Filtered by Topic: Monetary Policy Use setting Monetary Policy
The Bank of Japan’s admission that inflation won’t reach its 2% target anytime soon has generated speculation that the target will be lowered at the meeting later this month. By contrast, we believe that the target is here to stay. … Will the BoJ lower …
17th July 2018
The stronger-than-expected Turkish industrial production data for May, at first sight, suggest that the economy has weathered the recent financial market turmoil, but we doubt that this resilience will last. Indeed, there are signs that underlying …
The State Bank of Pakistan’s (SBP) 100bp hike to its policy rate on Saturday, along with today’s devaluation of the rupee, underlines growing concerns about the country’s precarious external position. Further rate hikes are likely over the coming months …
16th July 2018
Policymakers don’t put much weight on the wholesale price measure of inflation, but the fact that it surged to its highest rate in almost five years in June and looks set to remain elevated suggests that the RBI will follow up its recent rate hike with …
The 2019 budget guidelines approved by Brazil’s Congress this week diluted measures to contain spending and reinforce our view that appetite for economic reform in the legislature is waning. Even if an investor-friendly candidate wins October’s …
13th July 2018
The Bank of Canada appears increasingly confident in the economic outlook, but we think that its forecasts for GDP growth will prove to be too optimistic. Following this week’s increase in the policy rate to 1.50%, from 1.25%, the Bank believes that …
The release of disappointing credit data a month ago catalysed a deterioration in sentiment about China’s economy. Today’s even weaker figures will only add to those concerns, with the early signs suggesting that domestic activity also slowed in June. … …
According to the minutes of the Riksbank’s July meeting, Sweden’s monetary policymakers were particularly worried about the weakness of non-energy inflation. And with some justification. Data published this week showed that in June the CPIF excluding …
The financial markets will have one eye on President Donald Trump’s summit with Russian President Vladimir Putin next week, but Fed Chair Jerome Powell’s semi-annual congressional testimony is likely to take centre stage. Powell, who has been a revelation …
May’s GDP figures this week confirmed that the economy is starting to regain some momentum. That said, growth was still pretty anaemic, raising the possibility that the Monetary Policy Committee could back away from raising interest rates in August. But …
In an otherwise quiet week, the main economic news was the publication of the minutes of June’s ECB meeting. They showed that members of the Governing Council “widely agreed” to update their forward guidance, which now states that interest rates will be …
Turkish President Erdogan’s decisions this week to exclude investor-friendly members from his new cabinet and renew his calls for lower interest rates have rattled local financial markets and, ironically, strengthened the case for further rate hikes . …
A further slowdown in lending in June adds downside risks to economic growth and is likely to trigger a policy response. … Bank Lending & Broad Credit …
Survey and output figures released this week suggested that conditions in Nigeria and South Africa improved in Q2. South African retail sales figures out next week will probably provide more evidence of a modest recovery. We think that the SARB will keep …
Despite the further escalation in trade tensions between the US and China over the past week, there is little sign that policymakers are starting to panic. … Trade war risks rise, but no panic …
Consumer price inflation rose to a five-month high in June and, with core inflation in particular set to remain elevated, we think the RBI will follow up last month’s hike in the repo rate with further modest policy tightening, perhaps even as soon as the …
12th July 2018
Reports that Saudi Arabia will scrap the Aramco IPO would, if confirmed, deal a symbolic blow to the Kingdom’s reform plans, but the economic impact should be limited. And the news flow on arguably more important (but lower-profile) reforms has been …
Economic growth in Sub-Saharan Africa will probably strengthen over the second half of 2018, but we think that the consensus view that this year’s performance will mark the start of a multi-year acceleration is overly optimistic. Although most EM central …
June’s rise in Swedish CPIF inflation entirely reflected higher energy inflation. But with domestic price pressures building, and the latest minutes showing that Riksbank officials are increasingly concerned about stronger inflation, we continue to think …
The Bank of Korea (BoK) kept its policy rate on hold at 1.50% today, and while there was a dissenter favouring a rate hike, rising downside growth risks, benign inflation and limited external vulnerabilities suggest imminent policy tightening is not on …
Global monetary and credit conditions should remain supportive of GDP growth in the near term, even though the stock of assets purchased under “global” QE programmes is close to peaking. … Monetary Indicators Monitor …
11th July 2018
Alongside its decision to raise the key policy rate from 1.25% to 1.50%, the Bank of Canada maintained a fairly hawkish tone in its policy statement. While this suggests that the Bank intends to raise interest rate further in 2018, we suspect that it will …
Poland’s MPC bucked the regional trend today by retaining its ultra-dovish stance. However, we think that Polish policymakers will soon start to follow their neighbours. Inflation is likely to rise above the central bank’s 2.5% target range by early-2019, …
US plans to impose tariffs on an additional $200bn of Chinese imports represent a marked escalation of the ongoing trade tensions between the US and China. The tariffs would have knock-on effects on the rest of the region, with Taiwan and Malaysia likely …
The US is moving ahead with plans to impose a 10% tariff on an additional $200bn of imports from China. This will add to existing headwinds on China’s growth and is likely to trigger further policy easing. … Expanded US tariffs strengthen case for policy …
