Filtered by Topic: Monetary Policy Use setting Monetary Policy
The statement accompanying the Chilean central bank’s decision to increase its policy rate by 25bp last night to 2.75%, suggested that a gradual tightening cycle would lie in store over the next 12-18 months. But we think that tightening will come more …
19th October 2018
While the Riksbank, the Norges Bank and the ECB are likely to keep interest rates unchanged next week, we expect them all to signal tighter policy ahead. The recent rebound in underlying inflation will have made the Riksbank more confident in its plans to …
Official GDP growth slowed last quarter consistent with broader evidence that the economy is cooling. There are some early signs in the September data that policy support is starting to gain traction but we think more easing will still be needed in order …
The ECB has certainly given some mixed messages over recent weeks, with some Council members judging that the first rate hike should come during next summer while others assert that Q4 2019 is more likely. We doubt that it will change its forward guidance …
18th October 2018
The era of record-low interest rates is nearly over in Sweden, but it is a long way from finished in Switzerland. The Swedish economy is powering ahead, generating inflationary pressure that the Riksbank will soon need to rein in. We expect it to begin …
While a disorderly no deal Brexit might, depending on its nature, deliver a significant short-term blow to the UK economy and financial markets, any global fallout would probably be small. … Global fallout from a no deal Brexit would be …
The Bank of Korea (BoK) left interest rates unchanged today, but appeared to leave the door open to a rate hike soon. However, with growth set to slow, trade tensions building and inflation likely to drop back, we are sticking with our view that interest …
Prospects for Europe have deteriorated somewhat as slowing global demand has begun to affect exports and a sharp rise in bond yields has darkened the outlook for Italy. Some of the major players should continue to perform very well. The German labour …
17th October 2018
The markets are convinced that the Bank of Canada will hike its overnight rate by another 25bp to 1.75% at next week’s policy meeting and it isn’t hard to see why. Economic growth has been solid this year and probably a touch stronger than the Bank’s …
Economic growth in Sub-Saharan Africa will probably strengthen a touch in 2019, but growth across the region will remain weaker than consensus expectations. We think that growth in Nigeria will slow as oil prices fall and output stabilises. Meanwhile, the …
16th October 2018
Nigerian inflation remained essentially unchanged in September, which supports our view that – despite recent hawkish language – policymakers will leave their key rate on hold over the coming months. … Nigeria Consumer Prices …
The Bank of Canada’s latest Business Outlook Survey shows that growing capacity constraints are boosting investment intentions, which will reinforce expectations that the Bank will raise interest rates again at next week’s policy meeting. … Business …
15th October 2018
There are good reasons for the Bank of Thailand not to hike interest rates at its next meeting, as it currently appears determined to do. But currency strength is not one of them. … Thailand: strong baht will not stop rate …
The rise in wholesale price inflation in September was due in large part due to a significant rebound in food inflation. But core inflation also remained elevated, supporting our view that the RBI’s tightening cycle still has a little further to run. … …
Japan’s economy was always likely to slow in the third quarter after the surge of output it generated in the second. But the latest data have still been rather disappointing. While investment remains strong, industrial output may have contracted, consumer …
Inflation data published this week showed that price pressures are building in Sweden and Norway. We expect the Riksbank to begin raising interest rates in December. But while the Norges Bank looks set to raise interest rates again in the first half of …
12th October 2018
It is hard to explain this week’s sharp drop in equity prices in terms of the incoming economic data. True, following the surge in the 10-year Treasury yield that began last week, the sell-off in equities could be due to fears that higher interest rates …
Consumer price inflation crept only a little higher last month. But with core inflation still well above the Reserve Bank’s target, we think that the tightening cycle has a little further to run. … Consumer Prices (Sep.) & Industrial Production …
Some of the recent weakness in euro-zone industry, particularly that in Germany, seems to have been caused by hold-ups relating to new emissions tests. While part of this delayed output will probably be made up later, overall industrial growth is unlikely …
September’s strong Hungarian inflation data – released on Tuesday – caused investors to raise their interest rate expectations, coming round to our more hawkish view. Meanwhile, a fall in inflation last month didn’t prevent policymakers at the Czech …
The Monetary Authority of Singapore (MAS) today increased the slope of its nominal effective exchange rate policy band, a decision that amounts to a tightening of its policy stance. But with growth likely to ease over the coming year and inflation set to …
The rebound in non-energy inflation in September will reassure the Riksbank that it is right to be planning to tighten monetary policy in the coming months. We expect underlying inflation to continue to pick up, allowing the Bank to start raising interest …
11th October 2018
GDP growth has surged in recent quarters and, while it has probably peaked, we expect it to remain strong ahead of the general election in the first half of 2019. Thereafter, a focus on fiscal tightening and the lagged impact of recent rates hikes means …
Policymakers have responded to growing signs of weakness in China’s domestic economy by ramping up policy support. But with momentum still slowing and trade tensions escalating, growth will not stabilise until the middle of 2019. … Growth to slow further …
10th October 2018
Based on our forecast for economic growth to slow, there is little prospect of the Bank of Canada raising interest rates by another 100bps over the next year. Even if the economy maintained its recent strong pace of growth, raising interest rates by that …
