Filtered by Topic: Monetary Policy Use setting Monetary Policy
The statement accompanying the Chilean central bank’s decision to hold its policy rate at 2.75% last night suggested that this was only a brief pause in its tightening cycle. We continue to think that tightening over the next year will be more rapid than …
5th December 2018
It would be tempting to blame the slowdown in GDP growth in the third quarter on temporary factors. But we believe that the full effects of falling house prices and tighter credit conditions haven’t been felt yet and we expect GDP growth to slow further …
November’s falls in headline and core inflation highlight the lack of price pressures in Switzerland. And with GDP growth also weak, the SNB looks set to keep policy looser for longer than investors expect. … Swiss CPI …
4th December 2018
The Reserve Bank of Australia (RBA) sounded a little more cautious when it left interest rates unchanged at 1.50% for the 28th month. That supports our view that rates will not rise until late in 2020. … Cautious RBA may only hike rates in …
On balance, we still think that the Fed will raise rates twice in the opening six months of 2019, taking the fed funds target range to between 2.75% and 3.00%. The renewed weakness of core inflation could prompt the Fed to move to the side lines a little …
3rd December 2018
The minutes to Banxico’s latest interest rate meeting send a clear message that the recent policy shift under Andrés Manuel López Obrador’s (Amlo’s) will result in further rate hikes. Elsewhere, commodity prices seem to have re-asserted themselves as key …
30th November 2018
The Bank of England’s harrowing assessment of the consequences of a “ no deal ” Brexit grabbed the headlines this week. But it was designed to be an extreme scenario, and based on some implausible assumptions. The Bank’s projection s based on a deal being …
Fed Chair Jerome Powell's language earlier this week prompted some in the markets to claim he had taken a sudden dovish turn, possibly in response to pointed criticism from President Donald Trump. We suspect that Powell was simply trying to row back his …
The hawkish minutes from the Bank of Thailand’s (BoT) November meeting reaffirm our view that the central bank will raise rates by 25bp at its December meeting. Meanwhile, the Korean government’s failure to agree an exemption from possible US automotive …
Lower oil prices will benefit most countries in Emerging Europe and, for the major loser, Russia, oil at $60pb is manageable – although we do think that it will agree with Saudi Arabia to cut oil output next week. At the margin, the scale and pace of the …
We doubt that November’s decline in euro-zone inflation will cause the ECB to alter its plans for a gradual normalisation of monetary policy, with asset purchases set to end next month. … Euro-zone Flash CPI (Nov.) & Unemployment …
While the Bank of Korea (BoK) hiked its policy rate today for the first time in a year, this is unlikely to mark the start of a tightening cycle. … Korea: rate hikes next year look …
Having struck a business-friendly tone after his election, Mexico’s president elect Andrés Manuel López Obrador has more recently begun to unnerve investors. Ahead of his inauguration on Saturday, this Update highlights five things that would suggest his …
29th November 2018
The very weak Swiss Q3 GDP data make us more confident that the SNB will keep monetary policy ultra-loose longer than investors expect. Meanwhile, the contraction in the Swedish economy in Q3 suggests that the Riksbank will push back the first interest …
The revised GDP data for the past decade that have just been released suggest that recent growth has been further above India’s sustainable rate than previously thought. This underlines why the government’s attempts to strong-arm the RBI into loosening …
We doubt that the recent rally in Italian government bonds will last. And higher yields are already feeding through to higher borrowing costs in the private sector. We think that this will offset any positive impact on GDP from looser fiscal policy in …
28th November 2018
The drop in oil prices this month is clearly bad news for the region’s large net energy exporters, Colombia and Venezuela; a fiscal squeeze in on the cards in the former and the latter’s crisis will get even worse. But for the rest of the region, lower …
We suspect that the Bank of Canada will deliver a more dovish message next week than investors seem to expect. … Bank to present cautious message as oil prices …
The Fed looks to be on course to raise interest rates by a further 25bp at its December meeting in spite of financial market jitters and disappointing news on the global economy. But as financial conditions continue to tighten and the US economy slows …
The latest fall in oil prices means EM inflation is likely to rise more slowly. While we still expect a majority of EM central banks to hike interest rates, lower energy inflation may delay tightening in a few countries, including Hungary, Colombia and …
The recent drop in headline inflation, coupled with the sharp fall in global oil prices, should be enough to ensure that the RBI keeps policy rates on hold at the conclusion of its meeting on Wednesday 5th December. However, with core inflation still …
Kenyan policymakers left their key policy rate at 9.00% today, and we think that they will maintain the current policy stance going into next year. … Kenya: Rates on hold into …
27th November 2018
Most countries in the region are net oil importers (Malaysia is the key exception) and should gain from the recent drop in oil prices, with the Philippines likely to be among the biggest beneficiaries. Consumer price inflation in the Philippines reached a …
The Reserve Bank of Australia (RBA) will hold rates steady at next week’s meeting and signal that the first hike is still some way off. With the downturn in the housing market continuing unabated and the recent slump in crude oil prices likely to push …
This week’s U-turn by Poland’s government over a controversial judicial reform suggests that policymakers are adopting a less divisive stance in the run-up to next year’s elections. While this is unlikely to have a significant macroeconomic impact, it …
23rd November 2018
