Filtered by Topic: Monetary Policy Use setting Monetary Policy
The statement that accompanied the Brazilian Central Bank’s meeting last night provided the first clear sign that it is preparing to tighten monetary conditions, with the first rate hike likely to come before the end of 2018. But the tightening cycle is …
20th September 2018
Mr Abe will remain Prime Minister for another three years. That means fiscal policy will probably be tightened further, monetary policy will remain loose and policymakers may take some further steps to address the country’s demographic headwinds. … What …
The Reserve Bank of New Zealand will keep interest rates unchanged at 1.75% at the policy meeting on Thursday 27th September and will probably acknowledge that GDP growth in Q2 was stronger than it had anticipated. But we still think that economic …
We have revised up our forecast for the price of Brent crude, but still expect it to fall in the coming year or so, helping to reduce headline inflation. However, we don’t expect this to have much impact on monetary policy, because central bankers in …
19th September 2018
Last week’s aggressive interest rate hike in Turkey has reduced the risk of a more acute balance of payments crisis and helped to restore some of the central bank’s (CBRT) damaged credibility. But the CBRT would need to shrug off pressure from President …
The continued strength of economic growth in the third quarter together with signs that wage growth and underlying inflation are accelerating will maintain pressure on the Fed to keep raising interest rates once a quarter, including at next week’s …
Judging by what has happened in recent months, President Trump’s attitude to global trade could remain a more important driver of the US dollar than the prospects for monetary policy in the US and elsewhere. With this in mind, we might need to revise our …
The Bank of Thailand (BoT) left its policy rate unchanged at 1.50% today, but the hawkish tone of accompanying statement suggests that rate hikes are in the pipeline. With inflationary pressures very low, worries over the strength of the currency mounting …
South African inflation slowed to 4.9% in August, which supports our view that policymakers at the SARB will leave their key rate on hold at 6.50% at their meeting tomorrow. … South Africa CPI …
The Bank of Japan today reiterated its pledge to keep rates low for a prolonged period. With the sales tax hike looming and inflation set to remain below target for longer, we think that the Bank will keep rates unchanged beyond 2020. … Mounting risks …
The National Bank of Hungary’s revamp of its monetary policy framework announced today was characteristically complex. But the key point is that the Bank is paving the way for policy tightening and we expect interbank interest rates to increase over the …
18th September 2018
The latest comments from the ECB’s Benoît Coeuré suggest that future guidance about the pace of policy tightening might hinge on developments in wage growth. In our view, this would be a positive development, reducing the risk that the historically …
The US appears to be on the verge of expanding its tariffs to cover a total of $250bn of Chinese goods, the production of which generates 1.3% of China’s GDP. The proposed $200bn tariff list includes some consumer goods, though most have still been …
17th September 2018
Our new forecast that the Reserve Bank of Australia won’t raise interest rates from the record low of 1.5% until late in 2020 compares to the consensus view that lift-off will take place late next year. That partly explains why we now expect the …
Argentina’s 2019 budget will reportedly contain some much-needed spending cuts, but key IMF requests are conspicuous by their absence. Meanwhile, Brazil’s election race is beginning to heat up, but the chances of major economic reform after the vote seem …
14th September 2018
The aggressive interest rate hike in Turkey on Thursday has soothed the markets, but President Erdogan’s comments today reinforce our fears that he will put pressure on the central bank to reverse course. Meanwhile, comments from the Czech National Bank …
Political uncertainty following Sweden’s general election last weekend is unlikely to meaningfully alter the Riksbank’s plans to start tightening policy around the turn of the year. Meanwhile, in Norway, stronger August inflation data this week will have …
While Michel Barnier, the EU’s Chief Negotiator, raised hopes that a Brexit deal will be secured soon, we suspect that an agreement is still some way off. This feeds into our forecast that sterling will pull back to $1.25 and €1.09 by end-2018. This is …
Although retail sales were weaker than we had been expecting in August specifically, upward revisions to sales in previous months mean that real consumption growth still appears to have remained strong in the third quarter. … Retail Sales …
The tone of the Russian central bank’s press conference suggests that today’s interest rate hike was a pre-emptive move against an expected tightening of US sanctions, not the start of a cycle. As things stand, we think it’s most likely that rates will be …
Ten years after the collapse of Lehman Brothers, there are concerns that the financial markets will bring the global economy to its knees again. We do not think, however, that they will be a major cause of the next recession, despite claims that the …
There are growing suggestions that the South African Reserve Bank will raise interest rates at its meeting next week, but the weakness of the latest activity data and of inflation expectations mean we think that it will keep rates on hold. Elsewhere, the …
Although CPIF inflation was above target in August, the further decline in non-energy inflation will worry the Riksbank. If it remains soft, then the Bank will probably keep rates on hold until early 2019. … Swedish Consumer Prices …
The moderation in wholesale price inflation in August was in large part due to another drop in food inflation. But core inflation remained elevated, supporting our view that the RBI’s tightening cycle still has a little further to run. … Wholesale Prices …
The ECB today confirmed its intention to normalise policy gradually, expressing very little concern about signs of an economic slowdown. Given growing risks and economic uncertainty, the first interest rate hike is still at least a year away. But the …
