Filtered by Topic: Monetary Policy Use setting Monetary Policy
We think that today’s 25bp rate cut may be followed by two additional rate cuts before the year is out. Combined with renewed falls in iron ore prices, that suggests that the Australian dollar may weaken again before long. … RBA may have to cut rates to …
4th June 2019
Dovish comments from the South African Reserve Bank this week support our view that an interest rate cut is likely to come as soon as July. Elsewhere, the drop in Kenyan inflation in May backed up the Central Bank of Kenya’s earlier decision to look …
31st May 2019
The Central Bank of Sri Lanka (CBSL) was able to cut rates today as a result of the resilience of the currency, but we doubt this will last. We think that the rupee will come under pressure again this year, limiting the scope for further loosening. … Sri …
Signs that Philippines inflation continued to tumble in May suggest that the easing cycle there has further to run. Meanwhile, easing is also likely in Malaysia, Korea and Singapore in the second half of this year, despite all three countries recently …
The Bank of Korea (BoK) kept its main policy rate on hold today in the face of a clear cut case for looser policy, but we think it will eventually change its stance. With the Bank likely to be looking back at a second quarter of disappointing growth at …
Policymakers are likely to make two significant changes at their meeting next Thursday. They will probably announce that they expect to leave rates at present levels until at least mid-2020, rather than just to the end of this year as per current …
30th May 2019
The MPC is likely to use the current low rate of headline inflation as justification for a third consecutive rate cut at the conclusion of its policy meeting on Thursday 6th June. But with a growing perception that the central bank is allowing its control …
The raft of GDP data released this month showed that regional growth slowed to just 0.3% y/y in Q1 (from 1.0% y/y in Q4), the weakest pace in two years. While it doesn’t look like sluggish growth will prompt an immediate shift towards interest rate cuts, …
29th May 2019
The Bank of Canada today argued that the recent economic slowdown has been largely due to temporary factors, but that growing global trade tensions mean that “the degree of accommodation being provided by the current policy interest rate remains …
Emerging Europe has been one of the few parts of the emerging world where attention has centred on monetary tightening (rather than loosening) in the past month. A rise in core inflation to multi-year highs has prompted talk of rate hikes in Poland, …
With the trade war between the US and China continuing to escalate, a clear winner is starting to emerge: Vietnam. Since around the middle of last year, Vietnam’s exports to the US have shot up by around 50% in seasonally-adjusted terms, as US demand has …
We expect the current housing downturn to end around the turn of the year. We think that house prices may rise by 3% from their trough in 2020 and by 5% in 2021. While rising house prices should boost consumption growth, the drag on dwellings investment …
The Reserve Bank of Australia (RBA) has telegraphed that it will cut interest rates to 1.25% in June and we think it will follow up with another 25bp cut in August. But we suspect that further easing will be needed to lift GDP growth towards potential and …
28th May 2019
Growth slowed sharply in Emerging Asia last quarter, and is likely to remain fairly weak over the coming year, with looser fiscal and monetary policy unlikely to offset the drag from weaker global demand. … Weakest growth in a decade, further weakness …
27th May 2019
The domestic headwinds that have caused China’s economy to slow over the past year are abating thanks to the policy support that has put a floor under credit growth and fuelled local government spending. But policymakers are still concerned about credit …
24th May 2019
The slump in the US activity surveys in May and the big drop in oil prices this week add to the reasons to expect the Bank of Canada to maintain a cautious tone at its meeting next week. … More reasons for the Bank to remain …
Central banks in South Africa and Nigeria left policy settings unchanged at their meetings this week but the accompanying communications supported our long-held view that interest rates will be cut later this year. In fact, we have brought forward our …
Steps taken this week by Turkish officials to shore up the lira could be the first move towards the imposition of capital controls, but if anything these are likely to store up larger falls in the currency. Elsewhere, comments this week from the Russian …
While the trade war has dominated the headlines, the People’s Bank has been getting on with the unglamorous work of financial reform. It is moving closer to phasing out benchmark lending rates. That probably won’t be enough to lower bank lending rates, as …
Proposed changes by Australia’s bank regulator will increase the maximum loan size for some borrowers. While that is unlikely to bolster housing demand much at this stage, as the RBA lowers interest rates the effect should become more pronounced and …
The Colombian peso has been the worst performing EM currency so far this month and we expect it to fall by another 8% or so against the dollar by year-end. The resulting rise in inflation is likely to prompt more interest rate hikes than most currently …
23rd May 2019
The Egyptian central bank’s decision today to keep interest rates on hold (rather than cut them) reflected policymakers’ concerns about the inflationary impact of upcoming subsidy cuts. But with inflation likely to drop back, we think that the easing …
Today’s MPC statement strengthened our view that policymakers at the SARB will cut rates soon. Indeed, a shift in opinion on the council has led us to move our forecast of a 25bp cut forward to July’s meeting. … South Africa: Rates on hold, but cuts …
The account of the ECB’s latest monetary policy meeting confirms that policymakers were concerned about downside risks to economic activity and, particularly, inflation. This reinforces our view that the Bank is likely to seek ways to provide more policy …
The economy is performing better than the Bank of Canada previously expected, but the outlook remains challenging. We expect the Bank to keep policy unchanged next week and anticipate another fairly dovish policy statement. … Bank to remain cautious …
