Filtered by Topic: Monetary Policy Use setting Monetary Policy
The threat of a coronavirus outbreak in the US is a significant downside risk to the economic outlook. The Fed can do nothing to halt the spread of the virus, but a further tightening of financial conditions or a slump in business and consumer confidence …
28th February 2020
The 11% fall in UK equity prices this week shows that the situation is changing rapidly and that the financial markets appear to be pricing in the coronavirus triggering a marked weakening in the global and UK economies. At the same time, the markets have …
The possibility of the Olympics and/or the European Football Championships being cancelled as a result of the coronavirus poses downside risks to headline Swiss GDP growth this year. Nonetheless, this will not trouble the SNB, whose focus will remain on …
27th February 2020
The Bank of Korea (BoK) unexpectedly left its main policy rate on hold at 1.25% today. But with the economic cost of the coronavirus mounting, policy support will have to be ramped up soon – we are forecasting a cut in April. Today’s decision was the …
Fourth-quarter GDP growth probably in line with Bank’s forecast But possible coronavirus pandemic a key downside risk to the outlook Bank to issue a very dovish statement while keeping policy unchanged The potential for the coronavirus to develop into a …
26th February 2020
We estimate GDP growth in Australia continued to muddle along in Q4, edging up from 0.4% q/q in Q3 to 0.5% q/q. In New Zealand, we think a stronger contribution from net trade was offset by a decline in inventories and softer consumption growth, causing …
The slightly more hawkish tone of the Hungarian central bank’s post-meeting statement supports our view that the central bank will deliver a 10bp hike in the overnight deposit rate next month. However, the MNB is a dovish institution and, with inflation …
25th February 2020
Bank remains concerned that cutting rates further will undermine financial stability But coronavirus outbreak set to dampen activity and unemployment will climb further We’ve pencilled in a 25bp cut in April and July The Reserve Bank of Australia remains …
Hungary’s central bank will probably use Tuesday’s meeting to flag a shift towards tightening and we expect a small hike in the overnight deposit rate in March. But this is likely to be a symbolic gesture more than anything else. Monetary policy will stay …
24th February 2020
Temporary disruption from the outbreak of the coronavirus should have limited macroeconomic impact on Indian industry. After all, India has a negligible supply-chain exposure to China (see Chart 1), where factory shutdowns are now having knock-on effects …
More countries considering fiscal response to virus Bank Indonesia this week became the latest central bank in the region to cut interest rates in response to the coronavirus outbreak (see here ), and we expect further easing over the coming week with the …
21st February 2020
The Central Bank of Egypt’s (CBE) decision to keep interest rates unchanged last night for a second consecutive meeting suggests that policymakers are more concerned by the recent uptick in inflation than we had originally thought. As a result, we’ve …
Activity data disappoint across the board We have long argued that Japan’s economy will shrink this year and the recent string of bad news has only made that outcome more likely. But we still don’t expect the Bank of Japan to respond with more policy …
Unemployment rate jumps to 5.3% The unemployment rate jumped in January from 5.1% at the end of 2019 to 5.3%. And that’s despite the ABS excluding the areas of Australia that were worst hit by the bushfires. It’s possible that the number of unemployed …
Low expectations for Trump visit Progress on trade negotiations (as well as the opening of the world’s largest cricket stadium in Ahmedabad) will be high on the agenda during US President Donald Trump’s visit to India next week. There are suggestions that …
While we agree with investors’ general view that monetary conditions will be accommodative in DMs this year, there’s a group of countries – including the US – where the markets look too dovish. At the same time, we think too little easing has been …
20th February 2020
The account of the ECB’s January meeting suggests that the ECB was becoming a little more positive on the economic outlook. But weak data and the spread of the coronavirus since then will have surely added to the downside risks. We are sticking to our …
With the number of confirmed coronavirus cases in Korea jumping sharply over the past few days, the Bank of Korea is almost certain to cut interest rates at its meeting next week. The number of confirmed cases of the coronavirus in Korea doubled on …
Bank Indonesia (BI) today cut its main policy rate by 25bp to 4.75%, but we doubt this will be the start of a prolonged easing cycle given the country’s relatively limited exposure to the slowdown in China and the central bank’s concern over the rupiah. …
Commercial banks cut the Loan Prime Rate (LPR) today in response to moves by the People's Bank earlier in the month to lower their funding costs. While more easing is likely in the coming weeks, this alone won’t change the fortunes of the millions of …
In contrast to market expectations, we are still sceptical that the Fed will cut interest rates this year, but we agree with Treasury investors that rates are more likely to fall than rise over the next few years. Over the past six weeks, futures markets …
19th February 2020
The Turkish central bank (CBRT) shrugged off rising inflation and lowered interest rates by another 50bp today, but the accompanying statement was a little more cautious and we think that the easing cycle is nearing an end. With inflation set to surprise …
The proposed change to the mortgage stress tests could put even more upward pressure on house prices over the next 12 months, by increasing the amount that buyers can borrow by more than 3%. With the Bank of Canada already concerned about the impact that …
The profitability of Japan’s regional banks is likely to deteriorate further over the next few years. However, there’s little evidence of asset price bubbles and corporate balance sheets have continued to strengthen. In our view, even a shock akin to the …
While we suspect that the SNB has intervened to slow the rise of the franc in recent weeks, it has not prevented it from reaching a multi-year high against the euro. At the margin, an increased tolerance for a stronger currency argues against the Bank …
