Filtered by Topic: Monetary Policy Use setting Monetary Policy
The unemployment rate is close to the natural rate, inflation is close to the target and GDP growth is close to the economy’s potential rate, but interest rates are well below most estimates of the long-run neutral rate. This oddity is possible partly …
18th April 2019
The Riksbank is all but certain to keep its repo rate unchanged at -0.25% at its policy meeting next week. Meanwhile, coalition negotiations following last week’s election in Finland are likely to drag on into May, but we think that the Social Democrats …
Weak growth in the euro-zone overshadows near-term prospects in Switzerland and the Nordics. We expect activity to slow in most countries this year and to stay sluggish in 2020. As a result, price pressures should generally remain subdued, prompting …
Soft inflation readings across Africa this week supported our view that policymakers will cut rates in key economies. New figures added to the evidence that South Africa stumbled in Q1, while Nigerian policymakers tried (and, in our view, failed) to …
As the economic outlook has softened the RBA is inching closer to a rate cut. The analyst consensus has now come around to our view and foresees two 25bp cuts by early next year. But we think that the reduced potency of monetary policy combined with the …
Inflation will probably turn negative yet again over coming months once we strip out of the impact of October’s sales tax hike. However, that partly reflects one-off price cuts that have been flagged well in advance. As such, we think the Bank of Japan …
The Bank of Korea (BoK) left interest rates unchanged at 1.75% today. But, while it sounded less upbeat on the economy, we still think the BoK is too optimistic on the outlook for growth. With growth likely to undershoot the Bank’s expectations, we are …
The solid employment gain in March doesn’t resolve the tension between weak activity and healthy labour market data. Our view is that the drag from the housing downturn will eventually win the upper hand and that the RBA will cut interest rates before …
GDP growth in the euro-zone is likely to be only slightly stronger this year than in the second half of 2018. Hopes for a sharp rebound in export demand will probably be disappointed, meaning that the manufacturing sector will not turn the corner for a …
17th April 2019
The weakness of the recent business surveys suggests that the Bank of Canada will strike a dovish tone at its meeting next week. The Bank is unlikely to start talking about interest rate cuts just yet, but we think its next move will be in that direction. …
Retail sales figures for February added to the evidence that South Africa’s economy struggled in the first months of the year. Growth will probably pick up later this year, but it will remain weak, adding to the pressure for interest rate cuts. … South …
While the tone of the incoming data has been a little more positive since the March meeting, we still expect GDP growth to slow sharply this year. However, many on the Board remain concerned about the side effects of loose policy so further cuts in …
The easing in headline inflation in Q1 increases the pressure on the Reserve Bank to cut rates at their next meeting in May. And with weak growth set to keep a lid on inflation, we think they will cut once more before the year is out. … New Zealand - …
As CBN Governor Godwin Emefiele’s term draws to a close, we’ve taken a look at how his controversial decisions worsened Nigeria’s recent economic crisis. Given President Muhammadu Buhari’s views on monetary policy, Mr. Emefiele’s replacement is unlikely …
16th April 2019
This Briefing is a reference guide with our latest views and forecasts for Argentina’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 economy is still in stronger shape than it usually was when the Fed started cutting interest rates in the past. Based on the Fed’s previous behaviour, however, the economic slowdown that we expect this year should be more than enough to convince …
Growth in India is likely to slow as policy tightens after the general election. Even so, it should still be the best performing major emerging economy in the coming years. … Slower growth after the …
15th April 2019
The March consumer and producer price inflation data released this week highlighted that underlying inflationary pressures continue to fade. That hasn’t gone unnoticed at the Fed, with the March FOMC minutes revealing that officials are increasingly …
12th April 2019
The ECB struck a moderately dovish tone at its policy meeting this week, but with economic growth still fairly slow it will need to follow its words with actions. Meanwhile, industrial production data suggest that Italy’s recession might have come to an …
Private sector production data for February, released this week, added to the evidence from other indicators that Swedish economic growth slowed sharply at the start of 2019. We think that the Rikbank will have to revise down its forecasts for the repo …
The sustained drop in Treasury yields since early November is one reason why we have upgraded our economic forecasts for 2020, but we do not think that will be enough to prevent economic growth slowing sharply this year. … Lower rates won’t prevent …
We expect stimulus to shore up growth in the next few months. But with the scale of policy support smaller than in previous downturns, the sharp economic rebound that some are expecting is unlikely. … Policy restraint to limit scale of …
The Monetary Authority of Singapore (MAS) today left its policy settings unchanged, but given the worsening outlook for the economy, we think it will loosen policy at its next meeting in October. … Singapore: weak growth to prompt loosening from …
Economic growth across Africa as a whole will remain weak in 2019 due to very poor performances from Nigeria and South Africa. Conditions will probably improve next year, but regional growth will be weaker than most analysts expect. We think that East …
11th April 2019
The second delay to Brexit, to 31st October 2019, and developments overseas have altered the assumptions that underpin our UK economic forecasts. As such, we have tweaked those forecasts. The main takeaways are that both GDP growth and interest rates …
