Filtered by Topic: Monetary Policy Use setting Monetary Policy
Argentina elections: your primer on the primaries Argentine markets are likely to take their cue from the outcome of Sunday’s primary election when they open next week, but the vote doesn’t always foreshadow the presidential election outcome. Argentina’s …
9th August 2019
No end in sight to the downturn in Sweden The latest data releases for June from Sweden show that the flash estimate of a contraction in the economy in Q2 was no rogue reading. We learned on Tuesday morning that private sector production fell for the …
The statement accompanying the decision by Peru’s central bank to cut interest rates left the door open for further easing. And with the incoming growth and inflation data still weak, there is a window for further rate reductions. We’ve pencilled in 50bp …
Norges Bank to raise rates in September, but this will be the end of the tightening cycle. It is now a question of when, not if, the SNB cuts rates further into negative territory. Expected dovish shift by the Riksbank will ensure that the krona stays the …
8th August 2019
Today’s 25bp cut from the central bank in the Philippines (BSP) came as no surprise, and with inflation set to fall back further and growth only likely to stage a moderate recovery over the coming months, we expect another 25bp cut before the year is …
Escalation of crisis would have limited impact The Indian government this week revoked a long-standing constitutional provision that granted special autonomy to the state of Jammu & Kashmir. The measures will split the state into two separate “union …
RBNZ cuts while RBA holds In Australia, the RBA kept rates on hold at 1.0% this week, as widely expected. But the Bank acknowledged that the uncertainty generated by the trade war had increased and noted that it would “ease monetary policy further if …
Headline inflation is likely to have remained below the RBI’s 4.0% target in July and will be used by the central bank as vindication of its decision to reduce interest rates for the fourth consecutive meeting yesterday. But with policy now being loosened …
Yen climbs to 17-month high against dollar Two months ago we predicted that the US would eventually impose tariffs on all imports from China. (See here .) Indeed, President Trump announced last week that he will impose an additional 10% on the remainder …
The Reserve Bank delivered a (slightly) larger-than-expected rate cut today and has left the door open for further easing. If soft surveys are correct in suggesting that there is limited slack in the economy, further policy loosening could lead to higher …
7th August 2019
The Reserve Bank of New Zealand cut rates dramatically to 1.0% at today’s monetary policy meeting. But given our more pessimistic forecasts of the New Zealand economy, we don’t think that the Bank is done easing and now expect it will cut rates again in …
While Japan’s government will almost certainly refrain from direct intervention on the foreign exchange markets to stem the recent appreciation of the yen, we can’t rule out that the government’s pension fund will buy more foreign assets. The key point …
6th August 2019
The RBA adopted an easing bias when it left interest rates unchanged today. With the labour market set to loosen further, we expect the Bank to slash rates to 0.5% by early-2020. The RBA’s decision to leave interest rates unchanged at 1.0% was correctly …
Strength in the labour market won’t last long The sharp fall in the unemployment rate is unlikely to prevent the RBNZ from cutting rates tomorrow given that labour market data are volatile and often prone to revision. What’s more, we expect the …
Investment growth collapsed to a near four-year low in Q1. While a spectacular rebound will remain elusive, investment should recover gradually over the coming quarters as election-related uncertainty clears and funding costs drop following the RBI’s cuts …
5th August 2019
Despite cutting rates by 25bp this week, the Fed gave no indication that it is lining up another cut soon or that this will mark the start of the extended easing cycle investors are hoping for. But with President Donald Trump’s subsequent move to …
2nd August 2019
Swedish economy to flirt with recession… The 0.1% q/q fall in Swedish GDP in Q2 is unlikely to be the final word on the matter given that the data are almost certain to be revised in September. (See here .) Nonetheless, the release adds to signs that the …
MPC living in an alternative reality In our latest UK Economic Outlook , “ An economic multiverse ” (16 th July) , we set out the different paths politics could send the economy down. The MPC took a different approach this week, forecasting an alternative …
Hopes of strong rebound dashed Data released this week provide further evidence that the economy is performing below capacity. Admittedly, house prices appear to be bottoming out. Average house prices in the eight capital cities edged up in July. What’s …
Fall in Swiss inflation adds to pressure on the SNB The unexpected fall in Swiss inflation in July, and signs of a deepening downturn in the industrial sector, will only strengthen the resolve of the SNB to resist the rising franc. There is a growing …
Tariff man strikes again President Trump re-escalated trade tensions overnight by announcing a 10% duty, effective 1 st September, on the $300bn worth of US imports from China yet to be subject to tariffs. We estimate that this will directly knock of …
Fiscal deficit target likely to be exceeded India’s fiscal deficit in Q1 of FY19/20 (April to June) provides little assurance about the government’s ability to meet the 3.3% target that it set in the union budget last month. Data released this week show …
The manufacturing PMIs for July suggests that growth in EM industry remained soft at the start of Q3, with activity in Emerging Europe weakening sharply. The surveys also provide further evidence that price pressures are easing, supporting our view that …
1st August 2019
The communications following today’s meeting suggest that Czech policymakers are trying to temper the market’s view that interest rates will be cut in the coming months. Nonetheless, the Bank’s projections have moved closer to our view that rate cuts will …
Much like the Fed, the Monetary Policy Committee today blamed a lot of its more downbeat assessment of the outlook on the global economy. But unlike the Fed, the MPC still thinks it will probably need to raise interest rates (if there’s a Brexit deal). …
