Filtered by Topic: Monetary Policy Use setting Monetary Policy
Governor Glapinski struck a dovish tone in the press conference accompanying today’s MPC meeting. However, we think that inflation will rise faster than the central bank anticipates over the coming months, prompting the first hike in the policy rate …
7th March 2018
Little has changed since the Central Bank of Iceland’s (CBI) last policy meeting, so we expect it to keep policy unchanged next week. Later this year, we see the Bank raising interest rates. … Central Bank of Iceland on hold for time …
After a tough start to 2018, we think that equities in the Nordic countries and Switzerland will continue to struggle over the next couple of years. But their performance will be far from uniform. … Will Nordic and Swiss equities continue to …
Malaysia’s central bank (BNM) kept its policy rate on hold at 3.25% today following a hike at its last meeting in January. With inflation slowing, growth likely to cool further and the currency strong, we doubt that BNM will tighten again this year. … …
Following a downward revision to quarterly GDP growth in Q4, from 0.5% to 0.4%, a deterioration in all three of the headline PMI balances in January raised concerns that growth had continued to slow at the start of the year. But those fears were assuaged …
6th March 2018
The Reserve Bank of Australia left interest rates on hold at 1.5% for the 17 th consecutive meeting and it noted once again that progress in returning inflation to target is likely to be “gradual”, suggesting that a near-term rate hike remains unlikely. …
China’s retention of an “about 6.5%” growth target for GDP in 2018, while expected, undermines the argument that growth is being demoted as a central policy concern. Growth is likely to slow we believe, not least because the finance ministry is today …
5th March 2018
Japan’s economic expansion has become more shaky recently. And, while inflation has surged in recent months, it looks likely to moderate over the course of the year with the recent strengthening of the yen helping to keep price pressures in check. Against …
The large imbalances in the euro-zone’s TARGET2 payments system indicate that all is still not quite right in the region. There are some good reasons to expect the imbalances to narrow again over the next few years. But there is also a risk that sentiment …
2nd March 2018
Our relative views on monetary policy in the US and Australia suggest that US 10-year bond yields will rise further above Australian yields this year. While this would be rare, what’s more unusual is that the complete erosion of Australia’s traditional …
With the economy still performing well and the euro off the boil, we expect the ECB to remove the loosening bias from its forward guidance when it meets on 8th March. But the persistent weakness of inflation will have convinced the Bank to take a cautious …
1st March 2018
An advisor to PM Abe has suggested that the Bank of Japan should buy foreign bonds. However, economic conditions are far too buoyant at the moment for policymakers to take such a radical step. … Bank of Japan unlikely to buy foreign …
The Bank of Canada will raise interest rates again this year, most likely at the April policy meeting. In contrast to the consensus, we don’t see a series of further rate hikes beyond this. NAFTA’s potential demise cannot be ruled out. Meanwhile, the …
28th February 2018
The correction in global equities earlier this month coincided with a further rise in US Treasury yields, as higher inflation and the prospect of extra fiscal stimulus led investors to conclude that the Fed will step harder on the brakes. Our forecast …
International bond markets have been inundated with debt issuance from frontier markets over the past couple of years and there’s no sign yet that appetite is waning. Since the start of this year alone Nigeria, Kenya and Argentina have all issued dollar …
Monetary policy cycles across the region are nearing turning points. In most cases this means that easing cycles are drawing to a close and, as markets start to consider the eventual onset of monetary tightening, bond yields at the short end of the curve …
Central banks in the major advanced economies are now moving in the same direction, but they are doing so at very different speeds. The Fed is tightening policy in earnest, with six rate hikes likely by mid-2019, and we expect the Bank of England to raise …
27th February 2018
The Bank of Korea (BoK) today unsurprisingly kept its policy rate on hold at 1.50% for its second straight meeting, and the accompanying statement and governor’s press conference suggest the central bank will proceed cautiously with policy tightening. We …
The Reserve Bank of Australia will almost certainly leave interest rates on hold at 1.5% at its policy meeting on Tuesday 6 th March and it will probably continue to signal that there is no risk of a near-term rate hike. Indeed, as progress in raising …
Political risks are rising across Latin America. In Colombia and Mexico, left-leaning candidates have consolidated their leads in opinion polls ahead of presidential elections later this year, while the political crisis in Peru has sparked back into life …
26th February 2018
The Bank of Canada’s preferred core inflation measures have trended higher and are close to the 2% inflation target. Despite the drop in headline inflation in January, the core inflation data will reinforce market expectations of yet more interest rate …
Long-term bond yields in Hungary have risen further this year than those of the country’s peers, despite the central bank’s efforts to bring them down. It seems that markets are coming around to our view that continued loose monetary policy at this late …
Financial markets are now pricing in a 60% probability of the Monetary Policy Committee (MPC) raising Bank Rate by a further 25bps in May, up from around 40% at the start of the year. But we still think investors are underestimating the pace of tightening …
Although our New Zealand Activity Proxy declined in December, the decent rise over the fourth quarter as a whole suggests that GDP growth accelerated at the end of last year. … New Zealand Activity Proxy …
The minutes of the ECB’s January meeting indicated just how cautiously the Bank wants to communicate and carry out its monetary policy normalisation. The ECB looks set to revisit its forward guidance at the next meeting in March, but it only seems likely …
