Filtered by Topic: Monetary Policy Use setting Monetary Policy
The improvement in all three Markit/CIPS PMI surveys in June provided further signs that the economy has rebounded after the weak start to the year. Indeed, the all-sector PMI rose from 54.3 in May to 55.0, suggesting that quarterly GDP growth has …
5th July 2018
Headline consumer price inflation is likely to have stayed well above target in June, due in large part to core inflation remaining elevated by the standards of the recent past. We think that this will ultimately prompt the Reserve Bank to follow up …
Despite a host of negative developments since the Bank of Canada signalled in May that an interest rate rise was imminent, policymakers still seem eager to raise rates. While we now expect the Bank to hike next week, we think that its optimism is …
4th July 2018
Although the National Bank of Romania left its key policy rate unchanged today, the Bank is using open market operations to tighten monetary conditions. We think that policymakers will return to conventional interest rate hikes to tighten policy in the …
The sharp rise in the Egyptian government’s foreign currency debt over the past few years is not yet a major cause for concern – the risk of a destabilising fall in the pound appears to be low and the authorities are making progress with fiscal …
Emerging market (EM) currencies have mostly recovered a little ground against the dollar today. But the bigger picture is that they have generally been weakening for some time now, and in our view further falls are likely in most cases even if fears of a …
3rd July 2018
The recent plunge in Japan’s jobless rate suggests that wage growth will pick up faster than we had been anticipating. But we suspect that unemployment is now close to a floor so wage growth may never reach the rates necessary to meet the BoJ’s 2% …
The Riksbank looks very likely to raise interest rates in December. We think that the Bank will then raise interest rates more quickly in 2019 and 2020 than investors expect, causing the krona to strengthen. … Tighter monetary policy on the way in …
The much stronger-than-expected rise in Turkish inflation in June, to 15.4% y/y, is likely to prompt the central bank to hike interest rates, perhaps by 100bp, at its meeting later this month. … Turkey CPI …
Growing concerns about the global trade dispute and the deepening domestic housing downturn mean that the Reserve Bank of Australia will probably leave interest rates at 1.5%, as it did at today’s meeting for the 23rd month, until late next year. While a …
The increase in the ISM manufacturing index in June is a clear sign that, for now at least, the strength of the domestic economy is more than offsetting any increased uncertainty on trade policy . However, with the dollar appreciating by 6% since April, …
2nd July 2018
June’s manufacturing PMI suggests that the sector has rebounded from a disappointing Q1. And the forward-looking balances provided some encouragement that the outlook for the sector has improved. … UK Markit/CIPS Manufacturing PMI …
A victory for left-wing populist Andres Manuel Lopez Obrador (Amlo) in Mexico’s presidential vote this weekend looks priced in. The market reaction is likely to take its cue from the performance of his Morena coalition in the legislative elections taking …
29th June 2018
There was nothing in the comments made by MPC members this week, nor in the latest data releases, to make us alter our view that the MPC will raise interest rates on August 2 nd . Admittedly, Jonathan Haskel’s testimony in front of the Treasury Committee …
The Swiss Government this week made no progress towards reaching a deal with Brussels that would see Switzerland retain its unrestricted access to the Single Market. With the anti-immigrant SVP party announcing that it has collected enough signatures to …
Bank Indonesia’s (BI) decision to hike interest rates by a more-than-expected 50 basis points today suggests that the central bank’s priority over the coming months will be to support the currency. With the rupiah likely to remain under downward pressure …
Despite the upward revision to Q1 GDP growth, the breakdown left the economy looking a little more fragile than before. But there are still reasons to be optimistic about the growth outlook. … Quarterly National Accounts …
The recent rebound in short-term funding costs is not big enough to prompt all banks to raise their mortgages rates by more than a few basis points. But the risk that funding costs rise further is one more reason why the Reserve Bank of Australia is …
A sharp rise in inflation over recent months, and a jump in household inflation expectations, has raised concerns that the RBI has fallen behind the curve and is squandering its hard-won inflation-fighting credentials. By contrast, we see the RBI’s …
The Egyptian central bank’s decision to leave interest rates on hold (rather than lower rates) was a response to recently-announced subsidy cuts that will push up inflation. But the easing cycle is likely to resume at September’s MPC meeting. And we still …
28th June 2018
Over the next twelve months we expect the gap in policy rates between the US and euro-zone to continue to widen. The Fed is likely to raise rates every three months while the ECB leaves rates unchanged until late next year. Further ahead, though, we think …
Central banks across Emerging Europe have become increasingly hawkish in the past few weeks, supporting our view that policy in the region will (in most places) be tighter than most expect over the coming years. A sell-off in the lira since early May has …
The changes to the Reserve Bank of New Zealand’s (RBNZ) policy statement after it left interest rates at 1.75% today are more cosmetic than substantive. But the Bank has acknowledged the growing downside risks to both the global and domestic economies. …
27th June 2018
While most forecasters now agree with our long-held view that the first ECB rate hike will come in September 2019, there is no clear consensus over which rate will rise first or why. In this Update , we explain why the deposit rate is now the best gauge …
The statement and press conference following today’s Czech MPC meeting – at which the Council resumed its tightening cycle – were on the hawkish side, supporting our view that further rate hikes are in store. We expect that the policy rate will be raised …