The Brazilian central bank’s larger-than-expected 50bp reduction in the Selic rate last night to 6.00%, and hints of more stimulus, have prompted us to pencil in an additional two 25bp rate cuts this year. We now expect the Selic rate to end this year and …
The New Zealand economic outlook remains sour… …And the RBNZ have signalled they are ready to act Rates will be cut in August and again in November The Reserve Bank’s Monetary Policy Committee sounded almost ready to cut rates at its last meeting in June. …
Two-year manufacturing expansion won’t stop a rate cut India’s manufacturing PMI reading for July is consistent with decent output in the sector at the start of Q3. But this won’t be a barrier to further monetary easing, and we’ve pencilled in another …
The Fed reduced the fed funds rate by 25bp — to between 2.00% and 2.25% — at today’s FOMC meeting, but it was arguably a “hawkish” rather than “dovish” cut, which supports our view that the next reduction won’t arrive until much later this year. According …
31st July 2019
There has been mounting speculation that the Monetary Policy Committee (MPC) will join the global loosening cycle by cutting interest rates. We think it will if there is a no deal Brexit. But if there’s a Brexit deal or many more delays, the UK could buck …
The RBA will pause in August following back to back rate cuts… …But given the weakness in the economy, the RBA will cut rates to 0.5% by early 2020 Lowe may be venturing into the world of forward guidance We expect the Reserve Bank of Australia to take a …
Underlying inflation to fall further below RBA’s target Underlying inflation remained subdued in the second quarter and we think increasing spare capacity in the Australian economy means it will fall further below the RBA’s 2-3% target over the next year. …
Inflation remains below target, while most hawkish MPC member has stepped down As such, another rate cut is likely next week But aggressive policy easing risks stoking inflation over longer term The MPC – now even more firmly under the control of doves …
Another weak survey supports the case for an ECB rate cut in September July’s decline in the euro-zone Economic Sentiment Indicator (ESI) is consistent with our view that, after probably slowing to 0.2% q/q in Q2, GDP growth in the currency union will …
30th July 2019
The Bank of Japan projected a dovish tone today, promising further easing if needed. But unlike other major central banks the BoJ still seems a long way from following that up with action. We think it will refrain from lowering interest rates for the …
The slowdown in domestic economic activity along with global trade tensions is becoming more of a concern for businesses in both countries. That means that sentiment has not been bolstered by the stimulus that has been injected into each economy. Lower …
The Fed is likely to cut interest rates by 25bp at next week’s FOMC meeting. New York Fed President John Williams put the markets into a frenzy last week by arguing in a speech that the Fed should move quickly to ease policy at the first signs of a …
26th July 2019
Looser fiscal policy on the way It came as no surprise that Boris Johnson became the UK’s new Prime Minister this week. ( See here .) And in his first speech in Parliament on Thursday there was no sign of him rowing back on his campaign pledges for the UK …
The relatively dovish statement accompanying the Russian central bank’s decision to cut the policy rate today supports our view that the easing cycle has a lot further to go. We expect an additional 75bp of cuts over the next 9-12 months, whereas the …
MAS to loosen sooner rather than later The recent deterioration in the economic data from Singapore adds weight to our view that monetary policy will be loosened before the central bank’s (MAS) next scheduled meeting in mid-October. The advanced Q2 GDP …
Hawk’s flight from MPC points to more easing Dr Viral Acharya stepped down this week from his position as one of the six members of the RBI’s MPC, one month after handing in his resignation. Dr Acharya was one of the most hawkish members of the MPC. …
Is the inflation target still fit for purpose? Treasurer Josh Frydenburg revealed this week that he is currently reviewing the RBA’s inflation target in preparation to sign the Statement on the Conduct of Monetary Policy, along with Governor Lowe. The …
The apparent confirmation this afternoon that the ECB is inching towards loosening policy lends further support to our view that more rate cuts are on the cards in Denmark and Switzerland too. As we had expected, the ECB left its policy settings unchanged …
25th July 2019
The market reaction to today’s ECB press conference suggests that President Draghi was not as dovish as some investors had hoped for. But the big picture is that it seems clear that policy loosening is coming. We expect the Bank to cut its deposit rate in …
Beware of a misleading hawkish signal Key message is that the MPC has become less hawkish, but not as dovish as the markets Far more interesting than the probable decision by the Monetary Policy Committee (MPC) to leave interest rates at 0.75% on Thursday …
The Turkish central bank’s new governor, Murat Uysal, delivered a sharp 425bp interest rate cut at today’s MPC meeting and pressure from President Erdogan means that further aggressive easing lies in store over the coming months. But this is likely to …
Credit is growing at its strongest rate since the early 1990s. Given that investment growth has started to slow, the spike in private debt seems odd at first glance but much of it appears to have been driven by firms borrowing to seek higher rates of …
If it is introduced (which is far from certain) a tiered deposit rate would reduce the cost of negative interest rates for banks, but it would do so by only a trivial amount. Its main purpose would be to help to build support for, or buy off opposition …
24th July 2019
Fed likely to cut rates by 25bp next week, rather than 50bp Economy not yet weak enough to justify additional easing But we expect slowing growth to prompt further cuts in December and March next year The Fed is likely to cut interest rates by 25bp next …
Nigerian policymakers held their key rate at 13.50% today, and indicated that they will rely on unconventional policy tools to boost lending over the coming quarters. These are, however, unlikely to work, and we think that this will prompt another 50bp …
23rd July 2019