23rd February 2018
In light of weak inflation data earlier this week and the dovishness of today’s Riksbank minutes, we expect the Bank to signal at April’s meeting that it will raise interest rates later than its current guidance implies. However, we still think that …
A low level of foreign currency debt in the Philippines means the recent weakness of the peso is not a major concern. In fact, despite the current worries about rising inflation, policymakers appear to be welcoming the boost to competitiveness the weak …
On past form, capacity shortages alone will never be enough to generate 2% inflation in Japan. The prerequisite for faster price gains is that inflation expectations among households and firms also rise substantially. Unfortunately, the Bank of Japan’s …
Recent hikes to import duties on various goods appear to be an attempt by Prime Minister Modi and the BJP to shore up popular support ahead of a clutch of state elections this year, and the general election in 2019. But while the moves may help some local …
There has been a renewed focus in recent weeks on interest-only loans in Australia and the potential risk that these loans present to financial stability, particularly given a large portion of interest-only loans are due to expire in the next few years …
The recent changeover at the helm of Tunisia’s central bank has raised hopes of a shift towards more orthodox policymaking. But the new governor is likely to run in to resistance from the government and there are few signs so far that he is about to make …
22nd February 2018
Indian financial markets have not been able to escape the recent turmoil in global markets, with equities dropping sharply and the rupee weakening against the US dollar. Looking ahead, we expect further falls in equities. But we have revised our forecasts …
The minutes of the Reserve Bank of India’s (RBI’s) February policy meeting show that most MPC members are concerned about recent fiscal developments and the inflation outlook. Indeed, with core inflation now at multi-year highs and set to accelerate …
The unemployment rate may need to fall from 5.5% currently to around 4.0% before wage growth rises significantly. This is partly due to the existing excess capacity not captured by the unemployment rate, but also as the natural rate of unemployment may be …
21st February 2018
Icelandic growth is set to hold up well with tourism booming despite the strength of the króna and with the financial imbalances that caused the previous crisis largely resolved. But inflation is a threat. If unions secure large wage gains in negotiations …
Luis de Guindos, who is set to replace Vítor Constâncio as the ECB’s Vice President this June, may well be less dovish than his predecessor. What’s more, his appointment makes it more likely that arch-hawk Jens Weidmann will succeed Mario Draghi as …
Inflation proved unexpectedly sticky in January, remaining unchanged at 3.0%, contrary to the consensus expectation for it to fall. However, we don’t think that the Monetary Policy Committee (MPC) needs to worry about runaway inflation. Indeed, sterling’s …
16th February 2018
The Egyptian central bank’s easing cycle, which started last night, is likely to result in larger interest rate cuts than most anticipate. We expect an additional 650bp of rate cuts by the end of 2019. … Egypt’s easing cycle to be larger than most …
Recent suggestions by the Australian Treasurer that APRA could ease its current restrictions on mortgage lending seem to be motivated more by politics than financial stability. With the RBA and APRA appearing to pour cold water on the idea, it’s hard to …
15th February 2018
The decision by Argentina’s central bank to pause its easing cycle last night was accompanied by another cautious statement, reinforcing our view that interest rates will be cut by less than most expect this year. … Argentina: interest rates to be cut by …
Headline wholesale price inflation eased in January, but stripping out the effect of volatile fuel and food prices, our measure of core WPI inflation rose last month. With reasons to think that core price pressures will rise further, we remain of the view …
Sri Lanka’s central bank (CBSL) left rates on hold today but, in contrast to the consensus, we think that rate cuts will come onto the agenda soon. … Sri Lanka: rates cuts not far …
The increase in markets’ expectations for official interest rates that occurred in the build-up to the Monetary Policy Committee’s (MPC’s) February Inflation Report proved justified. The MPC revised up its projections for economic growth, and the language …
14th February 2018
Headline CPI inflation was unchanged at 2.1% in January, but the bigger story was the broad-based 0.3% m/m gain in core consumer prices. In three-month annualised terms, core inflation climbed to a six-year high of 2.9%. Higher inflation is already here …
If the Bank of Japan were to reverse course on monetary loosening in the near future, it would more likely be a response to worries about financial stability than high inflation. The recent deterioration in banks’ capital ratios therefore should be …
Given that the Riksbank called time on its net asset purchases just one meeting ago, it was always unlikely that the Bank would make any major policy changes today. In order to test the water ahead of repo rate rises later this year, in April we expect …
The Bank of Thailand’s (BoT) decision to leave interest rates unchanged at 1.50% today was no surprise given the backdrop of an improving economy but very weak price pressures. There was nothing in the accompanying statement that suggests the BoT is …
Having barely slowed in 2017, contrary to predictions of a substantial negative impact from the Brexit vote, we think that the economy will defy renewed expectations of a slowdown this year. Amid strong global growth and low interest rates, net trade and …
13th February 2018
Bank lending has continued to slow and Japanese banks are no longer gaining market share in the cross-border lending market. However, one reason is that non-financial firms are increasingly turning to the bond market to raise funds. … Monetary Indicators …
The slight easing of consumer price inflation in January was due to a decline in food and fuel inflation. Core inflation remained elevated and is set to rise further. We remain comfortable with our non-consensus view that policy rate hikes are likely this …
12th February 2018
