Filtered by Topic: Monetary Policy Use setting Monetary Policy
The Bank of Japan’s new special deposit facility won’t lift the profitability of struggling banks meaningfully, nor should it result in a rise in money market rates. However, it is another sign that the Bank is becoming more worried about the impact of …
30th November 2020
COVID-19 vaccines are a gamechanger for our economic forecasts and mean that we now think that by the middle of the decade the economy won’t be much smaller than if the COVID-19 crisis had never happened. This is a more positive outlook than the views of …
27th November 2020
House prices ready to skyrocket Daily data from CoreLogic suggest house prices in Australia’s five largest capital cities have risen 0.9% from their trough in October. And leading indicators suggest prices may soar before long. Indeed, our sales to new …
Foreign purchases of equities at record highs Net portfolio inflows into India have surged this month. (See Chart 1.) This mirrors the jump in portfolio inflows to other EMs, suggesting that global factors have been at play, such as the US election …
The account of the last ECB Governing Council meeting confirms that policymakers were becoming more concerned about the outlook for both inflation and GDP growth in late October and that they were preparing to loosen policy in December. The vaccine news …
26th November 2020
The announcement this morning by the Riksbank that it has left the repo rate on hold at zero was never in doubt, and positive news on the vaccine front means that we no longer expect it to cut back into negative territory next year. However, the expansion …
Lending growth is likely to pick up in the final two months of the year as firms again take advantage of loan guarantees to replace lost revenues during lockdowns. And the ECB looks set to support bank lending to the real economy by extending its Targeted …
The Bank of Korea (BoK) left its main policy rate on hold at 0.50% in a unanimous decision, and with the economy set to rebound further in spite of a growing third wave of the coronavirus, further easing seems unlikely in the months ahead. Instead, rates …
Central banks keen to bridge a difficult period before vaccines are rolled out… … and reduced fiscal stimulus shifts onus of supporting recovery to monetary policy The legacy of the virus will warrant rock bottom interest rates for several years The …
25th November 2020
The ECB looks set to announce an increase in the size of its Pandemic Emergency Purchase Programme in December and to extend the time for which it pledges to make net purchases and reinvestments. As a reminder, the Pandemic Emergency Purchase Programme, …
Property valuations improved for the seventh consecutive quarter in Q3, following another sharp fall in equities earnings yields. But this was the smallest rise in valuation scores this year and changes so far in Q4 point to a partial reversal. (See Chart …
24th November 2020
The huge amount of personal savings built up during the pandemic, if unleashed, represents perhaps the biggest upside risk to the economy over the coming year or two. But even once the spread of the virus is brought under control, there are reasons to …
After having been hit particularly hard during the COVID-19 crisis, UK assets are well placed to perform much better now that COVID-19 vaccines are brightening the economic outlook. Indeed, the combination of a decent economic recovery and continued …
Vaccine may be available by Q2 2020, allowing full reopening of the economy Labour market doing much better than Bank had anticipated Case for additional stimulus is diminishing The Reserve Bank of Australia won’t make any policy changes at its meeting on …
The Treasury’s decision not to extend the majority of the Fed’s emergency lending facilities beyond the end of the year is unlikely to have a major impact on the economy given that those facilities made just $25bn of loans. At the margin, however, it …
20th November 2020
Overview – The outlook for most commercial property sectors was already fragile and this has only been dampened by the second lockdown. Although transactions are set to pick up next year, we think property yields will edge higher and that all-property …
Minkgate rumbles on in Denmark The political wrangling in Denmark following the outbreak of COVID-19 in the country’s mink farms shifted up a gear this week. The main point of contention remains that the government did not have the legal basis to order …
At its December meeting, the ECB is very likely to announce additional TLTRO operations and it may well make their terms even more favourable for banks. In this Update , we review the ways that the ECB could alter TLTROs so that they provide greater and …
The Riksbank is likely to leave its repo rate on hold at zero next Thursday (26 th November). But with the economy heading south, and the ECB gearing up to ease again, we think there is a good chance that policymakers will take the opportunity to expand …
19th November 2020
The continued surge in COVID-19 infections across the country is prompting a growing number of states to reimpose restrictions on activity. The softer retail sales data in October indicated that this is already starting to weigh on the economy and, with …
Growth in narrow measures of the money supply has continued to edge higher as demand and saving deposits continue to accumulate but, with growth in broader measures of money and bank lending dropping back, there is little threat of that pushing inflation …
17th November 2020
Japan is in the midst of a third wave of COVID-19. Daily infections have already reached their previous early-August peak. (See Chart 1.) Only the Hokkaido Government has responded with countermeasures so far, asking Sapporo residents to consider …
Consumption and services back to normal The latest data suggest that the broad-based acceleration of China’s economy continued in October. Policy stimulus continued to boost investment and industrial output while growth in real retail sales and services …
16th November 2020
Would a vaccine help China’s economy? China is a rare example of an economy that would be worse off initially if effective COVID-19 vaccines were rolled out globally. The diversion of household spending in major economies from services to goods has served …
