Filtered by Topic: Monetary Policy Use setting Monetary Policy
The Bank of Thailand left its policy rate at 1.50% today, but the hawkish shift in the central bank’s tone means a rate hike is now likely before the end of the year. We are revising our end-2018 policy rate forecast to 1.75%, from 1.50% previously. … …
8th August 2018
Headline consumer price inflation is likely to have dropped in July, in large part due to a fall in food inflation. But core inflation is likely to have remained elevated by the standards of the recent past, underlining why the Reserve Bank felt it needed …
Q2’s slowdown in GDP growth to just 0.3% q/q dealt a blow to hopes that the softness of growth in the first quarter would be a one-off. While no breakdown is available yet, timely data from France and Spain suggest that the weakness reflected a drag from …
7th August 2018
A rise in China’s foreign exchange reserves in July suggests that the People’s Bank did not deploy them to defend the renminbi last month. It may do so soon, however, given growing concerns over outflows. … FX Reserves …
The Turkish lira has recovered some of its losses in the past few hours, but the plunge in the currency over the past few weeks is now on a scale which has, in the past, prompted the central bank to hike interest rates aggressively. We were expecting …
The Reserve Bank of Australia appeared a bit more upbeat on the outlook for the domestic economy while leaving interest rates at 1.5% for the 24 th month today, but it continued to hint that interest rates won’t rise for a while yet. We’re expecting the …
The small rise in Russian headline inflation, to 2.5% y/y, was driven by higher food inflation, while underlying price pressures still look very soft. We still think the central bank will lower interest rates over the next 12-18 months or so, whereas the …
6th August 2018
A new offer to restructure Mozambique’s debt hints at the shape that an eventual deal may take. An agreement would provide a boost to confidence in an economy that is already starting to recover. … Mozambique: Debt offer suggests a deal is …
The housing market enjoyed a little respite in June. The decline in buyer enquiries paused, new sales instructions rose and mortgage approvals recovered from their recent slide. But with house prices very high, and interest rates having risen, neither …
The MPC has estimated that the long-term equilibrium interest rate for the UK economy lies between 2% and 3%. Such estimates are uncertain, but they do tend to reinforce the idea that, barring a significant economic or financial market shock, the …
The world economy has rebounded after a sluggish first quarter, with global growth rising to around 4% annualised in Q2. But we doubt that this will last long because it has largely resulted from a fiscal-stimulus-induced surge in the US economy. What’s …
3rd August 2018
Inflationary pressures now seem to be building in many EMs. As a result, we think that the interest rate hikes seen in a few countries this week and that are likely next week will be followed by monetary tightening across a large part of the emerging …
Although May’s strong GDP growth partly reflected a rebound from earlier weakness, it was nevertheless encouraging and June’s trade data suggest that the economy ended the second quarter on a high note. With July’s Markit manufacturing PMI also suggesting …
Mexico’s central bank struck a hawkish tone in the statement accompanying this week’s monetary policy decision, and the markets are pricing in a good chance of another interest rate hike in the near term. But we still think that interest rates will be cut …
Non-farm payrolls increased by a more modest 157,000 in July but, with the gain in the preceding two months revised up by a cumulative 59,000, the labour market still appears to be in good health and any negative market reaction should be limited. This …
The US’s decision to impose sanctions on Turkey this week, as well as another bad inflation reading, has strengthened the case for further interest rate hikes. And there’s a growing risk of severe macroeconomic stress. Elsewhere, Hungary’s much-vaunted …
The outlines of the Bank of Japan’s new policy framework have become clearer during the week: a more flexible approach to intervention, a focus on preventing sharp moves, but also a tolerance of higher yields for the target 10-year JGB than before. In the …
After the recent run of upbeat economic news the Monetary Policy Committee’s decision to raise rates this week came as little surprise. And the hawkish tone of the Minutes and Inflation Report lent some support to our view that interest rates are likely …
While policymakers in other EMs are hiking rates, we think that African central banks will follow Kenya's recent example and continue to ease policy over the next 18 months. Fears surrounding the economic impact of South Africa's land reform process are …
July’s rise in Swiss inflation was driven by faster energy and food inflation, while underlying price pressures remained very weak. And with the franc set to remain strong by historical standards, we expect the Swiss National Bank to leave interest rates …
Rising inflationary pressures mean that the central bank of the Philippines (BSP) is almost certain to raise interest rates at its meeting on Thursday, the only question is by how much. … Philippines central bank to turn more …
The rise in Turkish inflation to a 15-year high of 15.8% y/y last month, coming alongside further lira weakness following the imposition of US sanctions, strengthens the case for interest rate hikes. While the central bank faces pressure from the …
Given the recent rebound in inflation, it was no surprise that the central bank of Sri Lanka (CBSL) decided to leave policy on hold today. But with growth continuing to disappoint and inflation likely to drop back again by October, we still expect another …
Data released this week show a rapid expansion of the central government’s deficit in the early part of this fiscal year. This is a common occurrence, as revenues tend to get ramped up in the latter months. Even so, there are a number of reasons to think …
The new forecasts accompanying today’s Czech MPC meeting – at which the policy interest rate was raised by 25bp – suggest that another hike is likely in November. In 2019, we think that interest rates will be raised by more than the central bank and …
