Filtered by Topic: Monetary Policy Use setting Monetary Policy
Overview – The drop in new COVID-19 cases and the resulting scaling back of containment measures in India has provided a much-needed boost to the economy, and an effective vaccine will further support the recovery in 2021 and 2022. But even widespread …
11th January 2021
Consumer price deflation reverses as food prices rise Headline inflation returned to positive territory last month as the drag from pork prices eased. Broader price pressures also edged up on the back of stronger demand. With underlying inflation likely …
US headline CPI inflation probably ticked up in December (Wednesday) We think that UK GDP fell by 8% in November due to lockdown restrictions (Friday) Read our highest-conviction macro and financial market forecasts on our dedicated page Key Market Themes …
8th January 2021
COVID-19 battle not over but vaccines offer hope Shijiazhuang, a city of 11 million and the capital of Hebei, was put into lockdown on Thursday, after recording 117 new coronavirus cases the previous day (67 of them asymptomatic). Mass testing is being …
The extension of lockdowns has dashed hopes of an early rebound in economic activity. Instead, the economy is likely to contract in the first quarter of this year. After falling quite steeply at the end of last year, the number of new virus cases in the …
7th January 2021
The Bank of England may not be ready to use negative interest rates until H2 2021. And by then, COVID-19 restrictions might be easing and the economy could be growing rapidly. In any case, if the Bank does loosen policy further, we suspect it will use …
The lockdowns implemented at the end of last year did not lead to another surge in bank lending, probably because they were less strict and more focused on limiting social activity. But if lockdowns are extended or made more draconian, firms’ demand for …
5th January 2021
House prices may rise by 10% in 2021 House prices continue to rise strongly in Australia and we now think they will rise by 10% between the end of 2020 and the start of 2021. Across the eight capital cities, house prices rose by 0.9% m/m in December. …
4th January 2021
COVID-19 has ravaged India’s economy in 2020, and GDP is all but certain to have suffered its largest slump on record this year. But there are reasons for optimism as the year draws to a close. Several activity indicators point to a continued recovery in …
23rd December 2020
The new Tier 4 COVID-19 restrictions, which closely resemble November’s lockdown, raise the chances that the economy stagnates, if not contracts, in the first three months of 2021. If the economy is heading for a double-dip, at least the second leg down …
21st December 2020
Commercial banks left the Loan Prime Rate (LPR) on hold today. But with China’s leadership eyeing a gradual withdrawal of policy support, we think the PBOC will start to hike its policy rates next year. The one-year LPR was unchanged at 3.85% (both the …
The Bank of Japan’s decision today to extend its emergency loan facility by six months didn’t come as a surprise. The announcement that the Bank would soon conduct an assessment of its easing strategy is more striking, but it appears unlikely to result in …
18th December 2020
Indonesia’s central bank left interest rates unchanged today, but given the poor outlook for growth, further easing is likely early next year. The decision by Bank Indonesia to leave interest rates unchanged at 3.75% came as no real surprise – 24 of the …
17th December 2020
PM Suga’s decision on Tuesday to halt the Go To Travel campaign for two weeks from 28 th December may put the recovery in services spending into temporary reverse. It comes after authorities in Tokyo, Osaka, and Nagoya this week extended requests for bars …
Upside surprise is under way The fall in the unemployment rate to 6.8% in November leaves it on track to fall to 6% by the middle of next year and is consistent with our view that the RBA won’t expand quantitative easing any further. The 90,000 rise in …
The Fed tweaked the guidance for its asset purchases in the statement issued after the conclusion of today's FOMC meeting, with the new language implying those purchases could continue for longer than previously believed. Nevertheless, with yields already …
16th December 2020
The recent swings in sterling triggered by shifts in sentiment towards the chances of a Brexit deal have left little room for the pound to appreciate if there’s a deal, but plenty of room for it to depreciate if there’s a no deal. As the markets appear to …
We think that the recovery from the pandemic will be stronger than most anticipate. That means that the labour market will tighten rapidly, allowing central banks to end their bond purchases. The upshot is that both the Australian dollar and the New …
The distribution of an effective COVID-19 vaccine in India will brighten the economic outlook next year, but India’s recovery will still be one of the weakest among major economies. One consequence is that government bond yields will remain exceptionally …
In contrast to the consensus, we think that the economic recovery in 2021 will be quicker and fuller, the Bank of England will continue to shy away from negative interest rates, the Chancellor won’t tighten fiscal policy and if there’s a no deal Brexit, …
15th December 2020
Activity goes from strength to strength China’s economy continued to accelerate across all fronts in November. We expect output to remain above-trend in the coming quarters, even as tailwinds from stimulus and exports start to ease. Industrial production …
Recovery still strong at start of Q4, but headwinds mounting Turkey’s industrial production and retail sales data for October suggest that the economy carried a lot of momentum into the start of Q4 but the recent tightening of virus containment measures, …
14th December 2020
As well as being a game-changer for economic prospects next year (see here ), the positive news on the vaccine front has also helped to ease the upward pressure on the Swiss franc against the euro. The franc briefly dropped to its lowest level of 2020 …
11th December 2020
