Filtered by Topic: Monetary Policy Use setting Monetary Policy
The Riksbank was always likely to maintain the status quo this morning, but against the backdrop of recent hawkish shifts by other central banks, notably the Fed, the focus was on how its thinking had shifted. The short answer is: not a lot. You did not …
1st July 2021
We think Sweden’s Riksbank could signal a rate hike in late 2023 (08.30 BST) June’s ISM Manufacturing Index may provide insight on recent supply shortages (15.00 BST) Read our highest conviction macro forecasts and their market implications here Key …
30th June 2021
High inflation has driven up rate expectations everywhere. But the inflation outlook is varied, and other aims will determine policy too. Norway and New Zealand will be first to tighten among DMs, others will delay. The rise in inflation and the question …
The virus situation in Emerging Asia has improved compared with a month ago. Although cases are rising sharply in Indonesia, daily numbers have come down in Taiwan, Singapore, India and Malaysia, and appear to have stabilised in the Philippines. That …
With the more contagious delta variant spreading in Australia, half of the population is now in lockdown. This highlights the Achilles heel of both countries’ virus management: their slow vaccine rollout. Just 8% of New Zealanders and 5% of Australians …
Some believe that China is adding to global inflationary pressure. The opposite is closer to the truth: the large increase in China’s trade surplus over the past year signals that supply from China has risen far more than demand. Global consumer goods …
We expect that China’s manufacturing PMIs edged down in June (02.00 BST) The flash estimate of euro-zone HICP inflation probably fell slightly in June (10.00 BST) Read our highest conviction macro forecasts and their market implications here Key Market …
29th June 2021
Latin America is once again the global epicentre of COVID-19 but, from an economic perspective, the region has built up significant immunity to the virus. Indeed, despite the surge in new virus cases at the start of Q2, the latest activity data show that …
We think investors may be overestimating how much monetary policy tightening is on the way in emerging markets (EMs), but still expect long-dated EM government bond yields to rise a bit from here. Over the past month the tightening cycle among EM central …
Bank to move to flexible QE while keeping weekly pace of bond purchases at $5bn RBA expects wage growth to pick up slowly and gradually; we expect a faster rebound We expect the Bank to taper QE in November, with first rate hikes in early-2023 The Reserve …
UK consumer credit likely to have increased as the economy reopened (09.30 BST) We think economic sentiment in the euro-zone continued to improve (10.00 BST) Colombia’s central bank will probably stay on hold, but sound more hawkish Key Market Themes …
28th June 2021
The further tightening of virus containment measures in South Africa for at least the next two weeks is unlikely to inflict severe damage on the economy. But it reinforces our view that the Reserve Bank will be in little rush to follow other EM central …
The next EM central banks likely to raise interest rates are those whose economic recoveries are relatively advanced and can focus on inflation and/or financial risks. Chile and Korea fit into this group and we expect rate hikes from both in August. …
Central bank hawkishness sweeping the region Latin American central banks are becoming increasingly hawkish, not just in Mexico but also in Brazil and Chile. Colombia may soon join this club. The biggest hawkish shift this week was in Mexico. After a …
25th June 2021
Ghana: bumper harvest to support recovery Media reports suggest that Ghana may be heading for its biggest cocoa harvest in at least a decade. High rainfall and better farming practices have, according to the same reports, helped push output to its highest …
Virus clouds lift over Turkey’s outlook The sharp improvement in Turkey’s virus situation has brightened the near-term outlook and presents a risk to our view that the central bank will start an aggressive easing cycle in the coming months. The number of …
Global developments driving the Nordic majors After last week’s seemingly counterintuitive drop in the NOK following the hawkish message from the Norges Bank (see here ), it was the turn of the Swedish Krona to apparently defy the laws of the market: the …
The latest CFIB Business Barometer shows that, as the re-opening process got underway, firms’ selling price expectations surged in June. Firms now expect to raise their prices by an average of 4.7% over the next 12 months, which is by far a record high. …
Another week, another set of euro-zone survey data highlighting the strength of the region’s economic bounce back as virus restrictions are lifted on the services sector. The flash Composite PMI for the euro-zone rose to its highest level in 15 years and, …
The evolving outlook for monetary policy on the other side of the Atlantic has once again been partly to blame for recent movements in UK markets. Like in the US, the yield curve flattened after the Fed became more hawkish at its May meeting, although …
The surprise 25bp rate hike by Mexico’s central bank (to 4.25%) suggests that its reaction function is less dovish that we had expected, as it is now reacting to quell high inflation. With the headline and core rates set to remain above target over the …
Korea to hike rates in August We were already more hawkish that the consensus in expecting a rate hike in Korea this year, but recent comments by the central bank and strong economic data mean we are shifting forward our forecast for the first hike to the …
Economic activity across Emerging Europe is rebounding strongly now that virus waves have passed and restrictions have been lifted. High-frequency data show that mobility has surpassed its pre-pandemic level in most countries and vaccination programmes …
24th June 2021
We think that US real consumption fell slightly in May… … while change in the core PCE deflator remained high, at 0.6% m/m (13.30 BST) Read our highest conviction macro forecasts and their market implications here Key Market Themes The yield of 10-year …
Worries about a third wave of COVID-19 in the region have intensified in the past month and the tightening of lockdown measures in some countries – most notably South Africa – will weigh on recoveries. As things stand, surges in cases appear concentrated …