The outlook for Lebanon’s economy is going from bad to worse. The most immediate threat is that the country could find itself caught in the crosshairs amid escalating tensions between the Gulf countries and Iran. One possible outcome is that Lebanon faces …
22nd May 2019
The reaction to Theresa May’s “new” Brexit deal suggests that the chances of a deal have fallen and the chances of another delay, a no deal, no Brexit and/or a general election have all risen. It’s hard to build this into our forecasts, but the risk is …
The recent fall in financial market measures of inflation expectations may be a bit misleading, and is not matched by a comparable fall in households’ inflation expectations. But it is nonetheless another reason for the ECB to keep policy ultra-loose, or …
The Central Bank of Iceland’s decision to cut interest rates by 50bp to 4.00% came as a surprise. While it was prompted by a deterioration in the economic outlook, inflation expectations remain high and wage growth is strong. Given that the economic …
Nigerian policymakers voted to hold their key rate at 13.50% today, but the governor’s suggests that they will continue to loosen policy later this year. The governor frequently stressed the need for stimulus, and we think that economic growth will remain …
21st May 2019
A policy rule suggests that for the time being the financial markets may be justified in taking a relatively sanguine approach towards the risk of rising interest rates. But should a Brexit deal be reached and the political uncertainty diminish, this …
Exit polls signal that Prime Minister Modi’s BJP and its coalition partners in the National Democratic Alliance have won India’s election. Admittedly, exit polls have been wrong in the past, not least in underestimating the strength of the BJP’s victory …
The RBA has made it clear that quantitative easing is its preferred tool once interest rates reach the effective lower bound. But we suspect that the Bank would first cut interest rates from their current level of 1.5% to 0.5% or lower before QE is …
Concerns about high inflation and the country’s large current account deficit mean today’s 150bp rate hike by Pakistan central bank (SBP) is unlikely to be the last in the current tightening cycle. … Pakistan hikes rates again, further tightening to …
20th May 2019
President Donald Trump clearly isn’t the only one hoping that the Fed will ride to the rescue amid the escalating trade dispute with China, with the markets now convinced that interest rates will be cut before the end of this year. We agree that the Fed …
17th May 2019
We suspect that the weather-related weak patch in Norwegian activity in Q1 will prove temporary. Meanwhile, following the recent flare-up in trade tensions and the Swedish Riksbank’s dovish shift, we have revised down our forecast for the krona. And as …
The recently announced cut to the reserve requirement ratio in the Philippines should provide a boost to economic growth and suggests that further cuts to the policy rate are likely soon. Meanwhile, the rupee came under pressure this week after Pakistan …
Employment growth has picked up over the last couple of months, but with the labour force expanding even faster the unemployment rate has started to rise. With GDP growth below potential and underlying inflation well below target, we suspect that will be …
This month’s escalation of US-China trade tensions and renewed concerns about Argentina and Turkey’s economic vulnerabilities have clear parallels with 2018, when these same factors triggered a sell-off in most EM assets. But there are important …
16th May 2019
Bank Indonesia (BI) left rates unchanged at 6.0% at its meeting today and hinted that it may consider loosening policy over the coming months. However, with the rupiah likely to lose more ground against the US dollar this year, we continue to expect …
President Trump’s claim that the PBOC will loosen policy in the months ahead may prove accurate, but this will be a justified response to a weaker economy and not a direct retort to tariffs. And while the Fed is likely to deliver rate cuts in time, this …
15th May 2019
Brazilian inflation has probably now reached a peak and the headline rate should fall below the central bank’s target in the coming months. With core inflation still extremely soft, the central bank is likely to keep the Selic rate unchanged at its …
14th May 2019
If the next downturn is a mild, cyclical one we would expect the Bank of Japan to cut its short-term policy rate but leave its 10-year yield target unchanged. Fiscal stimulus would probably have to do the heavy lifting. In the event of a severe downturn, …
The Turkish central bank (CBRT) seems to have become more inclined to use its foreign exchange reserves to support the lira, despite growing scrutiny about the level of reserves. Growing question marks about reserve coverage are likely to damage the …
13th May 2019
This Briefing is a reference guide with our latest views and forecasts for Saudi Arabia’s economy, including the prospects for key macroeconomic and financial market variables such as gross domestic product, wages, the exchange rate and interest rates. …
The Norges Bank held interest rates on hold at 1.00% at its meeting on Thursday but signalled that it will “most likely” resume its tightening cycle at the next meeting, in June. Meanwhile, the minutes from the Riksbank’s April policy meeting further …
10th May 2019
While the major advanced economy central banks have made no significant policy changes in recent weeks, a key theme has been a continued shift in their forward guidance to imply that interest rates will stay lower for longer. … Tweaks to forward guidance …
The RBA left rates on hold this week while the RBNZ cut. That’s odd as the case for a rate cut looks much stronger in Australia. In any case, we think that rates will need to fall in Australia as well, not least because fiscal policy may soon become …
The Reserve Bank of Australia’s (RBA) Statement on Monetary Policy (SMP) sounded a little more upbeat than the statement issued after the Bank kept rates on hold on Tuesday. We still think that the Bank is too optimistic about the outlook and that rates …
Euro-zone GDP growth was stronger than expected in Q1, at 0.4% q/q, but we suspect that it will slow again in the coming quarters. Activity was flattered by the comparison with a weak end to 2018 and construction was boosted by unusually good weather. …
9th May 2019
