Filtered by Topic: Monetary Policy Use setting Monetary Policy
The recent turmoil in local markets means that Argentina’s recession will be even deeper than we previously anticipated. We now expect a 4% drop in GDP over 2018 as a whole (vs. -0.5% previously), and a further 2% contraction next year. A sovereign …
6th September 2018
The Monetary Policy Committee (MPC) is unlikely to increase interest rates at its meeting on 13th September so soon after the last rise. In fact, given our assumption that a Brexit deal will only be struck at the eleventh hour, we doubt the MPC will move …
The decline in Brazilian inflation in August, to 4.2% y/y, adds to the reasons to think that Copom won’t raise interest rates at its meeting this month. Moreover, core inflation still looks quite soft and we think the pace of the eventual rate hikes over …
The improvement in South Africa’s current account deficit in Q2 should help to ease concerns about the country’s external financing needs and provide some support to the rand. Coming alongside the weakness of the latest GDP data, it reinforces our view …
Despite the more dovish tone of today’s policy announcement, the Riksbank looks likely to raise interest rates in December. We think that the Bank will then tighten more quickly in 2019 and 2020 than investors expect, causing the krona to strengthen. … …
While the Bank of Canada left its interest rates unchanged today it appears to be heading for a hike in October, although a serious breakdown in the NAFTA negotiations could result in a last minute delay. … Bank likely to raise interest rates in …
5th September 2018
The rise in Russian inflation to 3.1% y/y in August, combined with Governor Nabiullina’s hawkish comments yesterday, will add fuel to expectations for an interest rate hike. But with underlying price pressures still extremely weak, we think that the …
With growth easing and inflation very low, Bank Negara Malaysia’s decision to leave its main policy rate on hold at 3.25% today was no surprise. While the risks are skewed towards looser policy, we expect rates to stay on hold throughout this year and …
The statement accompanying the decision by Chile’s central bank to hold its policy interest rate at 2.50% flagged that a tightening cycle will begin in the coming months. We remain comfortable with our forecast for rates to begin rising at the next policy …
Headline consumer price inflation is likely to have eased in August, in large part due to another fall in food inflation. But more important from the policy perspective, core inflation is likely to have remained elevated. The upshot is that the RBI’s …
The increase in the volume of the Bank of Japan’s bond auctions merely offsets a reduction in their frequency and won’t alter the overall pace of purchases much. The bigger point is that those auctions don’t tell us anything about the outlook for monetary …
Uncertainty about the outlook for the economy and monetary policy in the euro-zone is unusually low. While it is unlikely to return to the levels seen during the financial crisis or euro-zone debt crisis any time soon, we suspect that it will rise over …
4th September 2018
In August, Swiss inflation was unchanged at its joint-highest level in over eight years. But underlying price pressures are subdued, and we think that falling oil prices and exchange rate effects will drag headline inflation down over the next year. So …
Today’s shift in the Bank of Japan’s bond purchases shouldn’t be interpreted as a signal that the 10-year target will be raised anytime soon. Note added post-publication: In this Update, we suggest that the increase in BoJ purchases “looks rather odd”. We …
The sense of crisis that engulfed Argentina on Wednesday and Thursday seems to have eased today and, while there is a clear risk that the currency falls further in the near term, based on the real exchange rate it looks like the necessary adjustment may …
31st August 2018
While the US and Canada are aiming to reach a compromise over NAFTA today, at this stage it’s still unclear whether this will happen. Either way, next week the Bank of Canada will take the spotlight. The Bank looks set to keep policy unchanged, even if a …
The Philippines looks to be on the verge of passing legislation to allow in more rice imports. If the bill passes, it should lead to a sharp drop in inflation and would reduce the pressure for further aggressive interest rate hikes. Meanwhile, the …
The sell-off in the Argentine peso this month gathered pace after the government’s impromptu request to draw down more of its IMF bailout. Rather than soothing market tensions, this reinforced concerns about the government’s ability to service its debts. …
Turkish CPI figures due on Monday are likely to show that inflation rose to its highest level since 2003, but government pressure means that this is unlikely to prompt the central bank to hike interest rates. Elsewhere, the Ukrainian hryvnia has come …
The Bank of Korea’s (BoK) decision to leave interest rates on hold at 1.50% today came as no great surprise given the recent deterioration in the labour market. Looking ahead, with headwinds to growth mounting and inflationary pressures likely to remain …
Australia is still a very long way from a recession or a financial crisis, but this week’s news that Westpac is hiking its mortgage rates has raised the risk a bit. After all, higher mortgage rates, falling house prices and tighter credit conditions are …
Fuel prices have risen to record highs in most of India’s major cities in recent weeks. This creates a political headache for the ruling BJP ahead of next year’s general election. However, the price rises won’t have a major impact on inflation or monetary …
The fresh sharp falls in the Turkish lira this week reflect growing concerns about the state of domestic policymaking and the health of the banking sector. Monetary tightening or an improvement in relations with the US could support a relief rally. For …
30th August 2018
Strong economic growth is fuelling inflationary pressures in both Norway and Sweden. So we expect the Norges Bank to follow through on its guidance and raise rates by 25bp next month. We doubt that Sweden’s Riksbank will be far behind and think that it …
