Filtered by Topic: Monetary Policy Use setting Monetary Policy
South African policymakers’ abrupt shift away from their previous hawkish rhetoric suggests that further rate hikes are now unlikely. We think that attention will soon turn to cuts; we expect a 25bp cut in 2020. … South Africa: SARB abandons hawkish …
17th January 2019
At its meeting on 24th January, the Norges Bank is likely to reiterate that it expects to raise interest rates in March, taking the key policy rate to 1.0%. But we think that its tightening cycle will be much slower than its forecasts imply. Meanwhile, at …
We think that 2019 will be the year in which previous excesses in Australia’s housing market will catch up with the economy. We believe that the deepening housing downturn will become a far bigger drag on Australia’s GDP growth than most anticipate. …
Bank Indonesia (BI) today left its policy rate unchanged for a second consecutive meeting, while there was nothing in the central bank’s statement to suggest that further rate hikes are imminent. However, given the likelihood of renewed falls in the …
The euro-zone has shifted down a gear but has not (yet) gone into reverse. Italy probably experienced a technical recession last year and Germany only narrowly avoided one. More importantly, the breadth of the downturn, which affected all major countries …
16th January 2019
Emerging Asia this year is likely to grow at its weakest rate since the global financial crisis. Although fiscal policy should help to support growth in most of the region, this is likely to be offset by the lagged impact of last year’s monetary policy …
The Turkish central bank’s decision to keep interest rates on hold suggests that policymakers may have been unnerved by the recent wobble in the lira. But with inflation likely to ease further, the economy in the midst of a deep recession and political …
Whatever the Bank of England thinks about yesterday’s failed Brexit vote, it will surely be pretty content with the news this morning that inflation has fallen to within a whisker of its 2% target for the first time since January 2017. Unlike Parliament, …
The Bank is getting a bit more concerned about the impact of prolonged monetary easing on financial stability. But with economic activity and inflation set to fall short of its forecasts yet again, policy settings will have to remain loose for the …
Japan’s 10-year government bond yield has been flirting with zero since the start of the year. Not so long ago, it was climbing towards the 0.2% ceiling of the “tolerance band” managed by the Bank of Japan. The outlook for domestic monetary policy hasn’t …
14th January 2019
The drop in headline consumer price inflation in December further diminishes the case for rate hikes in the near term. The RBI’s new governor seems keen to lower rates but, with core inflation still elevated, this would be a policy mistake. … Consumer …
Past experience suggests that the macroeconomic conditions are now in place for the Turkish MPC to start reversing last year’s monetary tightening. We expect the one-week repo rate to be cut by 50bp at Wednesday’s meeting. But the central bank’s failure …
Headline wholesale price inflation eased in December, further undermining the case for any further rate hikes in the near term. But the appointment of a dovish new governor of the RBI means we are more concerned with the policy outlook further ahead. … …
Sharp falls in industrial production in November last year mean that Germany and Italy may have experienced technical recessions in 2018. And GDP in the euro-zone as a whole probably increased by only around 0.2% in Q4. Meanwhile, officials at the ECB are …
11th January 2019
Governor Stephen Poloz struck a positive tone following the Bank of Canada’s decision to keep interest rates unchanged this week. Although officials remain optimistic, we think there are flaws in the Bank’s thinking and the case for further rate hikes is …
With financial markets rebounding this week and the incoming domestic activity data relatively strong, we still expect the “patient” Fed to raise interest rates this year. But core PCE inflation looks set to remain stable at just below the Fed’s 2% …
Recent developments suggest that both the Riksbank and Norges Bank will tightening monetary policy more slowly than we had previously anticipated. This is partly because we have revised down our forecasts for economic growth in the euro-zone. But there …
Further evidence this week that the Turkish economy is in the midst of a severe recession adds to the reasons to expect that the MPC will cut interest rates next week. Meanwhile, another batch of robust activity data suggests that the economies of Central …
In spite of the recovery that has taken hold since the turn of the year, we think that equities have further to fall. It is well known that UK stock indices are heavily weighted towards energy companies. As a result, given the violent slide in the oil …
10th January 2019
Given the huge and growing uncertainty surrounding Brexit, we are now placing much more emphasis on three forecasts for the economy that are based on different Brexit outcomes. The key point, though, is that in each scenario we are a bit more optimistic …
The account of the ECB’s last meeting confirms that the Governing Council was less confident about the economic outlook, even in mid-December. While policy loosening is very unlikely for now, the account implies that if further support were needed, the …
We are revising our forecasts for economic growth in the euro-zone and now expect GDP to increase by only 1% this year and a bit less in 2020. Core inflation is also likely to be around 1% this year and, as a result, the ECB will probably leave rates on …
9th January 2019
There is a clear possibility that, as in early 2016, slowing global growth and further weakness in financial markets will prompt the Fed to abandon its plans to continue hiking interest rates. With the latest data suggesting that the domestic economy is …
Despite slashing its economic growth forecast to below potential, the Bank of Canada reiterated today that it judges that more rate hikes will be needed to ensure that inflation remains in line with target. But if we’re right that even the Bank’s new …