18th February 2020
The People’s Bank (PBOC) has taken yet another step to help banks and borrowers weather the economic disruption from the coronavirus outbreak. But more easing will probably be needed. The PBOC has just cut the one-year rate at which it lends to banks via …
17th February 2020
Japan’s economy to contract in 2020 The sharp drop in output after October’s sales tax hike supports our view that Japan’s economy will shrink this year. But with capacity shortages still tight and underlying inflation holding up, we still expect the Bank …
Judy Shelton’s rocky Senate nomination hearing this week means that President Donald Trump’s efforts to reshape the Fed from the outside could yet fail at the first hurdle. But the dovish Christopher Waller should secure Senate approval and, with the …
14th February 2020
Support for the current policy stance Speeches this week by members of the ECB Executive Board, Philip Lane and Isabel Schnabel, were clearly part of a concerted effort to rebuff criticism of the ECB’s ultra-loose monetary policy. Ms Schnabel’s talk was …
Central bank action so far focused on crisis management in virus-hit countries. Likely fallout reinforces our existing dovish views on several EMs. But the temporary shock does not yet warrant a response from advanced economies. With the coronavirus …
Travel ban extended until February 22 nd The ban on travel from China to Australia was set to end this weekend. But given the continued growth in infections of the coronavirus in China it has now been extended to 22 nd February. That’s not particularly …
Underlying price pressures are building The RBI doesn’t put much weight on the wholesale price measure of inflation, but the pick-up in core WPI inflation supports our view that the room for further monetary easing has diminished. Headline WPI inflation …
Bank of Japan will prevent a public debt crisis In its Article IV report, the IMF this week called Japan’s public debt trajectory “unsustainable” and proposed a further increase in the sales tax from 10% to 15% to reduce fiscal risks. Arguing that the …
We think that a recent string of on-target inflation data and a less accommodating external environment will delay further interest rate cuts in Ghana. But monetary loosening will probably resume in 2021. Data released this week showed that headline …
13th February 2020
Given the rising economic toll from the coronavirus, worries about rising property prices and high levels of household debt are unlikely to stop the Bank of Korea (BoK) from cutting interest rates at the end of the month. With the economic costs of the …
12th February 2020
This morning’s decision by the Riksbank to leave its repo rate on hold at zero percent was never in doubt. While policymakers appear happy to stay in wait-and-see mode for the time being, we suspect that they will come under pressure to loosen policy …
The Reserve Bank of New Zealand sounded confident when it left rates on hold today and we think the improvement in underlying economic conditions means the RBNZ’s easing cycle is now over. The Bank’s decision to keep rates on hold was correctly …
The economic disruption from the coronavirus outbreak will lead to further rate cuts in much of Emerging Asia. And in those countries where currencies have fallen sharply, the moves have not been big enough to worry policymakers. As thing stand then, this …
11th February 2020
The RBA may yet cut rates to 0.25% in response to the drag on economic activity from the bushfires and the coronavirus. But with domestic demand rebounding as the housing slump has turned to boom, the urgency to support the economy has diminished. The RBA …
10th February 2020
The Russian central bank governor’s post-meeting press conference reinforced the message that, following today’s 25bp interest rate cut to 6.00%, further easing lies in store. We maintain our view that there will be another 50bp of rate cuts in the …
7th February 2020
Headline consumer price inflation is likely to have edged up in January, in large part due to a continued increase in food inflation. Further ahead, food inflation is likely to ease, but we expect core inflation to rise over the coming quarters as the …
Growth in Q4 set to remain subdued The decline in retail sales in December is consistent with our view that the surge in sales in November was driven by Black Friday discounts. After adjusting for price effects, real retail sales rose by 0.5% in Q4, the …
Finance ministry steps up These have been a busy few days for India’s policymakers. The finance ministry on Saturday confirmed in the Union Budget that it had changed tack and was aiming for much looser fiscal policy than it had been. (See here .) That …
The Brazilian government’s plans to enshrine full central bank independence in law would help to both keep longer-term inflation expectations low and bring down real interest rates. This adds to the reasons to think that local currency bond yields will …
6th February 2020
The statement and press conference following today’s Czech MPC meeting confirmed that the surprise decision to hike interest rates by 25bp, to 2.25%, will be a one-off. Policymakers will probably maintain a hawkish tone over the next few months but, as …
While several central banks are undertaking reviews of their monetary policy frameworks this year, the result is likely to be only small tweaks to the existing inflation-targeting frameworks. But this doesn’t rule out a potential widening of central …
The Philippines (BSP) cut its main policy rate by 25bp to 3.75% today and with growth likely to disappoint and inflation set to remain well within the BSP’s target, we expect more easing later this year. Today’s decision to cut was correctly predicted by …
The statement accompanying the Brazilian central bank’s meeting last night gave a clear steer that the easing cycle is now over. With growth likely to stay weak and inflation low, we expect that the Selic rate will be left unchanged for much longer than …
While keeping rates on hold today, the RBI has kept the door open for further policy loosening over the coming months. But we doubt this will materialise, and expect the central bank to shift to tightening mode before the end of the year . All six member …
Policymakers have loosened both monetary and fiscal policy in an effort to soften the economic blow from the coronavirus. Further easing is likely in the coming weeks. But if the virus peaks soon then activity may rebound quickly, with stimulus now coming …
