Filtered by Topic: Monetary Policy Use setting Monetary Policy
While Ms Lagarde’s assessment of the outlook in today’s press conference was slightly less gloomy than Mr Draghi’s in October, this does not change our view that the ECB will loosen policy again during 2020. After all, policy would need to be eased even …
12th December 2019
The 200bp interest rate cut (to 12.0%) by the Turkish central bank as well as other recent tweaks to boost lending suggest that policymakers will try to meet President Erdogan’s demand to bring rates down to single digits and bolster growth. As a result, …
Today’s decision by the Swiss National Bank to leave its policy stance unchanged came as a surprise to nobody. Five years on since the Bank first cut interest rates into negative territory, there is every chance that it will keep them below zero over the …
The statement accompanying the Brazilian central bank’s meeting last night did leave the door open for one more interest rate cut, but on balance we think the easing cycle is at an end. By the same token, the interest rate hikes that are now being priced …
The Philippines (BSP) left its main policy rate at 4.00% today, but with growth likely to disappoint and inflation set to remain below the mid-point of the BSP’s target, we expect more easing next year. Today’s decision to leave the main policy rate on …
The Fed called time on its easing cycle today by leaving the fed funds target range unchanged at 1.50%-1.75% and striking a more upbeat tone in the policy statement. With economic growth stabilising and inflation set to remain subdued, we expect interest …
11th December 2019
Optimism about an imminent resolution to the trade war between the US and China and subsiding protests in Latin America have supported EM currencies over the past month. But, barring a few exceptions, we think that they will weaken against the US dollar …
After cutting rates by 150bps since April, the Central Bank of Iceland kept its deposit rate at its current record low of 3.00% today. We suspect that in the absence of a sharp and sustained fall in inflation expectations, the Bank will keep rates …
We think that GDP growth in both Australia and New Zealand will fall short of expectations, forcing both the RBNZ and the RBA to cut interest rates more sharply than most expect. The consensus is that both the Kiwi and the Aussie dollar will strengthen …
10th December 2019
There is little evidence that negative interest rates have succeeded in boosting economic growth or inflation expectations. But equally, they do not seem to have done much harm either – many of the criticisms levelled at them have been wide of the mark. …
9th December 2019
The continued weakness of core inflation that we expect in November’s consumer price data will probably give the MPC scope to ease policy again in the near term. But the big picture is that the inflation backdrop is set to turn more difficult over the …
RBI waiting for clarity on fiscal loosening The Reserve Bank’s unexpected decision to keep interest rates on hold yesterday was primarily driven by its concerns over the spike in headline inflation above the 4.0% target in October. (Our response to the …
6th December 2019
Household spending remains the Achilles heel The RBA kept interest rates unchanged at the meeting that occurred one day before the release of the Q3 GDP data and reiterated that the economy had reached a “gentle turning point”. At first glance, the …
The statement accompanying the Chilean central bank’s decision to hold interest rates at 1.75% yesterday signalled that policy rates will be left unchanged over Q1, but we still think it’s most likely that rates will be lowered over the next 12 months. We …
5th December 2019
The Reserve Bank unexpectedly left interest rates unchanged for the first time this year, following five successive rate cuts. Nevertheless, the MPC has left the door open for further easing in the near term and a rate cut in February now looks likely. In …
The Reserve Bank of New Zealand’s decision to leave mortgage lending restrictions unchanged and tighten capital requirements means that lending and house prices are unlikely to surge in 2020. As such, concerns about financial stability won’t prevent the …
Looser financial conditions & improving economic data mean no further cuts needed Fed will not want to repeat the mistake of raising rates prematurely With inflation set to remain low, Fed is now on prolonged hold The Fed’s less dovish language, against a …
4th December 2019
Inflation jump won’t prevent rate cuts, for now The rise in Turkish inflation in November is likely to mark the start of a steady upward trend over the next couple of years. This won’t prevent the central bank from cutting interest rates further at the …
3rd December 2019
The RBA turned more optimistic when it kept rates unchanged today but we think that further stimulus will be required before long. We reiterate our long-held view that the Bank will cut rates to 0.25% next year and will launch quantitative easing in the …
The IMF has suggested that the Bank of Japan could target shorter bond yields in order to steepen the yield curve and support the profitability of financial institutions. But the benefits to insurance firms and pension funds wouldn’t compensate for the …
House price growth to ease in 2020 Our sales to new listings ratio suggests that house price growth will moderate before long . Even so given the sharp increase in recent months, we now expect prices to rise by around 7% in 2020 and 5% in 2021. The 2.0% …
2nd December 2019
We estimate that regional GDP growth picked up to about 0.5% q/q in Q3, which would be the fastest pace in 18 months. But that probably marks the peak in the recovery. Argentina and Chile are set to contract in Q4, Mexico’s economy is showing few signs of …
29th November 2019
As things currently stand, the US is due to extend its punitive tariffs to cover nearly all goods imported from China in two weeks’ time. But the Trump administration has appeared keen to avoid that happening almost since the president announced the …
Turkey: interventionist policy stores up problems Interventionalist policymaking in Turkey has come back on the radar this week. This is likely to lead to a misallocation of resources and adds to the reasons to think that the country’s next crisis could …
VAT cut a risk to Sri Lanka’s fiscal health In his first major policy move since being elected Sri Lankan president earlier this month, Gotabaya Rajapaksa on Wednesday cut the rate of VAT from 15% to 8% (the cut will take effect on 1 st December). On the …
