of Japan from ending negative rates over the coming months, but the recent string of disappointing data reinforces our view that this will …
Canada Chart Pack (Feb. 2024) …
29th February 2024
Despite renewed inflation concerns pushing interest rate expectations and gilt yields higher, our forecast that CPI inflation will fall below 1.0% later this year makes us think that the markets are wrong to price in interest rates falling from 5.25% now …
The Reserve Bank of New Zealand handed down another hawkish hold at its meeting today. However, with inflation on track to return to its 1-3% target by mid-year, we still expect the Bank to start cutting rates by August. The RBNZ’s decision to leave its …
28th February 2024
RBNZ holds rates steady while retaining hawkish bias As had been widely expected, the Reserve Bank of New Zealand left its official cash rate unchanged at 5.50% today. 28 out of 29 analysts polled by Reuters, including ourselves, correctly predicted the …
Inflation will continue to undershoot RBA's expectations The weaker-than-expected inflation print for January all but ensures that the RBA won’t hike rates any further, even if it does retain its hawkish bias at its next meeting in March. And with price …
This page has been updated with additional analysis since first publication. Inflation will jump above 2% in February Inflation at the national level held up better in January than the Tokyo CPI would have suggested, which brings a March rate hike back …
26th February 2024
The encouraging January CPI data mean that the Bank of Canada’s April policy meeting is back in play for a potential interest rate cut, although it still seems more likely that the Bank will wait until June – unless the economic and labour market data …
23rd February 2024
Fed to delay first rate cut until June Fed to wait until June Based on comments from Fed officials this week, we now expect the Fed to wait until June to begin cutting interest rates. Moreover, when it does begin to loosen policy, we suspect that the Fed …
Disappointing economic and fiscal forecasts from the OBR haven’t prevented the Chancellor, Jeremy Hunt, from unveiling a splash at previous fiscal events. This time last year, he was handed £14.5bn of headroom against his fiscal mandate to ensure the …
RBA won't hike rates again Flash PMI data released yesterday showed that Australia’s composite output index jumped to a 10-month high of 51.8 in February. The index is now consistent with annual real GDP growth of about 2.0% in Q1 (see Chart 1), which …
Central banks in both Australia and New Zealand are likely to remain in “wait and watch” mode in the near term, given lingering risks to the inflation outlook. However, we think concerns about inflation persistence are overdone. Goods inflation is already …
22nd February 2024
Minutes lean a little hawkish, but don’t rule out May rate cut The minutes of the Fed’s late January policy meeting included support for both hawks and doves although, somewhat disappointingly, there was no attempt to quantify what gaining “greater …
21st February 2024
The economy continues to appear impervious to higher interest rates and, although we expect growth to slow over the first half of this year, that slowdown is likely to be modest. But we don’t expect continued economic resilience to prevent inflation from …
An AI productivity boom. A Chinese structural slowdown. Aging workforces. In the coming decades, the global economy will be shaped by forces that will dictate which countries will make strides and which will stumble. Our Long Run Economic Outlook presents …
GDP has fallen for two consecutive quarters but we don’t think the economy is in recession and should return to growth this year. While the gap between nominal wages and inflation is closing fast, the wage-price virtuous cycle will receive a boost when …
20th February 2024
RBA’s talk of tightening is just bluster The minutes of the RBA’s February meeting showed that uncertainty remains the name of the game. However, we think that the incoming data should give the Board greater conviction that it has done enough to subdue …
In a week in which UK and Japanese data both confirmed two consecutive quarters of contracting GDP, Group Chief Economist Neil Shearing explains why the concept of “recessions” can be unhelpful in understanding the state of economies. He also tells David …
16th February 2024
Signs of healthy growth going into the first quarter support our view that the Bank of Canada will probably wait until June to pivot to rate cuts. Signs of positive activity in the first quarter The latest January data has brought signs that growth could …
Services inflation will slow sharply Australian labour market data published yesterday garnered considerable attention, largely because they showed that the unemployment rate overshot analyst expectations and jumped to a two-year high of 4.1%. However, we …
We think that global growth will undershoot consensus expectations in 2024 as various props to growth from 2023 fade and as the lagged effects of past rate hikes continue to feed through. Among the advanced economies, the US will continue to outperform …
15th February 2024
This page has been updated with additional analysis since first publication. In the mildest of mild recessions, but recovery is in sight The news that the UK slipped into technical recession in 2023, will be a blow for the Prime Minister on a day when he …
With activity and inflation both softer than it had expected a few months ago, the RBNZ will likely stay put at its meeting at the end of the month. However, with a still-tight labour market fuelling uncertainty about domestically-sourced price pressures, …
14th February 2024
We survey 12 major advanced economy housing markets to understand why house price falls have been small despite high starting points and sharp increases in mortgage rates. We then use this information to ascertain whether the correction in house prices is …
The strength of the labour market in January is another reason to think that the Bank of Canada can wait a little longer before it starts to cut interest rates. Bank’s latest communications give little away Governor Tiff Macklem gave little away in his …
9th February 2024
We’re trying a ‘quickfire round’ on this week’s episode of The Weekly Briefing from Capital Economics to get Group Chief Economist Neil Shearing answering the questions that clients have been asking most frequently in recent days: Could inflation rebound? …
RBA’s hawkish bias will be put to the test While the RBA’s decision to leave rates on hold on Tuesday didn’t surprise anyone, the Bank’s Monetary Policy Statement did raise a few eyebrows. In contrast to a number of its developed-market counterparts, the …
The euro-zone will remain close to recession in the first half of the year as the effects of higher interest rates continue to weigh on household consumption and investment, and fiscal policy is tightened. Headline inflation will be close to the ECB’s 2% …
8th February 2024
The resurgence in productivity growth is mainly a cyclical response to the tightness of the labour market rather than a sign that the AI revolution is already bearing fruit. Nevertheless, that still implies scope for productivity growth to remain …
7th February 2024
The faster-than-expected fall in wage growth in November suggests the unexpected rebound in CPI inflation in December will be fleeting. We still think that by April CPI inflation will have fallen below the 2.0% target, and further declines in utility …
What does the recent data flow and Jerome Powell’s pushback mean for the timing of the first Fed rate cut? How quickly and easily will core inflation get back to target? How far will the Fed go to cut rates this year? Chief US Economist Paul Ashworth and …
6th February 2024
With the Reserve Bank of Australia still striking a hawkish tone at its meeting today, we’re pushing back our forecast for the Bank’s first rate cut from May. But we still think that incoming data will show enough of a drop in inflation alongside …
RBA pours cold water on the prospect of early rate cuts Although we're sticking with our view that the RBA is done tightening policy, rate cuts may not be in play until the second half of this year. The RBA’s decision to leave its cash rate on hold at …
The news this morning that the unemployment rate is lower than previously thought increases the chances that interest rate cuts start a little later and are slower. After publishing experimental labour market data for the five months to November due to a …
5th February 2024
If Jerome Powell dampened talk of a March rate cut on Wednesday then the January payrolls report on Friday stamped it out for good. In the latest episode of The Weekly Briefing from Capital Economics, Group Chief Economist Neil Shearing dives into the …
2nd February 2024