Asian currencies have continued to hold up pretty well over the past few weeks despite the turmoil in EM currency markets. Since the start of August, the Korean won and the Thai baht have actually appreciated against the US dollar, while the Indian rupee …
Fed officials look increasingly confident in their plans to raise interest rates twice more this year while ECB officials are on course to end their asset purchases by December. Next year, though, we expect the Fed to raise rates only two more times …
Fears that financial turbulence in Turkey were the first sign of broader problems rumbled markets across the emerging world in August, with South Africa one of the hardest-hit. The country has Africa’s most globally-integrated economy and most …
With the fiscal stimulus acting as a strong tailwind, economic growth has been unusually strong over the past few months but, below the surface, signs are emerging that rising interest rates have begun to weigh on some parts of the economy. … Are rising …
29th August 2018
In his Jackson Hole speech, Fed Chair Jerome Powell revived Greenspan-era arguments that policy should be flexible and follow a “risk management” approach, but we doubt this amounts to much in practice. The Fed appeared to follow policy rules closely in …
Even if NAFTA negotiations are concluded successfully this week, the Bank of Canada is likely to wait until October before it raises interest rates. … Bank on pause ahead of October rate …
Frontier financial markets have endured a torrid 2018, but this hasn’t been accompanied by a deterioration in the hard activity data. Admittedly, growth in the largest frontier economy, Nigeria, slowed in Q2. But that was due to weakness in the oil …
Although the Central Bank of Iceland left policy unchanged today, it expressed concern about rising inflation expectations ahead of wage negotiations later this year. So domestic inflationary pressures are set to build further and we continue to expect …
Australian households have been more resilient to low income growth and falling house prices than we expected. After rising by just 0.3% q/q in the first quarter, the solid rises in retail sales in recent months imply that real consumption rose by about …
Although the Reserve Bank of Australia will once again leave interest rates at 1.5% at the policy meeting on Tuesday 4th September, we sense that Governor Lowe has started to send some subtle signals that the Bank is warming to the idea of raising rates. …
28th August 2018
The upward pressure on the Swiss franc eased this week and our forecasts for monetary policy in Switzerland suggest that the currency will continue to depreciate against the euro over the next couple of years. Meanwhile, the latest opinion polls suggest …
24th August 2018
Amid all the political drama of the past week, the clear message from Fed officials is that they remain committed to their plans to continue raising interest rates. That’s unlikely to change until next year. … Fed ignoring the …
Greece’s exit from its bailout on Monday was widely hailed by European policymakers as a sign of success, but its problems are far from over. Meanwhile, comments from President Trump emphasised that, despite the supposed tariff ceasefire between the US …
The Russian ruble came under pressure this week as investors worried that US sanctions will be ramped up. For now, though, we don’t think that this will have a significant near-term impact on the economy. Elsewhere, the dovish stance taken by Hungary’s …
Stronger-than-expected Q2 GDP figures this week and the Bank of Thailand’s (BoT) increasingly hawkish rhetoric suggest a 25bp rate hike is likely at its next meeting on 19 th September. However, with inflation likely to remain benign and growth set to …
Few details about Angola’s request for IMF aid have been released, but any deal would boost investor confidence. We revised down our rand/dollar exchange rate forecasts this week. A tweet from President Donald Trump subsequently highlighted the currency’s …
Even after its recent rise, we still think that the Swiss franc will weaken against the euro over the coming years as the Swiss National Bank lags the ECB in tightening monetary policy. But sustained demand for safe-haven assets suggests that the …
23rd August 2018
Growth only slowed a touch in Emerging Asia last quarter, but weakening export demand and tighter monetary policy mean that the region’s economies are likely to cool further over the next year or so. … Further slowdown …
Inflation in both Brazil and Mexico has been a bit higher than we had anticipated over the past few weeks, but we think the broad trend over the next year or so will be up in Brazil, and down in Mexico. Accordingly, interest rates are likely to head in …
The merchandise trade deficit narrowed to a 17-month low of $0.6bn in June, thanks to a 4.1% monthly rise in exports and a small fall in imports. But both moves were largely due to big swings in aircraft trade. The big picture remains that non-energy …
Both the consensus and financial markets are coming around to our view that the Fed will cut interest rates in 2020, but we still think they are underestimating how soon and how fast the Fed’s policy cycle is likely to turn. We expect that a sharp …
22nd August 2018
President Donald Trump’s recent public criticism of Fed Chair Jerome Powell is a clever attempt to pre-emptively blame the Fed and its interest rate hikes for any future downturn in the US economy. The particular danger for him is that weakness could …
The rand’s recent falls have prompted us to downgrade our end of year forecasts. We now think that the currency will slip from 14.4/$ to 15/$ by the end of 2018 and to 15.5/$ by the end of 2019. … South Africa: Revising down our rand …
Even if emerging market assets remain under pressure this year, we don’t expect the crises in Argentina and Turkey to be replicated in other emerging economies. Meanwhile, domestic conditions in the US and euro-zone support the case for gradual policy …
July’s stronger-than-expected inflation was almost entirely due to sharp rise in fuel costs. Core inflation remained stable, and we think that the SARB will keep policy on hold this year. … South Africa CPI …
