Filtered by Topic: Monetary Policy Use setting Monetary Policy
We expect economic growth to slow over the coming quarters, but the fading downside risks from the global backdrop and trade policy, together with new, less dovish language from the Fed means we are no longer forecasting a final 25bp rate cut. We now …
15th November 2019
After loosening policy again yesterday, Mexican policymakers will probably cut rates by another 75bp over the coming six months. Given that the US loosening cycle now seems to be at an end, market expectations – which point to 150bp of cuts – seem to have …
Spare capacity in the labour market to rise We wouldn’t read too much into October’s largest fall in employment in three years. The data are volatile and a renewed rise in November is likely. Even so, the labour market is clearly deteriorating. The …
The 100bp interest rate cut delivered by Egypt’s central bank today is likely to be followed by further easing in the coming months. While we expect inflation to edge up in the near term, it will remain below the central bank’s target. As such, we …
14th November 2019
While policy loosening has caused a marked easing of financial conditions around the world, lending growth is still quite subdued. We doubt that this will change, particularly since demand for loans is now weakening again. This is another reason to expect …
Lebanon: bailout wouldn’t be a silver bullet The situation in Lebanon is going from bad to worse and the chances of a combined debt, currency and banking crisis are rising. President Aoun seems to be seeking a bailout package but this would only pave the …
It was no surprise that the central bank in the Philippines (BSP) left its main policy rate at 4.00% today, and it is unlikely to adjust rates at its December meeting either. But with growth likely to disappoint and inflation set to remain subdued, we …
Headline WPI inflation drops to 40-month low Wholesale price inflation is not the preferred measure of inflation for India’s policymakers, but the fact that the headline rate dropped to a 40-month low in October won’t go unnoticed. Another rate cut in …
Unemployment rate to rise further The sharp fall in employment will be causing concern for the RBA and we think the unemployment rate has further to rise in the coming months. The sharp 19,000 fall in employment in October was the largest decline in three …
EM equities have continued to rise over the past month, seemingly driven by optimism about an imminent US/China trade deal and some improvement in the economic data. But we are sceptical that the rally will last, and forecast that EM equities will tread …
13th November 2019
The Reserve Bank of New Zealand sounded cautious when it left rates on hold today and we believe that a deterioration in the economy will force the Bank to 0.5% by early next year. We were one of the five forecasters polled by Bloomberg who correctly …
Wage growth will slow to 2.0% soon The slowdown in wage growth in the third quarter doesn’t come as a complete surprise to the RBA and we still expect the Bank to wait until February before cutting rates again. The 0.5% quarterly rise in the wage price …
While the Fed seems to have pressed pause, we wouldn’t rule out a December cut. Policy will be loosened further in the euro-zone, Australia and several EMs. But the impact will be modest, particularly in advanced economies. Following a wholesale shift …
11th November 2019
The People’s Bank is powerless to stop consumer price inflation jumping above its target without undermining its broader mandate to support growth and employment. Given this trade-off we expect the central bank to prioritise the latter and ease monetary …
Philippines: more easing in 2020 Governor Diokno was pretty emphatic earlier this week when he said that the central bank (BSP) had “absolutely” “done more than enough” this year. In response we are taking out the interest rate cut we originally had …
8th November 2019
The statement accompanying yesterday’s decision by Peru’s central bank to cut interest rates made it clear that this did not mark the beginning of a prolonged easing cycle. With inflation and economic activity likely to gradually rise, we expect the …
South Africa: Inflation, growth both weak Figures out this week suggested that South Africa’s economy faltered in Q3 and that both inflation growth will be soft in the last quarter of the year. Manufacturing production figures were even worse than most …
GDP growth to remain subdued This week we got a clear indication there has not been a strong rebound in economic growth in the third quarter as policymakers were hoping. Admittedly, before the release of the September trade data we had pencilled in a 0.4 …
By signalling that inflation will remain below the lower end of its 2-3% target band for the foreseeable future, the RBA signalled that further easing is on the cards. Our view remains that the Bank will cut rates to 0.25% and launch quantitative easing …
The statement following today’s MPC meeting confirmed that the Czech central bank is still concerned about above-target inflation and the need to hike interest rates. But with the economy likely to slow sharply next year and inflationary pressures to …
7th November 2019
The Monetary Policy Committee’s (MPC) dovish shift at its November meeting leaves the Committee unsure in which direction the next change in interest rates will be. As well as softening its language on the chances of rate hikes if there were a Brexit …
Against a backdrop of stubbornly-low inflation and rising unemployment, we now think that the RBA will launch quantitative easing (QE) in 2020. Here, we consider the implications for Australia’s assets. Assessments of the impact of QE elsewhere are not …
Headline consumer price inflation is likely to have risen above the RBI’s 4.0% target for the first time in 15 months in October due to another jump in food inflation. This won’t dissuade the central bank from loosening policy further in the near term. …
The Bank of Thailand (BoT) cut its key policy rate to 1.25% today, and with economic growth set to remain weak and concerns about the strength of the baht mounting, we think the central bank will loosen policy again next year. Today’s decision was …
6th November 2019
Economic data has been in line with RBNZ forecasts… …so we think the Bank will hold for now. But sustained economic weakness means rates will be cut to 0.5% next year. The economic data have been better than the Bank anticipated in their last set of …