Figures released over the past month confirmed that Africa’s larger economies have all struggled in 2018. South Africa, where GDP actually fell in Q1, was the worst performer. Elsewhere, figures from Nigeria, Angola, Kenya, and Côte d’Ivoire all suggest …
The Australian and New Zealand dollars have weakened to US$0.74 and US$0.68 respectively as rising trade tensions between the US and China have reduced the appetite for riskier currencies. Looking ahead, the Aussie and kiwi dollars may weaken further. Our …
The Bank of England Chief Economist, Andy Haldane’s, surprise vote for an interest rate increase in June, alongside a hawkish set of minutes, suggests that the MPC will press ahead with a rate hike in August. Indeed, the Committee appeared unconcerned by …
26th June 2018
Market fears that South African policymakers will hike interest rates in response to a weak rand are overdone. We think that the SARB’s repo rate will be held at 6.50% for the rest of this year. … S. Africa: Why the SARB will look through rand …
Two years after coming to power, President Duterte of the Philippines has not been the disaster for the economy that some feared. Growth has remained strong, while economic policy has been left in the hands of technocrats, who have pushed through a number …
An apparent wilting desire to raise interest rates means that the Reserve Bank of Australia will leave interest rates at 1.5% at the policy meeting on Tuesday 3rd July and probably won’t raise rates until late in 2019. If anything, the chances have …
Yesterday’s required reserve ratio (RRR) cut is officially intended to support banks’ debt-to-equity swaps rather than mark a shift away from deleveraging and toward monetary easing. But in practice, the RRR cut does seem likely to result in looser …
25th June 2018
The Mexican central bank’s decision to raise interest rates this week underscored its sensitivity to currency weakness and, while our base case is that this move will be a one-off, further falls in the peso in the coming months would clearly push the …
22nd June 2018
This week’s quarterly policy statement from the Swiss National Bank strengthened our view that tighter monetary policy in Switzerland is a long way off. By contrast, higher interest rates are imminent in Norway. Meanwhile, data released this week for …
The Canadian dollar hit a 12-month low this week, dropping to 75 cents against the US dollar. It started this year above 80 cents. Despite that decline, markets appear to be sanguine about the risks of a full-blown trade war with the US, since most of the …
Escalating trade tensions with the US have led the news abroad, but in China much of the focus over the past week has been on the outlook for the domestic economy and policy. An RRR cut appears imminent and more concerted policy efforts to support the …
The hawkish tone of this week’s MPC Minutes supports our long-held view that the Committee will raise rates in August. Elsewhere, this week’s CBI Industrial Trends Survey provided us with some reassurance that a rebound in manufacturing growth in Q2 is in …
Over the past week the central banks of Indonesia, the Philippines and India have all signalled that further monetary policy tightening is only a matter of time. Elsewhere, however, with inflation under control and worries about a potential trade war …
The more hawkish communications from Hungary’s MPC this week support our long-held view that ultra-loose monetary policy will be reined in this year. The hawkish shift caused market expectations for interest rates to rise sharply, although we still think …
Markets are getting ahead of themselves by pricing in rate hikes in South Africa. Policymakers have explicitly said that they will not react to currency moves until they see a lasting effect on domestic inflation, which actually eased last month. We …
The combination of the escalation in global trade tensions and some dovish developments at home have dragged down the Australian dollar to a one-year low of US$0.74. We suspect it will weaken further to US$0.72 by the end of the year. And if the US-China …
The latest hard activity figures suggest that EM growth held up well going into Q2, but that headwinds to the macroeconomic outlook are starting to build. The most recent trade figure show that EM export growth was slowing even before the latest fears of …
21st June 2018
While the Monetary Policy Committee (MPC) stopped short of explicitly committing to a rate hike in August, the hawkish tone of June’s Minutes & Statement suggest that it is pretty likely. … MPC on track for an August …
With economic growth fairly strong and inflationary pressures subdued, Taiwan’s central bank (CBC) decided today to keep its policy rate unchanged at 1.375%. The dovish tone of the Bank’s accompanying statement, which revealed increasing concerns among …
Today’s policy announcement by the Norges Bank shows that it is on the brink of raising interest rates. But once it has started, it will tighten policy only very slowly. And because we forecast oil prices to fall, we think that the krone will depreciate …
Despite the ECB calling time on its asset purchase programme last week, the Swiss National Bank today left its monetary policy stance unchanged and cited worries about franc strength, political developments in the euro-zone and protectionism. With …
The Reserve Bank of New Zealand will almost certainly leave interest rates on hold at 1.75% at its policy meeting on Thursday 28 th June and Governor Orr may well repeat that rates will stay at this level for “some time to come”. But with GDP growth …
GDP growth is by no means falling off a cliff, but the end of the migration and housing booms have already caused a marked slowdown and they probably mean growth will ease to just 2.0% next year. Against that backdrop, the RBNZ is unlikely to raise …
The minutes of the Reserve Bank of India’s June policy meeting – at which interest rates were hiked – are dominated by concerns about upside risks to inflation and the potential for damage to the central bank’s recently-acquired credibility. The …
20th June 2018
Given the hawkish tone of the central bank’s statement, a further rate increase in the Philippines now looks likely. We originally thought today’s hike would mark the end of the tightening cycle. But with inflation close to peaking, we are only pencilling …
