Filtered by Topic: Monetary Policy Use setting Monetary Policy
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 …
27th March 2018
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 …
The Reserve Bank of Australia will almost certainly leave interest rates on hold at 1.5% at its policy meeting on Tuesday 3rd April and it’s likely to reiterate that rate hikes remain some way off by once again saying that progress in returning inflation …
Today’s unexpectedly aggressive interest rate cut – which took the key rate to 18.00% – suggest that the current loosening cycle has further to run. We expect that the rate will fall to 16.00% by year end. … Ghana: Easing cycle …
26th March 2018
Incoming RBNZ Governor Adrian Orr today signed a Policy Targets Agreement that included a new reference to employment. Admittedly, this probably won’t significantly alter the outlook for monetary policy. But the bigger risk is that the new Governor …
25th March 2018
During his first post-meeting press conference, Fed Chair Jerome Powell managed to signal faster rate hikes over the coming years while simultaneously calming the bond market by playing down the risks of a pick-up in inflation. The problem is that the Fed …
23rd March 2018
With another hike in interest rates in May now largely priced into markets (and supported by this week’s Monetary Policy Committee (MPC) Minutes), the bigger question is just how “limited and gradual” the rise in interest rates will be thereafter. Markets …
Russian central bank governor Elvira Nabiullina gave little away at today’s post-meeting press conference about the future path for interest rates, but her overall tone suggests that there’s scope for significant further easing. We remain confident in our …
The Swiss National Bank is likely to reduce its currency interventions further over the next couple of years as other central banks start to normalise policy and the Swiss economy is better able to withstand a franc appreciation. But an outright reduction …
22nd March 2018
Somewhat counterintuitively, the price of gold gained 1.4% following the Fed’s decision to hike US interest rates for the sixth time in this tightening cycle. However, we think that the recent rally will not last as the Fed will tighten rates more …
The US Fed’s decision to increase rates by 25bp yesterday and to raise its projection of future rate hikes has limited implications for the rest of the world. Other than the Bank of England, most major central banks will be well behind the Fed in raising …
While the Monetary Policy Committee (MPC) stopped short of explicitly committing to another interest rate hike in May, the Minutes of March’s meeting suggest that it is highly likely. … MPC still on track for a May …
Bank Indonesia (BI) left interest rates unchanged today, while also appearing to rule out further interest rate cuts. But with growth set to underperform and inflationary pressures under control, we are maintaining our view that rates will be cut later …
Taiwan’s central bank (CBC) decided to keep its policy rate on hold today at 1.375% against a backdrop of decent economic growth and subdued inflationary pressures. The familiar and dovish tone of the CBC’s accompanying statement reaffirms our view that …
The Philippines central bank (BSP) decision to leave rates on hold today, despite this year’s jump in inflation, adds weight to our view that policy will remain on hold throughout 2018. This stands in contrast to the consensus, which is expecting at least …
For the second time since December, the People’s Bank has responded to a Fed rate hike by raising the rates it charges when providing funds in China’s interbank market. But contrary to perceptions, it is actually loosening monetary conditions at the same …
Reserve Bank of New Zealand Governor Grant Spencer finished his six-month term without any fireworks by leaving interest rates at 1.75% for the 16 th month and reiterating that rates are unlikely to rise until the second half of 20 The new Governor Adrian …
21st March 2018
The Fed’s decision to raise interest rates by 25bp today was widely expected but some investors may have been caught off-guard by the degree to which Fed officials increased their projections for future interest rate hikes. The median forecast for the fed …
Colombia’s central bank left its policy rate unchanged at 4.50% last night, but the accompanying statement left the door open for further easing in the near term. Meanwhile, Chile’s central bank kept rates on hold at 2.50% and we expect them to remain …
We believe the probable rise in US rates on Wednesday will mark the start of the first prolonged period since the late 1990s where interest rates in America are higher than in Australia and New Zealand. This will cap the rise in bond yields in Australia …
Japanese households and firms now both receive more in interest income than they pay out on their debt. That is making life difficult for banks. The main factor keeping them afloat is their sizeable activity overseas. … Monetary Indicators Monitor …
20th March 2018
Today’s rate cut will be followed by another cut later this year. The pace of further easing will depend on when the government amends or abandons its controversial cap on lending rates. … Kenya: Easing cycle restarts, CBK mute on lending …
19th March 2018
The latest inflation data in the Nordic countries and Switzerland have generally been quite weak. Indeed, inflation in Switzerland slowed to a five-month low of 0.6% in February. The core rate was unchanged from the previous month at 0.5%, while the rate …
16th March 2018
The surge in job growth in February, which was fuelled by a rise in new entrants to the labour force, supports the doves’ view that there is still hidden slack in the labour market. But the story isn’t quite that straightforward. Almost all of the …
This week has featured a raft of speeches from the ECB’s Governing Council on the outlook for monetary policy, displaying a range of views among its members. Several would clearly prefer to end asset purchases in September, while others favour a much more …