13th November 2020
We think that inflation in Japan will remain subdued while the pandemic will result in a rise in US inflation to above the pre-virus pace. With both the Bank of Japan and Fed likely to remain inactive for some time, the resulting real interest rate …
BSP under pressure to cut The weakness of the recovery in the Philippines means that the central bank (BSP) is likely to lower interest rates at next Thursday’s scheduled meeting. Third quarter GDP figures published earlier this week confirm that the …
12th November 2020
President Erdogan’s latest comments suggest that the recent changes in Turkey’s economic management team may herald a shift back to orthodox policymaking. If these developments are backed up by a sharp interest rate hike at next week’s MPC meeting – we …
Output won’t return to pre-virus trend The US elections sent the ASX 200 to fresh highs last week as the prospect of a divided US government means that several measures proposed by president-elect Joe Biden are off the table . And it has risen further …
The Bank of England won’t be worried by the recent jump in gilt yields given that it has been triggered by the growing possibility of a COVID-19 vaccine improving the economic outlook. As such, we have revised up our gilt yield forecasts. However, as the …
11th November 2020
There have been some concerns that as well as there being little scope to generate stimulus through interest rate cuts, the Bank of England is now reaching its limits on Quantitative Easing (QE). But the Bank seems open to loosening its own QE rules. And …
The Reserve Bank of New Zealand’s (RBNZ) decision to implement a funding for lending programme in December should provide some further stimulus on its own and is another step towards implementing negative rates in 2021. The Bank did not adjust the OCR or …
Rapid recovery set to continue The further surge in the Economy Watcher’s Survey (EWS) in October suggests that Q4 could surprise to the upside. However, further ahead the recovery will slow as the economy gets closer to pre-virus levels. The rise in …
10th November 2020
Food price drop drags inflation to eleven-year low Headline consumer price inflation fell sharply in October, to its lowest since 2009. But this was almost entirely due to falling food prices – core inflation and factory gate inflation held steady last …
The UK is facing up to the possibility of a festive period dominated by COVID-19 restrictions and Brexit. We think that the England-wide lockdown will shrink the economy by 8% m/m in November and that the rebound in December will be muted. (See Chart 1.) …
9th November 2020
While card transaction data have overstated the health of consumer spending in recent years, we suspect they didn’t do so recently. As such, we’re willing to take the jump in transaction amounts in Q3 at face value and have pencilled in a strong rise in …
China tensions continue to bubble Trade data this week suggest that trade was a big drag on Australia’s GDP growth in Q3, though that’s largely because the rebound in domestic demand lifted imports. And despite mounting trade tensions with China, exports …
6th November 2020
October looking good Japan’s economy has been performing well over the autumn months. Indeed, the early evidence points to a further recovery in economic activity having taken place in October. New car registrations surged 22% m/m last month and were …
Household incomes should rebound further Wage growth improved in September and should recover further over the coming months as overtime hours continue to rebound – besides a hit from a fall in end-of-year bonus payments. Meanwhile, the rise in “core” …
With the markets still relatively calm amid the ongoing election uncertainty, the Fed took the predictable decision to stand pat today. However, if the election results in a divided government – as now looks likely – that will reduce the odds of any …
5th November 2020
Euro-zone economic activity looks set to slow sharply again in November and to remain weak for a while beyond that. The number of patients in intensive care units is rising rapidly (see Chart 1.) and we suspect that the new restrictions will bring the …
This UK Economics Update contains full details of our new economic and financial market forecasts if there is a Brexit deal and for two different kinds of no deal Brexit. It also highlights that business investment is going to remain in the doldrums for …
As expected, the Norges Bank did not set off any fireworks this morning, and the decision to leave its key interest rate on hold at zero was never in doubt. The economy is likely to prove comparatively resilient during the second wave, but we still expect …
Back in June, we predicted that the Bank of England would expand quantitative easing (QE) by a further £350bn over the following 18 months (consensus £100bn). (See here .) By announcing an extra £150bn of QE today, the Bank has already done £250bn of …
Economic data have been mixed but generally support further easing RBNZ to launch lending programme to lower funding costs RBNZ to cut OCR to -0.25% in April and hold rates steady thereafter At its meeting on 11 th November, the Bank will likely unveil a …
Bank Negara Malaysia (BNM) left its main policy rate on hold at 1.75% today, but with a new set of restrictions to combat a second outbreak of the virus dragging on the economy, we doubt this marks the end of the central bank’s easing cycle. Of the 21 …
3rd November 2020
Inflation begins steady rise, adding to pressure on CBRT Turkey’s headline inflation rate edged up to 11.9% y/y in October and is likely to rise further over the coming months. This, combined with the recent sharp falls in the lira, means that the central …
The RBA didn’t disappoint when it cut interest rates and launched quantitative easing today. And even though it turned more optimistic about the economic outlook, we suspect it will expand its government bond purchases beyond the planned six months . The …
Fin Min’s growth forecasts appear unfeasible Comments this week from Finance Minister Nirmala Sitharaman that GDP growth would be “near zero” this fiscal year paint an unrealistically optimistic picture of the economic outlook. For a start, India’s …
30th October 2020
