Filtered by Topic: Monetary Policy Use setting Monetary Policy
The recent resurgence in oil prices should be good news for Canada but, since it is partly due to a temporary spike in geopolitical tensions, we expect prices to fall back later this year. Domestic crude oil prices have enjoyed a particularly strong run, …
20th April 2018
While the Nordics and Switzerland seem to have made slow starts to 2018, the outlook for these economies is generally pretty bright. Nevertheless, healthy rates of economic growth will push up inflation at different speeds in different countries. We think …
Despite some weakness in the first quarter, and concerns about protectionism, global economic growth is likely to hold up well this year. In advanced economies, the outlook for investment and household consumption is fairly bright. Tightening labour …
Malaysia, Indonesia and Pakistan all face crucial elections over the next few months, and in each country, policymaking has recently taken a turn for the worse. In Malaysia and Indonesia we see little prospect of an improvement even after the elections …
Looking past the temporary dip in inflation in the first quarter, which was partly driven by government decisions, there have been some encouraging signs about the outlook for inflation in New Zealand. But while capacity pressures do appear to be growing, …
The tight labour market is now boosting wage growth but not by enough to generate significant inflation. With the economy likely to slow this year, the Bank of Japan won’t be able to tighten policy anytime soon. … Policy tightening still a distant …
With the economic data weakening, but some members of the Governing Council keen to bring asset purchases to an end, President Draghi is unlikely to give much away next week. We suspect that the ECB will remain fairly confident in the outlook for growth …
19th April 2018
We maintain our relatively optimistic view about the prospects for UK economic growth over the next few years. In particular, a recovery in real earnings should help household spending growth to regain some momentum, while we think investment will …
At next week’s meeting, the Riksbank is likely to cut its GDP growth and inflation forecasts. This leads us to expect the Bank to signal that interest rate rises will come later than policymakers previously thought, but we still expect an increase this …
The fall back in CPI inflation towards the bottom of the RBNZ’s 1-3% target range in the first quarter was partly due to government decisions rather than economic forces, but it nonetheless highlights that price pressures probably won’t prompt the RBNZ to …
While the latest data suggest that the European economies made a weak start to the year, we do not see this as the start of a serious slowdown. The euro-zone in particular has more spare capacity than official estimates suggest and we think that stronger …
18th April 2018
The Bank of Canada left its key policy rate unchanged at 1.25% at today's Governing Council meeting and, although the markets still anticipate a further 25bp rate hike later this year, we think the Bank is done tightening policy and may need to reverse …
Headline wholesale price inflation held steady in March. But with core price pressures still elevated, we remain comfortable with our view that policy rate hikes are likely later this year. … Wholesale Prices …
16th April 2018
The HKMA’s sales of foreign exchange FX to support the Hong Kong dollar, which hit the weak end of its trading band this week for the first time since 2005, shows the exchange rate regime working as intended and isn’t a sign that the peg is under threat. …
13th April 2018
The recent run of weak data suggests that a hike in Bank Rate, to 0.75% in May, is far from a done deal. But we don’t think that a May hike is now off the table. Some of the unexpected weakening in this week’s activity data reflects temporary factors. And …
We expect that economic growth in Sub-Saharan Africa will continue to accelerate in 2018. This recovery will be driven largely by South Africa and Nigeria, where growth is set to pick up by more than most expect. Performances elsewhere in the region will …
Peru’s central bank left its policy interest rate unchanged at 2.75% last night and, while the statement gave little away regarding future moves, we think the easing cycle is probably over. … Peru rates on hold, easing cycle probably …
The Monetary Authority of Singapore (MAS) today moved to increase the slope of its nominal effective exchange rate policy band, a decision that amounts to a tightening of its policy stance. But with growth likely to slow in the coming quarters and …
The Bank of Canada is unlikely to hike interest rates again at its Governing Council meeting next Wednesday. Even with the risk of NAFTA’s demise fading and core inflation picking up, there is now a good chance that faltering economic growth and growing …
12th April 2018
Bank lending has continued to slow in recent months. However, banks’ willingness to provide credit has rarely been higher, and broader measures of credit that also include corporate bonds show that credit growth remains strong by past standards. The …
The Bank of Korea (BoK) unsurprisingly kept its policy rate on hold at 1.50% today, and the dovish tone of the governor’s press conference suggests that the BoK is likely to remain on the sidelines for a while. … Korea’s central bank in wait-and-see …
Governor Glapinski’s extremely dovish post-meeting press conference, coupled with the recent weak inflation data, has prompted us to take out the interest rate hikes from our forecast for this year. Even so, with price pressures likely to build over the …
11th April 2018
Mounting concerns about Turkey’s current account deficit as well as debt problems in the corporate sector are likely to keep the lira under pressure over the coming weeks. As a result, we now expect the central bank to respond by tightening monetary …
The sharp fall in the Russian ruble today has raised the risk that the central bank pauses its easing cycle when it meets later this month. The situation is in a state of flux and the outlook for interest rates will depend in part on whether US sanctions …
10th April 2018
Economic growth in Hong Kong has cooled in recent quarters, and we think this trend will continue over the coming months. Domestic monetary conditions are likely to tighten sharply this year, while exports look set to weaken even if trade tensions between …