Nigeria: CBN holds rate, toes government line The governor of the Central Bank of Nigeria (CBN) used this week’s MPC statement to heartily defend the government’s latest round of protectionist policies, which will add to the impression that the bank is …
Higher bar for QE will be reached before long In a much-anticipated speech this week Reserve Bank of Australia Governor Lowe laid out the Bank’s thinking around unconventional monetary policy. For the most part, the speech confirmed our existing views. …
The Bank of Korea (BoK) left rates on hold today but kept the door open to further easing. With growth set to stay subdued and inflation likely to remain weak, we have pencilled in one more 25bp rate cut for early 2020. Today’s decision to leave the main …
Headline inflation has eased across Central and Eastern Europe (CEE) over the past few months, but that was entirely due to falling food and fuel inflation; core price pressures have continued to build. Indeed, core inflation hit multi-year highs in …
28th November 2019
Figures released over the past month painted a very downbeat picture of economic conditions in Africa’s two largest economies. Growth in Nigeria did, admittedly, pick up a touch in Q3. But activity remained very weak by past standards, with GDP rising by …
The recent strong performance of Central and Eastern Europe (CEE) will probably continue for a few more years as fiscal and monetary policy remain loose. But this is likely to cause some of the pressures and imbalances that have started to build up during …
Further slowdown in growth in Q3 would seal the deal for another rate cut MPC will look past above-target inflation resulting from supply disruptions But in contrast with consensus, we expect modest hikes towards the end of 2020 We agree with financial …
Economic data have been weak but RBA will wait for Q3 GDP data before cutting Subdued growth and inflation will force the RBA to cut rates to the 0.25% floor in 2020 Governor Lowe set a higher bar for QE but we expect that bar to be reached next year The …
27th November 2019
US Q3 GDP growth will probably be confirmed at 1.9% q/q annualised (13.30 GMT) US durable goods and income & spending reports for October are due … … and are likely to reiterate that underlying domestic demand growth has continued to slow Key Market …
26th November 2019
Governor keeps faith with unconventional policy Nigerian policymakers left their key rate unchanged today, preferring to use unconventional policy rather than rate cuts to boost the economy. We suspect that most of these measures will fail, prompting a …
Some signs that economic weakness is spreading to service sector But Bank will be increasingly concerned by resurgent housing market Unchanged policy now the most likely outcome for the next few quarters The labour market is starting to show cracks and …
Looser monetary and fiscal policy should help to drive a modest recovery in Thailand over the coming quarters, and we are revising our GDP growth forecast for next year up slightly. Figures released earlier this month showed Thailand grew by just 2.4% y/y …
Preparations for the public listing of Saudi state oil company, Aramco, have stepped up a gear this month but the signs are that it is unlikely to be the blockbuster sale that the Kingdom once hoped for. When plans for the listing were first mooted in …
25th November 2019
Nigeria: New data underlines struggling economy Economic growth in Nigeria remained very weak in Q3 , with the economy again failing to escape the slow-growth trajectory on which it has been stuck since 2017. (See Chart 1.) Chart 1: Nigeria GDP (% y/y) …
22nd November 2019
Government stimulus underwhelming The government appear to have had a change of heart with PM Scott Morrison this week promising additional stimulus in the Mid-Year Economic and Fiscal Outlook (MYEFO), which is usually released in mid-December. The …
Q3 GDP data due next week are likely to show a further slowdown in India’s economy, with the industrial sector the main source of weakness. However, some comfort can be taken from the fact that the services sector – which accounts for over 50% of the …
Calls for much looser fiscal policy in the euro-zone are falling on deaf ears. While the Netherlands and Germany have set out fiscal stimuli for 2020, each has past form for running tighter policy than planned. And any loosening in these countries is …
21st November 2019
South African policymakers left their key rate on hold at 6.50% today, and we expect that it will remain on hold going into 2020. But we do admit that the risk of a cut in the middle of next year has increased. South African policymakers’ decision to …
Bank Indonesia (BI) today left interest rates unchanged, but the cut to the reserve requirement ratio (RRR) and dovish comments from Governor Perry Warjiyo suggest that further interest rate cuts are likely. The decision by Indonesia’s central bank to …
The decline in bond yields in Australia and New Zealand throughout 2019 has paused in recent months following optimism about a potential trade deal between the US and China and hawkish language from the Fed. But we think that bond yields in both countries …
Loose financial conditions make a recession unlikely The risk of a recession occurring within the next year appears to have faded – with the yield curve un-inverting, financial conditions loosening and the incoming economic data still comfortably above …
20th November 2019
The latest Loan Prime Rate (LPR) reductions confirm that banks are lowering lending rates on new loans in response to the recent cuts to the PBOC’s lending facilities. And policymakers’ willingness to embrace lower rates on long-term loans hints at a …
In our view, claims that the ECB’s negative deposit rate is weighing heavily on bank lending in the euro-zone are wide of the mark. In fact, we suspect that policymakers will cut the deposit rate even further below zero next year without having major …
19th November 2019
For the first time this easing cycle, the People’s Bank has cut the rate it charges banks for short-run liquidity. We expect further cuts in the coming months, which will open the door to lower interbank rates and make banks less reluctant to cut lending …
18th November 2019
Ongoing protests in Chile, Hong Kong and Lebanon will weigh on their economies and financial markets, but to different degrees. While the tightening of financial conditions and strikes in Chile will hit activity in Q4, the strength of the government’s …
15th November 2019