The Turkish government’s latest plan to tackle high and rising inflation will probably have a limited impact and it reinforces our view that last month’s aggressive interest rate hike did not herald a broader shift back to orthodox policymaking. … Turkey: …
The Romanian central bank’s FX intervention this year has kept the leu artificially strong, causing economic imbalances to build. Unless policymakers change course soon and loosen their grip on the currency, a messy economic adjustment lies in store. … …
The rise in Egyptian inflation to 16.0% y/y last month was driven almost entirely by higher food inflation but, even so, it probably means that the central bank’s easing cycle will be paused for a little longer. … Egypt Consumer Prices …
Even if the current drift towards an all-out trade war between the US and China is halted (which we doubt), weaker global demand will drag on regional exports. With domestic demand also likely to struggle in many places, we think GDP growth across the …
9th October 2018
The further rise in Mexican inflation in September will provide yet more ammunition to the hawks within Banxico. But with inflation now likely to have peaked, we still expect the next move in interest rates to be down – although this is unlikely to come …
Economic growth has held up far better than financial markets in the emerging world over the past few months. But while some countries will continue to do well, EM growth in aggregate is now slowing and will continue to decelerate over the coming year. … …
As the price for a deal with Pakistan, the IMF is likely to demand a further sharp tightening in fiscal and monetary policy as well as structural reforms aimed at raising more revenue and improving the business environment. Although growth is likely to …
Domestic demand will pick up speed ahead of next year’s sales tax hike, extending one of Japan’s strongest runs of growth since the 1980s, and price pressures will strengthen. But weaker domestic demand after the tax hike means that GDP growth will slow …
The sizeable rise in Chilean inflation to 3.1% y/y in September, taken together with hawkish comments from policymakers, supports our view that rates will begin to rise at the central bank’s meeting next Thursday. We’ve pencilled in a 25bp rise in the …
8th October 2018
Consumer price inflation is likely to have risen in September, in large part because the recent sharp fall in food inflation appears to have reversed. More important from the policy perspective, core inflation is likely to have remained elevated. The …
We think the upcoming reduction in banks’ required reserve ratio will be followed by cuts to the policy rate to ensure that interbank rates fall far enough to boost lending. But despite its growing efforts to prop up economic activity, the People’s Bank …
The fall in Swiss inflation in September is a sign of things to come. Indeed, exchange rate effects and weak wage growth are set to ensure that price pressures remain very weak, keeping the SNB on hold until 2020. Meanwhile, although private sector …
5th October 2018
The sharp rally in Brazilian asset prices this week appears to reflect growing expectations that right-wing candidate Jair Bolsonaro will win the presidential election, the first round of which is on Sunday, but we think the markets are getting ahead of …
The changes to Canada’s trading relationship with the US and Mexico do not, on their own, have big implications for the economy. By removing uncertainty, the agreement will help to keep economic growth at a healthy clip for the next couple of quarters. …
The recent strength of the economy appears to be pushing Fed officials in an increasingly hawkish direction. But the corresponding surge in market interest rates this week only reinforces our own view that economic growth will slow sharply next year. … …
The further rise in Russian inflation, to 3.4% y/y, last month was driven mainly by a pick-up in food inflation, but core price pressures stayed soft. That, coming alongside the recent stabilisation of the ruble and fall in inflation expectations, …
The rise in Brazilian inflation, to 4.5% y/y in September, has already exceeded the BCB’s newly-published forecasts. And, taken together with comments from policymakers that hint at the start of a tightening cycle, it’s looking most likely that the first …
Inflation in the Philippines rose to a fresh nine-year high in September, but even if it starts to drop back over the coming months, pressure is likely to remain on the central bank (BSP) to tighten policy further. Elsewhere, the central banks of …
The Reserve Bank of India (RBI) unexpectedly kept rates on hold today, but flagged several upside risks to the inflation outlook in its accompanying statement and explicitly shifted to a more hawkish formal description of its policy stance. As such, we …
New GDP figures have presented a more flattering picture of Ghana’s economy, though obviously actual output remains unchanged. The Bank of Uganda hiked its key interest rate this week, adding to signs that Africa’s wave of policy loosening is over. …
We doubt that the gap between the Reserve Bank of Australia’s relatively upbeat tone and the downbeat feel of the recent economic news will be sustained for long. We suspect the RBA may become a little more concerned about how credit conditions and the …
Business and consumer surveys suggest that growth in the euro-zone as a whole will continue at a fairly healthy pace of around 0.4% per quarter in the near term. But there is a growing divergence by country. The German survey indicators have stabilised at …
4th October 2018
Poland’s MPC maintained a dovish stance today. On the face of it, low inflation suggests that this position is justified, but we think that policymakers are too sanguine on the outlook for consumer prices. Inflation is likely to rise by more than the MPC …
3rd October 2018
A year after the Fed began shrinking its balance sheet, global central banks’ net asset purchases have slowed sharply, and they are set to turn negative in January. However, we doubt that this will cause a sharp sell-off in global bond markets or that it …
The timing of the Brazilian central bank’s first interest rate hike is likely to be determined by politics as much as economics. There’s a lot of uncertainty related to the outcome of the Presidential election. But, as things stand, it seems most likely …