13th September 2018
Ten years after the collapse of Lehman’s, the risk of something similar occurring again in the near future appears to be low. But looking for the next Lehman’s misses the point – crises on the scale seen in 2008 are rare and, while a repeat looks unlikely …
The Monetary Policy Committee (MPC) does not appear to be in a rush to raise interest rates again soon. Indeed, our assumption that a Brexit deal will be struck at the eleventh hour will probably prevent the MPC from lifting rates again until next year. … …
The aggressive interest rate hike delivered by Turkey’s central bank has soothed the markets, but the next thing to watch will be the reaction of President Erdogan. Any sign that he will try to reassert his influence over monetary policy decisions could …
August’s rise in Egyptian inflation means that the central bank will probably leave interest rates on hold at this month’s MPC meeting. But signs that core price pressures have eased means that it won’t be long until rate cuts come back on to the agenda. …
In previous EM currency crises, real interest rates have increased (on average) by around 10.5%-11.0%-pts in the following year and remained more than 6.5%-pts above pre-crisis levels over the subsequent two years. In Argentina, real interest rates are …
Polish inflation is lower, and has been slower to rise, than elsewhere in Central & Eastern Europe (CEE), which seems to be a result of having more slack in its labour market and faster productivity growth. Nonetheless, we think inflation is likely to …
Mounting downside risks to economic activity mean that the Bank of Japan will have little reason in the foreseeable future to deviate from its pledge to keep interest rates extremely low for an extended period. Our long-held view that the Bank will keep …
The risk that higher interest rates will trigger widespread corporate defaults and cause the next global downturn is low, not least because business finances are generally in good shape. But as monetary policy is tightened, companies may scale back …
12th September 2018
Another sharp drop in food inflation pulled down headline consumer price inflation in August. But core inflation remains high and we still think that the Reserve Bank’s tightening cycle has a little further to run. … Consumer Prices (Aug.) & Industrial …
Indonesia and the Philippines are likely to tighten monetary policy aggressively over the rest of this year. The Philippines may even call an emergency policy meeting in the face of soaring inflation. But these two countries are the exceptions. With the …
The Andean economies of Chile, Peru, and Colombia all appear to be close to raising interest rates. In this Update, we take a closer look at what has triggered central banks to begin tightening cycles in the past. The short point is that Chile’s central …
10th September 2018
The large build-up in private sector debt over the last decade means that the Canadian economy is far more sensitive to interest rate rises than in the past. This increases the likelihood that the Bank of Canada’s rate hikes could trigger a potentially …
The rise in Egyptian inflation to 14.2% y/y last month, coupled with the backdrop of the recent sell-off in EM financial markets, means that the central bank will probably leave interest rates unchanged (rather than cut them) at this month’s MPC meeting. …
Following August’s increase in core inflation to a 19-month high, the Norges Bank is almost certain to raise interest rates at next week’s meeting. But policymakers remain cautious about the impact of tighter monetary policy, so they will move very slowly …
The latest opinion polls suggests that Sunday’s general election in Sweden will be a close call. But the outcome of the vote is unlikely to significantly alter the outlook for the economy or monetary policy. Meanwhile, data published this week showed that …
7th September 2018
The ISM surveys released this week suggest that the economy is set for another quarter of growth above 4% annualised. We suspect that will prove a little too optimistic, but the bottom line is that the economy remains unusually strong. That will give the …
Despite the steady flow of negative news about protectionism and crises in emerging economies, global growth is holding up well in Q3. Moreover, the labour market has continued to strengthen, particularly in the US, making two more rate hikes this year a …
The central bank governor of the Philippines, Nestor Espenilla, today all but confirmed that interest rates will be raised soon, possibly in an emergency meeting before the BSP is next scheduled to meet on 27 th September. Meanwhile, weak activity data …
The latest slide in the rupee appears finally to have jolted the RBI into action, with widespread reports of intervention today. We doubt that this will draw a line under the rupee’s decline. Meanwhile, the reliability of the GDP data is again being …
Central banks in both Russia and Turkey created a stir this week by raising the prospect of rate hikes, but we think that the degree of tightening in Turkey will disappoint markets and policymakers in Russia will probably leave interest rates unchanged. …
The People’s Bank still appears reluctant to deploy its FX reserves in order to support the renminbi. We suspect that it is leaning on state-owned financial institutions to sell foreign assets in its place. … FX Reserves …
Chinese consumers appear to have become more worried about inflation recently. But these concerns may reflect a broader sense of unease among households in response to a weakening labour market rather than about inflation itself, which seems likely to …
Despite mixed news from the economy and growing risks to the outlook, we expect the ECB to reiterate that asset purchases are set to end in December and that interest rates will probably rise gradually from next autumn. It will stress its ability to …
6th September 2018
Turkey’s central bank has all but confirmed that it will raise interest rates at next week’s MPC meeting and an increase of 350-400bp seems to be the bare minimum that will be needed to soothe investors. But pressure from the government means we think …