November’s fall in the Composite PMI raises doubts about whether the economy will rebound after a weak Q3. This won’t be enough to stop the ECB from ending its asset purchases next month, but it increases the chance that the Bank will wait longer to raise …
Hawkish rhetoric from South Africa’s MPC suggests that another rate hike is likely in Q1. But the divided MPC’s appetite for further tightening will dissipate if – as we expect – inflation eases in mid-2019. Tanzania’s president continued his run of …
Immigration has been very strong in New Zealand in recent years but we think it will slow sharply over the next couple of years. By contrast, we don’t think that the Australian government will significantly restrain net migration despite PM Morrison’s …
The RBI’s highly-publicised board meeting passed without much incident this week, but this has by no means eased the tensions between the central bank and government, nor concerns over the RBI’s independence. The first test of the ceasefire is likely to …
The fall in oil prices over the past couple of months will drag down fuel inflation across the emerging world, but it probably won’t be enough to prompt policymakers to slow the pace of monetary tightening. After all, the impact of weaker fuel inflation …
22nd November 2018
Hawkish rhetoric suggests that policymakers at the SARB will follow today’s 25bp rate hike with another rate rise in Q1. But we think that inflation will soon peak, and that rates will ultimately fall in 2020. … South Africa: SARB hikes, but cycle will …
Growing concerns about the health of the global economy have prompted speculation that the Fed won’t hike interest rates as aggressively as previously believed. We suspect that the strength of the domestic economy will persuade the Fed to follow through …
21st November 2018
Last month’s rise in South African inflation was almost entirely due to fuel prices, so we still expect that the SARB will keep its key rate unchanged at its meeting tomorrow. … South Africa CPI …
Australia’s economy has become less sensitive to conditions in the US as their trade links have diminished. The upshot is that the RBA should be able to hike interest rates in 2020 even if our forecasts prove accurate and the Fed is simultaneously cutting …
As one of the world’s largest net importers of oil, India should be a key beneficiary of the recent slide in global oil prices. If prices remain lower, as we think likely, the oil import bill will fall and the current account deficit should shrink. We …
We think that policy makers would move quickly to help the economy to get back on track in the event of a “no deal” Brexit. Despite Mark Carney’s hints to the contrary, the MPC would probably cut interest rates, and the Chancellor would sacrifice his …
20th November 2018
Households’ balance sheets are mostly in good shape and so are unlikely to cause any major trouble. But households in a few economies would be vulnerable if interest rates were to rise by more than we expect. … Households can cope with rate hikes (in most …
The spread of African swine fever (ASF) to China’s leading pig-rearing province (Sichuan) last week is an alarming development. But despite its rapid expansion across the country (the disease has spread to 18 of China’s 31 provinces in three months), the …
The Reserve Bank of India (RBI) and the government found common ground on some of the points of contention between them at the Bank’s board meeting yesterday. But key issues remain unresolved, and the sense that the government is trying to strong-arm the …
We’ve argued for a long time that the monetary stance of the Hungarian National Bank (MNB) is far too accommodative, and it finally appears that tightening is on the horizon. The complex nature of the Hungarian monetary framework, though, means that the …
19th November 2018
GDP growth in Thailand slowed sharply in Q3, and is likely to struggle for momentum in the quarters ahead due to a combination of weaker external demand and a faltering tourism sector. … Thailand GDP …
October’s weaker-than expected inflation data, published this week, are unlikely to deter the Riksbank from raising interest rates in the coming months, with a December hike most likely in our view. Meanwhile, although temporary factors weighed on …
16th November 2018
Recent dovish comments from the Deputy Governor of the central bank of the Philippines (BSP), Diwa Guinigundo, which mention falling inflation expectations and the BSP having the “the flexibility to digest the recent rate hikes” support our view that the …
South Africa’s government has taken a big step towards the expropriation of land without compensation, but fears that land reform will disrupt the economy are overblown. Meanwhile, given weak economic growth and fading inflationary pressures, we think …
Indian media has been awash with reports this week that RBI Governor Urjit Patel could quit his post at the Bank’s board meeting on Monday. We think this is unlikely but if he were to resign, local markets would come under pressure. The extent of the …
The Australian Labor Party’s fiscal proposals may not be quite as restrictive as we had thought. But we still believe that fiscal policy would be tighter if Labor wins the next Federal election. Meanwhile, the latest batch of encouraging labour market …
The decision by Egypt’s central bank to keep its policy interest rate on hold confirmed that the MPC is paying more attention to weak underlying price pressures than the recent spike in headline inflation. The easing cycle is likely to resume next year as …
15th November 2018
The contraction in Japan’s economy in Q3 should prove short-lived. But the income data released alongside the GDP figures provide a more lasting reason for concern. The Bank of Japan had been able to point to signs of accelerating wage growth as evidence …
A reassessment of the prospects for interest rates will probably play a far bigger role than the Fed’s quantitative tightening (QT) in influencing Treasuries next year. Indeed, we expect the 10-year yield to fall back to 2.5% after the Fed stops hiking …
News that Theresa May could soon face a leadership challenge is the latest twist in the Brexit saga, but even if she survives, the key point is that the chances of her deal being passed by parliament are not looking good. There is therefore still a good …
