Filtered by Topic: Monetary Policy Use setting Monetary Policy
Although the Fed is unlikely to make any policy changes at next week’s meeting, we expect the statement to reiterate the FOMC’s plan to continue gradually raising interest rates, with the next move coming in December. With the latest data showing that …
31st October 2018
The current political crisis in Sri Lanka, which has seen the country’s president, Maithripala Sirisena, replace Prime Minister Ranil Wickremesinghe with former President Mahinda Rajapaksa, comes at a bad time for the economy. Growth has been very weak …
Price pressures eased in Kenya and Uganda in October, and we think that inflation will remain within target in both countries. Kenyan policymakers will probably keep their key rate on hold in 2019, while their Ugandan peers will hike rates once more in …
Growth in most of Emerging Europe will continue to slow over the next couple of years, and by more than most expect. The slowdown is set to be sharpest in Turkey, where the recent currency crisis will result in a slump in domestic demand, pushing the …
Despite the recent plunge in equity prices, it looks highly likely that the Fed will raise interest rates again in December and then press ahead with two more rate hikes in the first half of 2019. But a slowdown in the US economy should discourage Fed …
The Indian government is treading on dangerous ground with a number of moves that could put the independence of the Reserve Bank of India (RBI) at risk. A loss of credibility for the central bank could jeopardise its efforts to rein in inflation, which …
The Bank of Japan seems to be getting a little more worried about the impact of prolonged easing on financial stability. However, the looming sales tax hike and the downgrade to the BoJ’s inflation forecasts underline that policy tightening remains a long …
Political developments have re-emerged as a key risk to the region’s economic outlook in recent weeks. The economic fallout for Saudi Arabia from the Khashoggi scandal should be limited, at least in the near-term. The threat of sanctions has weighed on …
30th October 2018
The direct impact on Mexico’s economy resulting from president-elect Andrés Manuel López Obrador’s decision to scrap the Texcoco airport project will be small, but it is the clearest sign yet that policymaking will be more interventionist and …
Policymakers in South Africa and Nigeria both laid out fiscal plans this month, but their responses to weak revenues were very different. South Africa’s new finance minister announced a wider deficit in 2019, while Nigerian officials promised to cut …
The People’s Bank (PBOC) appears to have stepped up intervention recently to support the renminbi as it has approached 7.0 to the US dollar. Many are talking about that line as a psychological threshold that would trigger capital outflows if breached. We …
29th October 2018
With the effective fed funds rate getting close to the top of its target range again, there’s a good chance that the Fed will combine a 25bp hike in the fed funds target range in December with another smaller 20bp hike in the interest on excess reserves …
Comments from Brazil’s president-elect suggesting that the central bank should target the exchange rate have made headlines today but his post-election comments otherwise point to orthodox macroeconomic policy. More importantly, the extent of Mr. …
While both the Riksbank and the Norges Bank kept monetary policy unchanged this week, they signalled in their policy statements that they intend to raise interest rates in the coming months. With inflationary pressures building, we expect the Riksbank to …
26th October 2018
As well as hiking interest rates to 1.75% this week, the Bank of Canada explicitly confirmed that it intends to raise the policy rate back to its estimate of the neutral rate. We doubt it will make it that far. … Bank aiming for at least three more …
The recent slump in stock markets is hard to square with the 3.5% annualised gain in third-quarter GDP that follows an even more impressive 4.2% rise in the second. Looking at the details of that economic growth, however, there are signs that higher …
At 3.5% annualised, GDP growth remained unusually strong in the third quarter, thanks partly to this year’s fiscal stimulus, but there are signs that higher interest rates are beginning to have a bigger restraining effect. Once the boost from fiscal …
We expect the Fed’s monetary policy tightening cycle, which is now well underway, to contribute to a slowdown in the US economy during 2019-2020. And tighter monetary policy may also trigger downturns in countries with high household debt burdens and in …
Credit growth in advanced economies is likely to maintain a healthy pace despite quantitative tightening. Meanwhile, the recent spike in Italian government bond yields may increase firms’ borrowing costs. … Monetary Indicators Monitor …
The Office for Budget Responsibility (OBR) will hand the Chancellor, Philip Hammond, a get-out-of-jail-free card by slashing its forecast for the deficit this year in Monday’s Budget. This will allow Hammond to deliver the pledged increase health spending …
Policymakers are worrying about the widespread use in China of shares as collateral for lending – for good reason. But the remedies announced this week are unlikely to make much of a difference as long as share prices continue to fall. Meanwhile Xi …
The Russian central bank’s statement accompanying today’s Board meeting reinforces our view that September’s interest rate hike was intended as a one-off. Whereas the financial markets are pricing in further tightening, we think it’s most likely that the …
South Africa’s new finance minister used this week’s budget statement to signal a shift away from further austerity, suggesting that Pretoria is prioritising support for the weak economy. Nigerian officials, by contrast, promised to tighten policy. Given …
The sharp rallies in the Argentine peso and Brazilian real reflect growing optimism that economic policymaking will improve in both countries, but markets seem to be looking through the political hurdles to reform that are building. While Argentina’s IMF …
25th October 2018
The ECB today reaffirmed its plans to normalise monetary policy gradually, expressing little concern about the recent run of weaker economic data or the clash between Italy and the European Commission. Risks to the outlook mean that the first interest …