The drop in headline inflation in Switzerland in December is a sign of things to come, as inflation is set to fall to just above zero in the coming months. Meanwhile, the minutes of the Riksbank’s December meeting suggest that it is likely to hike at most …
The sales tax hike is likely to trigger a fall in output in Japan later this year but, thanks to counter-measures from the government, the downturn will be much less sharp than after similar tax increases in the past. Even so, price pressures will remain …
Firing Fed Chair Jerome Powell, even if President Donald Trump actually had the power to do so, would do little in practical terms to change the future course of monetary policy. Arguably the bigger risk is that Trump’s frustrations with Powell could lead …
8th January 2019
It’s well known that the uncertainty caused by the Brexit bedlam probably contributed to GDP growth easing from 0.6% q/q in Q3 of last year to 0.3% or less in Q4. But it’s less appreciated that should a way out of the Brexit quagmire be found in the next …
7th January 2019
The People’s Bank (PBOC) appears to have sold only a small amount of foreign exchange last month, suggesting that the renminbi has faced little downward pressure recently. … FX Reserves …
Today’s cut to the required reserve ratio is partly about managing liquidity ahead of Chinese New Year. But it is also intended to provide support to the economy and will be reinforced with further easing soon. Given the pressures the economy is facing …
4th January 2019
Brazilian markets have performed strongly this week as hopes for business-friendly reforms under President Jair Bolsonaro have continued to build, but we think that the rally may run out of steam before long. Elsewhere, the minutes to the Mexican central …
In keeping with its usual practice of making policy moves late on Fridays, the PBOC today announced a 100bp cut to the required reserve ratio aimed at supporting the economy and managing liquidity ahead of Chinese New Year. With economic activity likely …
Investors pared back their expectations for interest rate hikes in Central Europe this week, but we still think that a fresh pick-up in inflation will prompt more monetary tightening than most anticipate over the course of 2019. As a result, the recent …
Data published over the past week show that Emerging Asia ended 2018 on a soft note, a trend we expect to continue into 2019. Meanwhile, a further sharp drop in inflation in the Philippines in December supports our view that the central bank (BSP) will …
The drumbeat of pre-election giveaways continues at the state level in the form of loan waivers and from the national government. These steps may be effective politically but they risk eroding policymakers’ credibility as guardians of fiscal and financial …
The raft of GDP figures released over the past week showed that, in aggregate, the MENA economies strengthened in Q3 of last year. But we think that a fresh slowdown is on the cards in 2019. Meanwhile, t he Egyptian central bank left interest rates on …
3rd January 2019
GDP growth will probably weaken in both Australia and New Zealand in 2019. And even though the labour market may tighten a little further, inflation is unlikely to rise much. The upshot is that monetary policy will have to remain loose for longer than …
With the sudden slump in oil prices over the last three months likely to weigh heavily on economic growth, and fears of a global downturn building, we expect the Bank to keep rates unchanged and strike a dovish tone at its policy meeting next week. … …
2nd January 2019
Two of the Bank of Canada’s three measures of core inflation, CPI-trim and CPI-median, declined in November. As a result, an average of the three measures fell to 1.9%, the lowest in five months. Base effects mean that core inflation will probably decline …
21st December 2018
The slump in the Business Outlook Survey future sales balance looks consistent with GDP growth falling towards zero and is another reason to doubt that the Bank of Canada will raise interest rates further. … Business Outlook Survey …
The Riksbank’s decision to hike interest rates this week supported our long-held view that it would tighten policy more aggressively than investors anticipate. But the risks from high household debt and weak construction output are mounting. Meanwhile, …
In an interview this week, Bank of Canada Governor Stephen Poloz seemed fairly relaxed about the economic outlook. But with inflationary pressures fading, oil prices falling again and exporters becoming less confident about the outlook, there is little …
The clear view in financial markets in the wake of the December FOMC meeting is that any further rate hikes over the coming months are likely to be reversed in 2020. Our long-held forecast is that a sharp slowdown in economic growth next year will prompt …
We doubt that the phasing-out of caps on interest-only loans will provide much support to the housing market as there’s still a large imbalance between supply and demand. And the government won’t provide much support either as it has pledged to tighten …
Xi Jinping used the 40 th anniversary of the start of China’s economic reforms to set out a narrative which placed state and, in particular, Party control at the heart of China’s subsequent economic successes. A stronger argument, in our view, is that …
The thickening Brexit fog meant that the Monetary Policy Committee was always going to leave interest rates at 0.75% today and it looks as though that fog won’t fade for a few months. But should a Brexit deal be agreed, which we still think is just about …
20th December 2018
Taiwan’s central bank (CBC) today left its policy rate on hold at 1.375% and gave little indication in its accompanying statement that it is in any hurry to adjust its policy setting anytime soon. We think interest rates will be left unchanged throughout …
The Riksbank’s surprise decision to hike interest rates today supported our long-held call that it would tighten policy more aggressively than investors anticipate. But there is a clear risk that a housing-related economic slowdown could leave the Bank …
Today’s decision by Bank Indonesia (BI) to leave interest rates unchanged at 6.0% is unlikely to mark the end of the tightening cycle given the likelihood of further falls in the rupiah over the coming year. … Bank Indonesia set to raise interest rates …