After last week’s hawkish shift by the Fed, and the erasure of any doubt about the start of hikes by the Norges Bank , the Riksbank may also pencil a rate hike into its projections next Thursday (1 st July). However, policy action will be centred on the …
Other than the Monetary Policy Committee (MPC) noting the growing upside risks to inflation alongside today’s policy decision, there were no real signs that it is thinking about tightening policy sooner, à la the Fed. We think policy will be tightened …
The price of oil has continued to rise and will help to improve balance sheets in the Gulf. With oil prices at $75pb, all Gulf economies with the exceptions of Bahrain and Oman are likely to be running current account surpluses, having run deficits in …
The central bank in the Philippines (BSP) left its main policy rate on hold at 2.00% today, but with inflation fears receding, more rate cuts to support the beleaguered economy are only a few months away. The BSP has been on hold so far this year after …
The hawkish surprise delivered by the Fed at its latest meeting and the subsequent market reaction have not changed our view that the 10-year US Treasury yield will end the year higher and that the “rotation trade” in equity markets will resume before …
The surge in consumption in Q1 resulted in the savings rate falling to a 15-year low. While we expect households to respond to falling house prices with higher savings, the rebound in GDP could be even stronger than we currently assume if households keep …
Germany’s Ifo survey likely to rise again this month (09.00 BST) We don’t expect BoE to suggest it is any closer to tightening policy (12.00 BST) Banxico likely to look through rising inflation (19.00 BST) Key Market Themes As the dust finally begins to …
23rd June 2021
The Czech National Bank (CNB) raised its two-week repo rate by 25bp to 0.50% at today’s meeting and the accompanying communications support our view that this marks the start of what will be the most aggressive tightening cycle in Europe. We expect that …
Last week’s surprise change in the Fed’s guidance about how soon it is likely to raise its key policy rate raises the question of whether the ECB will follow suit. In our view, although the euro-zone faces similar inflationary pressures in the coming …
India’s 10-year government bond yields have remained stable at around 6% over the past month, taking the unexpectedly large jump in inflation in May and a more hawkish turn by the US Fed in their stride. That reinforces our long-held view that borrowing …
The Bank of Thailand (BoT) today left interest rates unchanged at their all-time low of just 0.5%, dovish comments from the press conference support our view that rates will be on hold for a long time to come. Interest rates have now been left unchanged …
We now expect the unemployment rate to approach 4% by late-2022. Even though the reopening of the border should ameliorate staff shortages a bit next year, we expect wage growth to accelerate markedly. As such, we’re bringing forward our forecast for the …
Hungary’s central bank (MNB) raised interest rates by 30bp today and with inflation set to remain above the MNB’s 4% upper tolerance level well into 2022, we expect an additional 60bp of tightening at the next three Inflation Report meetings. This would …
22nd June 2021
We think there’s a good chance that when the Bank of England’s Monetary Policy Committee (MPC) starts to tighten monetary policy it will do it by unwinding some quantitative easing (QE) before it raises interest rates. That would be consistent with the …
While policymakers in Hungary and Czechia look set to lift interest rates from their pandemic lows later this week, we doubt that Poland’s central bank will follow suit this year. That said, with inflation in Poland set to be higher than we had previously …
21st June 2021
Commercial banks left the Loan Prime Rate (LPR) on hold again today. The PBOC has now fully reversed last year’s credit acceleration using quantitative controls. Accordingly, policy rate hikes that could prompt LPR increases are unlikely in the near …
The FOMC’s optimistic assessment of the outlook and the significant shift up in its “dot plot” projections has sent the US dollar soaring over the past couple of days. We have brought forward our own forecast for the first Fed hike (see here), and our …
18th June 2021
Surge in virus cases casts a dark cloud over Russia A surge in virus infections in Moscow and tightening of restrictions at a time when vaccine coverage is so low threatens to derail Russia’s economic recovery. New daily virus infections in Russia had …
Bank of Korea closer to pulling the trigger Minutes from the Bank of Korea’s (BoK’s) May meeting, released on Tuesday, support our view that the central bank will tighten policy this year. The minutes were decidedly hawkish, with one of the seven members …
Norges Bank trumped by the US Fed The Norges Bank laid its cards on the table this Thursday, all but confirming that it will start to raise its key interest rate from September. (See here .) In the event, it was overshadowed by the less anticipated news …
The yields of 10-year US Treasuries and German Bunds have moved in lockstep since the latest Fed meeting, but we doubt that this will continue. While we expect the Treasury yield to rise sharply between now and the end of 2022, we think that the Bund …
Wednesday’s hawkish surprise from the Fed adds weight to our views that i) the US stock market will see only limited gains between now and the end of 2023, even as the economy generally continues to power ahead and ii) the stock market ‘rotation trade’ …
Inflation has risen sharply across the emerging world in the last few months, prompting much more cautious words from central banks (mainly in Latin America and Emerging Europe), but we expect that EM price pressures will ease in the coming months. (See …
Hawkish moves When RBA Governor Lowe stood up to give a speech on Thursday, markets were still digesting the hawkish shift from the US Fed that had come just a few hours before. The Fed’s move to add two rate hikes in 2023 to its projection took it ahead …
The Central Bank of Egypt (CBE) announced it kept interest rates on hold on Thursday evening and, with inflationary pressures building, the CBE is likely to refrain from cutting rates in the near term. Even so, very high real interest rates and the …