9th April 2018
The recent rise in banks’ short-term funding costs would probably need to triple before banks could justify raising their mortgage rates by 0.25%, which would be equivalent to a hike in the official interest rate. In any case, the heat the biggest banks …
The escalating threats over tariffs between the US and China have dominated the headlines this week. But next week could bring the more positive news of a ‘preliminary’ deal on NAFTA. Reports suggest that any agreement would be limited to content …
6th April 2018
The US administration appears to be pushing hard to get a deal done on NAFTA, reigniting speculation of further interest rate increases from the Bank of Canada. Even if a trade deal is done, however, we doubt that the Bank would risk raising rates again …
As a small, open economy that releases GDP data much earlier than most other countries, Singapore is often billed as a bellwether for the global economy. In reality, Singapore’s GDP figures are far too volatile to give a reliable indication of how the …
Consumer price inflation is likely to have eased in February, due to a further drop in food inflation. But core price pressures are still building. We think this will ultimately prompt the Reserve Bank to begin tightening policy over the coming months, …
The National Accounts showed that the economy barely slowed at all in 2017. Annual growth, revised up from 1.7% to 1.8%, was only marginally lower than 2016’s 1.9% outturn. Since then, however, the heavy snowfall at the start of March appears to have …
5th April 2018
Euro-zone money and lending growth slowed in February, adding to the evidence from the official data and business surveys that economic growth has peaked. Growth in “narrow” money – which is the sum of currency in circulation and overnight deposits – fell …
The RBI’s decision to hold its repo rate at 6.00% today came as no surprise. But we think that elevated core inflation and looser fiscal policy will prompt the central bank to raise interest rates in the second half of the year, much sooner than the …
The growing threat of a US-China trade war is the key risk to the outlook. The tariff measures announced so far don’t amount to much, but any escalation in trade tensions that leads to a significant fall in US imports from China would have a sizeable …
Today’s Nigerian MPC press conference supported our view that policymakers will cut rates later this year. We think that the key rate will fall from 14.00% – at which it was left today – to 13.00% in June. … Nigeria: Rates on hold, but cuts likely later …
4th April 2018
A rise in interbank rates and weaker net wage growth appear to lie behind the Romanian MPC’s surprise decision to keep its policy interest rate on hold today. We still think that the tightening cycle will be resumed in May, but today’s decision raises the …
The central bank of Sri Lanka (CBSL) today cut its lending rate by 25bp. While further monetary policy loosening looks likely against a backdrop of weak growth and easing inflation, aggressive rate cuts are not on the cards. … Sri Lanka cuts rates, …
The Bank of Japan has become more vocal about its desire to exit the current ultra-loose policy settings. But with concerns about the impact of low policy rates on financial intermediation overblown and inflation set to remain well below its 2% target, …
The Reserve Bank of Australia has become more worried about trade tariffs and rising global bank funding costs. Coming on top of the weakness of the housing market and wage growth, it is becoming even more likely that the RBA will keep interest rates at …
3rd April 2018
Brazil’s central bank appears to have been spooked by the weakness of the recent inflation data, but we think that the conduct of fiscal policy will ultimately have a much greater bearing on how interest rates are set over the next 12-18 months. … Fiscal …
29th March 2018
The recently announced US tariffs should have a limited direct effect on the UK economy. Admittedly, falls in equity prices – on the back of concerns over a full-blown trade war – could clearly have bigger knock-on effects on consumer spending and GDP …
The Reserve Bank of India (RBI) looks set to keep its policy rates on hold at the meeting that ends on Thursday 5th April. But we think that elevated core inflation and looser fiscal policy will prompt the central bank to raise interest rates before too …
We expect the Fed to raise interest rates three more times this year, and twice in 2019, but we think it will then begin to loosen policy in 2020. Other than the Bank of England, most major central banks will lag a long way behind the Fed in raising rates …
28th March 2018
Today’s 25bp interest rate cut does not signal the start of a new easing cycle. We think that policymakers were attempting to seize the opportunity for a quick cut before inflation picks up later this year. … South Africa: Rate cut will be a …
With the economy in good shape and inflationary pressures subdued, the Bank of Thailand unsurprisingly decided to keep its policy rate on hold today at 1.5%. The accompany statement reiterated that monetary policy will remain accommodative and we are …
Both the Australian and New Zealand economies failed to regain any momentum at the end of 2017 with GDP rising by a slower than expected 0.6% q/q in New Zealand and just 0.4% q/q in Australia. Admittedly, some of this weakness can be explained by …
The statement accompanying today’s MPC meeting in Hungary continued to strike a dovish tone which, given the recent run of weak inflation data, isn’t a surprise. But the softness of inflation has been due to transitory factors that will unwind over the …
27th March 2018
Five years after Governor Kuroda embarked on aggressive policy easing, core inflation in Japan is still barely positive and the Bank of Japan seems to have run out of ideas on how to push it higher. There is an argument that the Bank should acknowledge …
An analysis of all the recessions which have occurred in G7 economies since 1960 throws up two main conclusions. First, while most had multiple triggers, monetary policy tightening was usually one of them. And second, the most common underlying causes of …
February’s euro-zone money and lending data add to the evidence from the activity surveys that economic growth has topped out. But with interest rates likely to rise only slowly as the ECB normalises policy, bank lending looks set to continue supporting …