One of the biggest upside risks to our forecasts is that households spend the extra savings that they have accumulated during the past few months. If they do, North America and the UK look likely to benefit more than the euro-zone. Chart 1 shows that …
Sanctions threat a reminder of Turkey’s fragility Both the US and the EU look set to impose sanctions on Turkey, which could undermine the gains from the recent shift to orthodox economic policymaking. Any sanctions are likely to be towards the milder end …
Credit rating downgrade unlikely to lift bond yields S&P Global Ratings downgraded the credit ratings of New South Wales and Victoria this week from AAA to AA+ and AA respectively. Both states have held the prestigious AAA rating since 2003 and entered …
The ECB’s message that it will persist with its flexible asset purchase programme until at least early 2022 should reassure investors that there will not be a reversal of the compression of bond yields anytime soon. Beyond then, there is a little more …
10th December 2020
Vaccines mean the recovery may not need a further monetary boost But monetary policy will remain extremely loose for years yet And a no deal Brexit could yet prompt further easing The next Monetary Policy Committee (MPC) meeting on Thursday 17 th December …
Recovery has surprised to the upside but third wave is a downside risk Bank to extend emergency lending facility New facility to support regional banks highlights discomfort with negative rates With the ongoing wave of infections in Japan the most severe …
The key change to the Bank of Canada’s policy statement today was its commitment to “keep interest rates low across the yield curve”. This is in line with our view that, even as the economy rebounds strongly next year, the Bank will prevent the 10-year …
9th December 2020
Officials unconvinced of need for, or benefits of, further stimulus But guidance on asset purchases is set to be updated Strength of rebound in inflation next year could catch the Fed off-guard We expect the Fed to keep its main policy settings unchanged …
Surge in mortgage advances comes despite reduction in riskier lending The surge in mortgage lending to its highest level since before the financial crisis has come despite banks curbing riskier loans. If we are right to think that house prices will dip, …
8th December 2020
Recovery to slow but not reverse The drop in the Economy Watchers Survey in November still leaves it consistent with solid growth in consumer spending. As such, the survey is consistent with our view that the third wave will slow rather than derail the …
Recovery to surprise to the upside The sizeable upward revision to Q3 GDP and the sharp rise in “core” household spending in October support our view that Japan’s economy will recover from the pandemic faster than the consensus expects. Meanwhile, wage …
Euro-zone GDP looks set to fall in Q4, but the prospect of vaccine rollouts has significantly improved the outlook. We think that containment measures will be scaled back when the most vulnerable members of society are inoculated, which will probably be …
4th December 2020
The RBI kept the repo and reverse repo rates on hold today and made an explicit commitment to keep policy “accommodative” for the foreseeable future. Markets are too hawkish in expecting modest rate hikes within the next 12-18 months. The MPC’s unanimous …
Containment measures may need more teeth Daily cases have started creeping higher again at the national level driven by a renewed rise in infections in Tokyo and Osaka. (See Chart 1.) However, across most of the country the virus is a long way off …
Consumption set to rebound further The 3.3% q/q rebound in Q3 GDP was stronger than most had expected. The 7.9% q/q rise in consumption reversed half of the drop in Q3, but some sectors are still on their knees. For example, spending on accommodation …
China’s rebound from the COVID-19 shock has been swifter and stronger than most anticipated. We think its economy will continue to surprise to the upside for a while, paving the way for PBOC rate hikes and further renminbi appreciation. But the property …
Rebound in retail sales to continue in November The rebound in retail sales in October is likely to be overshadowed by an even larger increase in November as Victoria reopens . The 1.4% m/m rise in retail sales values in October was smaller than the …
The Bank will play down the chances of a quick return to economic health. We expect it extend the PEPP until at least mid-2022 and announce more TLTROs. But the Governing Council will probably leave the deposit rate unchanged. Policymakers at the ECB have …
3rd December 2020
COVID-19 vaccines have dramatically brightened the economic outlook. GDP probably still fell during the second lockdown in November, perhaps by up to 8% m/m, and the strict COVID-19 regional tier system will limit the rebound in activity in the coming …
Inflation jumps, raising risk that CBRT is forced to hike rates again Turkey’s headline inflation rate jumped to a stronger-than-expected 14.0% y/y in November and, while the lira has rallied strongly over the past month and the economy looks set to …
The ECB has said it is prepared to reduce its deposit rate further below zero. However, since any economic benefits would be small and it would be politically unpalatable to some on the Governing Council, we expect the Bank to instead focus on the TLTROs …
1st December 2020
The RBA still sounded cautious when it left policy settings unchanged today. But if our more optimistic forecasts for GDP growth and inflation are realised, the Bank may not decide to expand QE in April. The Bank kept both its cash rate target as well as …
New Zealand is likely to be one of the few countries where output had recovered to pre-virus levels in Q3. Taken together with the recent positive news on the vaccine, we no longer expect the RBNZ to cut rates into negative territory. New Zealand removed …
30th November 2020
We have been arguing for some time that the unemployment rate would not rise as much as most believed in either Australia or New Zealand. We remain confident in those forecasts. Admittedly, the unemployment rate rose from 4.0% to 5.3% in New Zealand in …