2nd August 2018
Despite the Monetary Policy Committee (MPC)’s hawkish forecasts accompanying the second rise in interest rates for a decade, markets are still anticipating only a very modest pace of monetary policy tightening over the coming years. We continue to think …
The sanctions imposed by the US on two Turkish government ministers in themselves aren’t very big, but it looks likely that more measures will be announced. The lira is likely to fall further, strengthening the case for interest rate hikes. And given the …
The slightly more dovish language in the Brazilian central bank’s post-meeting statement adds weight to our view that policymakers are untroubled by the recent spike in inflation. And while a tightening cycle is set to begin over the next six months, rate …
While leaving interest rates at 1.75% at the policy meeting on Thursday 9 th August, the Reserve Bank of New Zealand will probably acknowledge the recent softening in activity by revising down the GDP growth forecasts published in the accompanying …
As was widely expected, the Fed left interest rates on hold today but, by upgrading its assessment of economic growth to “strong” in the accompanying policy statement, it hinted that it will keep raising rates once a quarter. Despite the uncertainty over …
1st August 2018
The Bank of England is expected to publish an estimate of the neutral interest rate (i.e. the level at which rates have neither an expansionary nor a contractionary effect on growth and inflation) for the first time on 2nd August. A number of around 2% …
The Norges Bank will soon start to tighten monetary policy. But in contrast to the consensus view, we think that as interest rates rise over the next few years, the krone will depreciate against the euro. … Norwegian krone to weaken even as interest rates …
The RBI opted to tighten policy again today against a backdrop of strong growth and rising inflation. The swiftness with which the central bank has responded to the jump in inflation should prevent the need for very aggressive policy changes in the …
Growth in the broad monetary aggregates and bank lending has continued to accelerate in recent months even as the monetary base contracted, suggesting that the Fed’s balance sheet run-down is having little impact on the wider economy. … Monetary …
31st July 2018
Even after Q2’s disappointing euro-zone GDP data, we still think that the ECB is unlikely to extend its net asset purchases into next year. But it might vary the reinvestment of funds from its huge bond portfolio in 2019 to keep longer-dated government …
Data released in July revealed a wide-spread economic slowdown across most of Sub-Saharan Africa. The available figures mostly suggest that conditions improved more recently, but that growth remained weak in the middle of the year. … Recent weakness …
The consensus-beating 0.5% monthly rise in GDP means that growth over the second quarter as a whole looks to have been 3.0% in annualised terms. The Bank of Canada largely anticipated this strength, however, having pencilled in a 2.8% gain, so we doubt …
The rebound in the Pakistani rupee, which has gained around 4% against the US dollar since last week’s election, is likely to prove fleeting. The exact trigger behind the surprise jump in the currency is unclear, but it has been linked to rumours that …
The Bank of Japan made some technical adjustments to its policy framework today. But its key message, which it emphasised with the introduction of explicit forward guidance, was that the main policy rates will remain at very low levels for the foreseeable …
The combined message from the Reserve Bank of Australia’s policy announcement on Tuesday 7 th August and the publication of the Statement on Monetary Policy on Friday 10 th will probably be that even though this will be the 24th month that interest rates …
The statement that accompanied today’s decision by the Central Bank of Kenya to lower interest rates by 50bp suggested that the easing cycle has further to run. However, with inflation set to rise in the coming months, the next cut in rates is likely to …
30th July 2018
The rise in inflation in most of Emerging Europe over the past month has caused central banks to adopt a more hawkish tone. Policymakers in Romania and the Czech Republic are likely to hike interest rates further in August, and Hungary’s central bank is …
The sharp jump in headline inflation in Brazil over the past month has masked continued weakness in core inflation. And underlying price pressures should remain fairly subdued over the next 12-18 months. As a result, interest rates are likely to rise more …
In our view, speculation that the Bank of Japan is preparing to dial back its ultra-loose monetary policy is misplaced. Meanwhile, the ECB is likely to leave its policy rates at rock-bottom levels until September 2019, if not later. In contrast, with the …
27th July 2018
The acceleration in GDP growth, to an impressive 4.1% annualised in the second quarter, is principally due to the massive fiscal stimulus unleashed at the start of this year. Unfortunately, there is little evidence that tax cuts have improved the supply …
The easing of trade tensions between the US and EU this week reduces the risk that the US will soon increase tariffs on EU cars, but it still leaves us a long way from any action to reduce trade barriers. Meanwhile, ECB President Draghi’s comments at …
The first activity surveys for July should provide a final bit of encouragement to the MPC to raise interest rates at its meeting next Thursday. Elsewhere, the EU’s Chief Negotiator, Michel Barnier, ruled out key components of the Government’s Brexit …
Asian equities have rebounded over the past week, helped in part by easing fears of a global trade war after the successful trade meeting between US President Donald Trump and EU President Jean-Claude Juncker. Meanwhile, the latest trade data suggest that …
Bond market participants appear convinced that something substantive will come from next week’s Bank of Japan meeting. But if the Bank did anything that was perceived as backing away from the commitment to keep policy ultra-loose it would be shooting …
The Russian central bank’s post-meeting statement once again sounded hawkish on inflation risks. But it also implied that interest rates could be lowered in 2019, supporting our view that the easing cycle has further to run. In contrast, the markets …