In the event that rising trade tensions lead to a significant fall in US imports from China, it would have a sizeable impact, not just on China, but also on other countries such as Taiwan and Malaysia which export a lot of intermediate goods to China. …
Malaysia’s central bank (BNM) left interest rates unchanged at today’s scheduled monetary policy meeting, but it shifted to a more dovish tone under its new governor. While we are forecasting no change to policy this year or next, with inflation set to …
We expect GDP growth to be broadly in line with trend both this year and next. The labour market will remain very tight and wage growth may strengthen further. But sluggish demand after next year’s tax hike will keep 2% inflation out of reach. The Bank of …
The tariffs announced so far are unlikely to boost Canadian inflation by much more than 0.1% pt, while the effects on economic growth should also be small. We therefore doubt that they will have much bearing on tomorrow’s Bank of Canada monetary policy …
10th July 2018
The main impact for EMs so far from rising global trade tensions and risk aversion has been on financial markets rather than on economic growth. But the resulting tightening of financial conditions – along with the danger of an escalation towards a trade …
Although GDP came in a touch below the consensus expectation in May, it still looks likely that quarterly growth in Q2 will be in line with the Monetary Policy Committee’s (MPC’s) expectation. As a result, we continue to expect the Committee to raise …
Moves over the past 24 hours by Turkey’s President Erdogan to consolidate his power is likely to result in pressure for looser monetary and fiscal policy, but this will ultimately come at the cost of weaker (and more volatile) economic growth, higher …
June’s decline in core inflation won’t stop the Norges Bank from raising interest rates in September. But with price pressures building only slowly, the subsequent tightening cycle will be very slow. … Norwegian Consumer Prices …
Egyptian inflation jumped to 14.4% y/y last month on the back of recent administered price hikes, but we still think that the next move in interest rates will be down. … Egypt Consumer Prices …
Sentiment about China’s economic prospects has worsened recently as trade tensions have escalated. The tariffs announced so far won’t have a big impact though. Instead, we expect economic growth to slow in coming quarters due mainly to domestic headwinds. …
The Bank of Canada’s policy announcement will take the spotlight next week. Despite June’s Labour Force Survey being something of a mixed bag, the subsequent rise in the Canadian dollar suggests that markets share our view that the rebound in employment …
6th July 2018
The main event this week was the Riksbank meeting , at which the Bank reiterated that it expected to raise interest rates in December. And data released since the meeting support the case for the Riksbank to begin tightening policy soon. Elsewhere, data …
Mexican financial markets have rallied this week following some business-friendly noises from left-wing president-elect Andrés Manuel López Obrador (Amlo), but we’d be wary of reading too much into his comments. There’s still some time before he takes …
Immigration has remained very high up the political agenda this week, and while EU leaders reached a compromise on Monday, this is not a closed issue and tensions may well flare up again. Meanwhile, the news on the German economy has been much better this …
The modest decline in Russian inflation in June, to 2.3% y/y, was mainly a result of a sharp fall in fruit and vegetable inflation. And while headline inflation is still weak, there were some tentative signs in the data that broader price pressures may be …
An encouraging set of Markit/CIPS surveys provided further evidence that the economy has rebounded in Q2. Meanwhile, in a speech this week, Bank of England Governor, Mark Carney, appeared to reinforce market expectations that an interest rate rise in …
The infringement procedure launched this week by the European Commission against Poland – in response to controversial legal reforms and the associated worries about the erosion of judicial independence – has put the country in the headlines this week. We …
BoJ Board member Harada this week refuted criticism that the Bank’s prolonged monetary easing poses a major threat to financial stability. We share his view that those concerns are overdone, which is one reason why we expect policymakers to keep policy …
Recently-released figures have supported our view that Kenya’s economy will strengthen this year. Conditions elsewhere, however, seem to have deteriorated. And we think that next week’s data will throw cold water on hopes that South Africa’s economy …
The Malaysian government’s decision earlier this week to suspend work on the US$20bn East Coast Railway Link points to a bleak future for Chinese investment in the country. Halting work on these projects is likely to lead to a slowdown in investment …
With the US and China poised to impose tariffs on each other in the coming days trade tensions look set to ratchet up further. But the world economy is still doing well. We estimate that global economic growth picked up a bit in the second quarter and …
5th July 2018
Economic growth has surged in recent quarters and we expect it to remain strong over the next year or so, supported by buoyant private and government consumption ahead of the general election that is due in mid-2019. Core inflation is also set to stay …
Hard data relating to euro-zone activity in Q2 have been a little disappointing so far, denting hopes that GDP growth would rebound strongly after Q1’s 0.4% quarterly expansion. Industrial production declined by 0.9% m/m in April, while retail sales fell …
The monetary data reveal a sharp slowdown in M1 growth in May, to its weakest pace since early 2016. But this isn’t a serious concern. Our measure of M3 broad money continued to expand at a decent rate, while bank lending growth looks set to accelerate …
The recent spate of rate hikes in the emerging world probably marks the start of a sustained tightening cycle over the next 18 months – the first such cycle since 2011. This has more to do with domestic economic conditions than recent currency weakness. …