While the Bank of England’s Financial Policy Committee (FPC) left its annual stress test scenario unchanged, the test will still be a bit more stringent this year for some major UK banks. Nonetheless, it seems unlikely that these banks will be required to …
Central banks across Emerging Asia typically do a poor job at flagging up their decisions in advance, which often leads to investors being wrong-footed. Since the start of 2010, under half of interest rate changes (either hikes or cuts) in Emerging Asia …
We wouldn’t read too much into the early results of this year’s spring wage negotiations, which showed that the large carmakers and electronic firms lifted base pay by less than in 2014 and 2015. But the bigger picture is that wage growth will remain well …
With no Monetary Policy Committee (MPC) meeting scheduled in April, its meeting on 22nd March will be the last opportunity for the MPC to lay the groundwork for another interest rate hike in May. Markets are pricing in around a 70% chance of one. But with …
15th March 2018
With the benefits of the fiscal stimulus, strong global demand and the weaker dollar, we expect GDP growth to accelerate to 2.8% in 2018. As the fiscal stimulus begins to wear off and the cumulative monetary tightening starts to bite, however, GDP growth …
Following the recent reduction in its inflation target, the Norges Bank now clearly expects to begin raising interest rates this year. However, we think that it will tighten monetary policy more slowly than investors anticipate. Along with our forecast …
Despite sounding a slightly more positive tone on the economy, the Swiss National Bank today reiterated that the Swiss franc remained “highly valued” and that it still needed to keep interest rates at rock-bottom levels and intervene in the currency …
The Reserve Bank of New Zealand will almost certainly keep the official cash rate on hold at 1.75% at Grant Spencer’s final meeting as Governor on Thursday 22nd March and it’s likely to reiterate that policy will remain accommodative for a considerable …
The rebound in inflation, rapid employment growth and the recently announced boost to Federal spending for the next two years should convince the Fed to raise rates by 25bp at Jerome Powell’s first FOMC meeting as Chair. We expect the Fed’s updated …
14th March 2018
While the Central Bank of Iceland left policy unchanged today, it also acknowledged that inflation expectations are rising. We expect higher actual and expected inflation to prompt the Bank to raise interest rates in the next two years, contrary to the …
Slower inflation and a political breakthrough have opened the way to interest rate cuts in Nigeria. We expect that policymakers will lower their key rate from 14.00% to 13.00% in Q2. … Nigeria Consumer Prices …
Headline wholesale price inflation edged down in February. But stripping out the effect of volatile fuel and food prices, our measure of core WPI inflation rose accelerated month. With reasons to think that core price pressures will rise further, we …
The rise in Romanian inflation – which hit a five-year high last month – appears to have been driven by rapid wage growth and provides further signs that the economy is overheating. As a result, we now think that the National Bank will step up the pace of …
13th March 2018
The economy will probably cope reasonably well even though both the mining and housing booms are over, but over the next couple of years it is unlikely to strengthen as much as policymakers hope. Over the next decade, life after mining may prove to be …
12th March 2018
In addition to reducing the monthly pace of its asset purchases from €60bn to €30bn, in January the ECB also changed the composition of its purchases. Corporate sector debt now accounts for a larger share of the total, as we expected. This should help to …
9th March 2018
The likely dent to retail sales, spending on consumer services and construction output as a result of February’s bad weather will make the economy look fragile. But the hit to the economy will be cushioned by households spending more to heat their homes. …
The Norges Bank’s new inflation target strengthens the case for tighter monetary policy. But we think that the Bank will move very cautiously. … How big a deal is the new lower inflation …
The decision by Peru’s central bank to cut interest rates by 25bp, to 2.75%, was accompanied by a statement that left the door open for one more cut in the easing cycle. But the big picture is that attention will quickly shift towards policy tightening, …
Inflation in Norway rose quite sharply in February, but we do not think that it is about to surge. Meanwhile, Icelandic GDP growth would have been negative in Q4 was it not for a one-off intellectual property payment which boosted exports. Nevertheless, …
Sluggish wage growth, subdued inflation expectations and the renewed strengthening of the exchange rate suggest that inflation will remain below the Bank’s 2% target for the foreseeable future. The upshot is that the Bank’s new leadership will have to …
The yen would have to strengthen much further before it turns into a major drag on export competitiveness and corporate profits. However, the recent appreciation should bring the pick-up in goods inflation to a halt over the coming months. … Yen strength …
In an environment of global uncertainty, the Swiss National Bank will be wary of exacerbating any upward pressure on the safe haven franc when it meets on 15th March. Admittedly, its forecast for inflation to surpass 2% by 2020 suggests that it may soon …
8th March 2018
The ECB’s decision to remove the loosening bias from its monetary policy statement today was arguably the first step along a path of policy normalisation. But note that its balance sheet will continue to expand with new asset purchases until at least …
The Bank of Canada implied in its policy statement this morning that, despite growing concerns around trade, it still believes further interest rate increases will be needed later this year. That said, in its decision to keep rates at 1.25%, there were …
7th March 2018