After a strong Q2, growth in Emerging Europe as a whole slowed in Q3, from 3.5% y/y to around 2.8% y/y. In Russia and Poland, this slowdown has been relatively gradual and driven by weakness in manufacturing sectors. Turkey’s economy has, unsurprisingly, …
The Turkish central bank’s decision to leave interest rates unchanged today and the accompanying statement reinforce our view that last month’s aggressive rate hike didn’t represent a shift back to orthodoxy. Interest rates are unlikely to be raised …
The chances of an interest rate rise at the Monetary Policy Committee’s (MPC) meeting from 0.75% on 1st November are pretty slim. We doubt the MPC will move again until the Brexit fog has lifted. … MPC to wait for Brexit fog to …
Although it left its policy stance unchanged today, the Norges Bank struck a slightly more hawkish tone. We continue to think it will raise rates again next March. But even as the Bank tightens policy, we think that falling oil prices will cause the krone …
The recovery in the Middle East and North Africa will gather pace over the rest of this year and in early 2019, but growth will peak sooner than most expect. Egypt’s cyclical upturn should continue and we expect it to be a regional outperformer. In Saudi …
24th October 2018
By replacing its pledge to raise rates at a “gradual” pace with an indication that it intends to hike by at least as much as, if not more than, markets expect, the Bank of Canada today struck a decisively hawkish note. We think it will follow today’s …
Although narrow money growth rebounded in September, the Fed’s quantitative tightening will continue to exert downward pressure over the months ahead. Furthermore, signs are emerging that the Fed’s interest rate hikes are starting to weigh on demand for …
South African inflation stabilised in September remaining unchanged at 4.9% y/y. We think that inflation has peaked and expect that the SARB will keep its key rate on hold at next month’s policy meeting. … South Africa CPI …
Although the Riksbank left monetary policy unchanged today, it is still on track to begin raising interest rates in December. We think that the Bank will then tighten more quickly than investors expect, causing the krona to strengthen in 2019 and 2020. … …
The Bank of Japan will probably lower its growth and inflation forecasts further at next week’s policy meeting. And it should reiterate its pledge to keep interest rates at current extremely low levels for an extended period. … Sales tax hike is the nail …
India’s shadow banking sector has been thrust into the spotlight over the past few weeks, triggered by news that the Infrastructure Leasing & Financial Services (IL&FS) Group is likely to miss several debt repayments this year. Fears over contagion in the …
The latest data suggest that underlying inflation is picking up in Sweden, Norway and Iceland and we expect the central banks in all three countries to respond by tightening monetary policy. In Sweden, non-energy CPIF inflation rebounded in September and …
23rd October 2018
Price pressures have continued to strengthen in the emerging world. Our aggregate EM inflation measure jumped from 3.8% y/y in August to 4.2% y/y in September, its fastest pace since early 2016. The rise has occurred across all EM regions and the drivers …
The third-quarter Business Outlook Survey revealed a rebound in firms’ investment intentions, which is consistent with machinery and equipment investment growth remaining close to 10% y/y. Moreover, the survey was carried out before the US and Canada …
Today’s decision by Bank Indonesia (BI) to leave interest rates on hold is unlikely to mark the end of the current tightening cycle. With the rupiah likely to remain under downward pressure over the coming months, we still expect two more rate hikes …
Growth in Latin America as a whole is likely to strengthen over the coming quarters, but with monetary and fiscal policy tightening in most countries, it will be weaker than most expect. We’re relatively upbeat on the near-term outlook for Mexico, the one …
22nd October 2018
Global growth is likely to ease over the next two years, led by slowdowns in the US and China. Although headline inflation should drop back in many advanced economies next year, core inflation will continue to rise. Against this backdrop we expect the Fed …
The announcement on Friday that Ukraine has come to an agreement with the IMF to replace its current bailout package should reduce risks posed by the government’s large upcoming FX debt repayments. But compliance will remain a major hurdle and problems …
The minutes of the Reserve Bank’s October policy meeting show that, despite keeping rates on hold, the MPC continues to place great importance on preserving its recently-acquired credibility. With this in mind and given that core inflation is still …
After the legalisation of cannabis this week, next week the spotlight turns to the Bank of Canada’s policy rate announcement. The Bank looks set to raise interest rates for the third time this year, to 1.75%. As that hike is widely expected, the key event …
19th October 2018
The plans outlined by Brazil’s likely next president, Jair Bolsonaro, to tackle some of the causes of Brazil’s productivity problem should be welcomed. But his apparent waning commitment to fiscal and welfare reforms suggests that the chances of a …
Safe-haven demand for the Swiss franc increased this week as the Italian Government clashed with the EU over its 2019 Budget. With worries about Italy set to persist, we think that the franc will weaken only slightly against the euro as the SNB lags …
The PBOC has been hiding its efforts to support the renminbi over recent months. But a release this week showed the clear hand of the central bank: the PBOC’s balance sheet for September reveals the first sizeable sales of foreign exchange since the start …
US insistence that provisions against currency manipulation be a part of any future trade deal with Japan has raised suggestions this week that Japanese policymakers, particularly those at the Bank of Japan, could find their hands tied in future. We …
The recent rallies in the Russian ruble and the Turkish lira have added weight to our view that central banks in both countries will refrain from tightening policy further when they meet next week. Meanwhile, data that slipped under the radar this week …