The Fed’s latest Senior Loan Officer survey points to a continued drop off in demand for commercial and industrial loans, consistent with business equipment investment contracting again in the fourth quarter. And while looser policy has prompted a surge …
5th November 2019
Bank Negara Malaysia (BNM) left its policy rate unchanged at 3.00% today, but with growth set to slow sharply over the next few quarters and inflation likely to remain subdued, we think the central bank will ease policy again early next year. 16 of the 25 …
The RBA reiterated its view that the economy had reached a gentle turning point when it left rates unchanged today. However, we think that the Bank’s forecasts for GDP growth and the labour market remain too optimistic and we expect the Bank to cut rates …
After keeping interbank rates broadly stable for most of this year, the People’s Bank (PBOC) is starting to take more direct steps to push down borrowing costs. We think this could mark the beginning of a series of PBOC rate cuts. Today, the PBOC cut the …
Our central scenario is that cutting interest rates to 0.5% will be enough to weather the economic slowdown in 2020. And if required, fiscal policy and macroprudential tools could be used to help stimulate demand. However, if the global economy slows more …
Bank brings output gap to the fore The Bank altered its forward guidance when it left rates unchanged this week. It had previously pledged to maintain the current extremely low levels of short- and long-term interest at least until spring 2020. Now it …
1st November 2019
Goods inflation climbs to 10-year high The inflation data released this week were stronger than we had anticipated. Core market services inflation duly weakened from 1.3% to 1.2% as the looser labour market probably restrained wage growth. But core market …
Political risk grabbed the headlines this month, with protestors taking to the streets across the Andes and Argentina electing a new Peronist president. Demonstrations in Ecuador and Chile will weigh on growth in Q4 and have already forced policymakers to …
31st October 2019
The spotlight has shifted back onto weak sovereign debt positions in Frontier Markets this month after the election of a left-wing president in Argentina and growing political instability in Lebanon. As we see it, debt write-downs are the only way out for …
The economy may be on a path that would eventually prompt the MPC to cut rates… …but the chance of a Brexit deal in January will keep the toolbox in the closet for now Unless the headwinds of weak global growth and Brexit uncertainty fade, the next move …
Policymakers in South Africa and Angola admitted the severity of their countries’ economic problems this month, while their Nigerian peers moved further down the road to autarky. South Africa’s finance minister revised his government’s deficit and debt …
The statement accompanying last night’s Copom meeting gave a clear signal that there will be just one more 50bp interest rate cut in the current cycle (to 4.50%), which should temper expectations in the market for more aggressive rate cuts in the next few …
The Bank of Japan left policy rates unchanged today and reiterated its readiness to ease policy if required. However, the background material to its “re-examination of economic and price developments“ was fairly upbeat. And by anticipating a further …
In its latest World Economic Outlook, the IMF predicted Australia’s economy to expand by 1.7% in 2019 and by 2.3% in 2020. While the 2019 forecast is consistent with our own expectations, their forecasts assume a larger bounce in GDP growth next year than …
The Fed cut interest rates for a third time as expected today, to between 1.5% and 1.75%, but changes in the statement suggest it is trying to dissuade the markets from pricing in any further loosening. Nevertheless, we still anticipate that a further …
30th October 2019
While the Bank of Canada kept policy unchanged today, it cut its growth forecasts and delivered a more dovish policy statement. This supports our view that the Bank will cut its policy rate before long. Alongside its decision to keep the policy rate …
Campaigning ahead of Sri Lanka’s presidential election, to be held on 16 th November, is well underway. President Maithripala Sirisena has already confirmed he will not stand again and will step down when his term ends on 9 th January. Altogether 35 …
The corporate earnings season currently underway in China has been disappointing. Admittedly, the Q3 results published so far point to a slight improvement in year-on-year growth in earnings per share of domestically-listed firms. But the recovery was …
Despite rebound in house prices, GDP growth set to remain subdued Rising unemployment will push underlying inflation further below 2% We now expect the Bank to cut rates to 0.25% and launch quantitative easing next year Falling unemployment and steady …
As part of its forthcoming review under Christine Lagarde, the ECB is likely to change its inflation target and make its voting system more transparent. Further ahead, it will have bigger issues to resolve, including deciding which tools it could use in a …
29th October 2019
The focus on political risk and Lebanon’s growing debt problem have meant that the sharp slowdown in growth across large parts of the region has gone unnoticed. The latest figures suggest that the economies of Saudi Arabia, Qatar and Lebanon were all …
The Russian central bank’s decision to opt for a 50bp rate cut today (to 6.50%) and the dovish tone of the accompanying statement support our view that the easing cycle has further to run. As things stand, we expect the one-week repo rate to be lowered to …
25th October 2019
Australia could have its cake and eat it too The new secretary to the Australian Treasury, Steven Kennedy, has pushed the RBA’s hopes for fiscal stimulus slightly further out of reach by endorsing the government’s current fiscal policy settings. He said …
Mixed bag of data not weak enough for a cut The upcoming meeting by the Bank of Japan is an important one as the Bank has indicated that “it is becoming necessary to pay closer attention to the possibility that the momentum toward achieving the price …
Bank to remain on the side-lines next week But latest surveys point to below-potential GDP growth and lower inflation Markets underestimating the chance of a December rate cut There is little reason to expect the Bank to alter its policy rate next week …
24th October 2019