We expect GDP growth across Emerging Asia to be very weak this year, with a number of countries set to grow at their weakest rates since the global financial crisis. A key drag will come from falling exports – our forecasts for the global economy suggest …
The Argentine central bank’s pledges to keep monetary policy tighter for longer have helped to stave off a run on the currency in recent weeks. But by keeping the economy weak ahead of October’s election, the measures will weigh on President Macri’s …
10th April 2019
President Draghi’s comments at today’s press conference suggest that the ECB will announce the terms of the TLTRO-III programme in June, which we suspect will be more generous than previous TLTROs. But we still think the Bank will need to do more to …
We hold below-consensus growth forecasts for the Gulf States, where oil output cuts and renewed fiscal austerity will result in a sharp slowdown. We are, by contrast, relatively optimistic about the prospects for Egypt, as well as Morocco, where growth is …
A slowing global economy will magnify the headwinds from the housing downturn in Australia and slower net migration in New Zealand. We think that GDP growth will slow more sharply than most anticipate and expect central banks in both countries to lower …
9th April 2019
The Fed began publishing interest rate projections submitted by FOMC participants as far back as 2012, but in the past seven years only one maverick official has ever forecast a cut in interest rates. As markets are now beginning to price in the prospect …
8th April 2019
During a speech this week, Bank of Canada Governor Stephen Poloz refused to commit to the possibility of further rate hikes and suggested that the neutral range was not a good target for investors to have in mind when it comes to the future direction of …
5th April 2019
Markets no longer expect further monetary easing in China but we aren’t convinced. Headwinds to growth look set to resurface as support from fiscal front-loading wanes, at which stage the stimulus baton is likely to be passed back to the People’s Bank. … …
After making some fairly big changes in early March, the ECB will probably be happy to leave things as they are at next week’s meeting. President Draghi will have no choice but to give a downbeat assessment of the economic outlook, which will probably set …
4th April 2019
The account of the ECB’s 7th March monetary policy meeting makes gloomy reading. It confirms that policymakers were worried about downside risks to their growth and inflation forecasts, even though they had only just been revised down, and that they were …
The RBI has delivered another pre-election gift to the government by lowering rates at a second successive meeting. A low level of headline inflation provided justification for the move. But with core inflation high, and a growing perception that the …
We expect GDP growth to slow from 2.9% to 2.0% this year and only 1.4% in 2020. That weakness should convince the Fed to reverse course and cut interest rates by a cumulative 75bp, with the first reduction probably now coming before the end of this year. …
3rd April 2019
The Bank of Canada’s belief that the policy rate is still far below its neutral level looks doubtful. In fact, market pricing implies monetary policy is as restrictive as it was on the eve of the global financial crisis. … Policy not as loose as Poloz …
2nd April 2019
The Reserve Bank of Australia sounded more cautious when it left interest rates unchanged at 1.50% today. With the full impact of the housing downturn on economic activity yet to be felt, we think the Bank will start to cut interest rates soon, perhaps as …
The statement accompanying the Chilean central bank’s decision to hold its policy rate at 3.00% on Friday night signalled that rates are likely to stay on hold for longer than they had previously anticipated. Our forecast for rates to remain unchanged …
1st April 2019
Speeches by policymakers this week suggest that the ECB is likely to provide more policy accommodation within the next six months or so. All the more so as the latest survey data continue to point to an economy which is losing momentum. … Draghi dovish, …
29th March 2019
The State Bank of Pakistan (SBP) today raised its policy rate by a further 50bp to 10.75%, and we think further rate hikes are likely over the coming months due to worries about high inflation and the country’s large current account deficit. … Pakistan …
The upcoming Moody’s review of South African debt has raised fresh concerns about a sell-off in the country’s bond market. But we think that these fears are overdone. Meanwhile, central bank meetings this week reinforced our view that policymakers are …
The partial inversion of the Treasury yield curve has attracted a lot of attention over the past week, but we have been more surprised by the speed at which markets have started to price in rate cuts. Market expectations have almost caught up to our …
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 …
The sharp fall in JGB yields in recent weeks means that the Bank of Japan will probably lower its JGB purchases more quickly than we had anticipated. In fact, there’s a chance that the Bank may soon have to sell rather than buy JGBs in order to defend its …
The Egyptian central bank’s decision today to keep interest rates unchanged (rather than cut rates) appears to have been a result of the jump in inflation in February. But if we’re right that inflation will fall again over the coming months, the easing …
28th March 2019
The flattening of yields curves over recent weeks has raised fears of a sharp economic slowdown to come. Central banks are unlikely to be led by the views of bond markets, not least because their actions and comments have driven at least part of the …
The Czech National Bank made clear that it is more concerned about the impact of weakness in the euro-zone than strong domestic inflationary pressures. We still think that above-target inflation may trigger more tightening this year, but we have revised …
The South African Reserve Bank’s (relatively) dovish post-meeting communications support our view that the next move in interest rates will be down (probably in early 2020). The markets have moved towards our view and no longer expect hikes, but they …
