Filtered by Topic: Monetary Policy Use setting Monetary Policy
The raft of Q4 GDP data for Central and Eastern Europe (CEE) due later this week is likely to show that the region’s economies continued to grow at a rapid pace at the end of 2017, at around 5.3% y/y. But this probably marks the peak of the economic cycle …
12th February 2018
The latest data suggest that the worst of the downturn in the Saudi economy had passed in late 2017 and a recovery should get underway over the coming months. The limited evidence so far suggests that the anti-corruption purge launched in November has had …
Governor Kuroda looks likely to be reappointed as Bank of Japan Governor when his current term ends in April. It is still unclear who his two deputies will be, but the main candidates are mostly in favour of continued aggressive monetary easing. As such, …
The volatility in global financial markets in recent weeks has brought concerns about EM external vulnerabilities back into the spotlight. However, with the notable exception of Argentina, economies in Latin America are now better placed to weather either …
9th February 2018
The early regional evidence from Toronto and Vancouver revealed that the tightening of mortgage lending standards at the start of this year did hit home sales in January, but the declines were not disastrous. Perhaps more surprising was the steep drop-off …
The further falls in global equities over the past 24 hours have not left EMs unscathed, but in general EMstocks have held up better than DM stocks and there’s little evidence that falls in equities are affectingother EM assets. From an economic …
The Russian central bank’s 25bp cut in its policy interest rate (to 7.50%) today was smaller than we had anticipated, but the decision was accompanied by a very dovish statement that paves the way for significantly more easing this year. We remain …
The manufacturing industry in the Philippines has been a key driver of economic growth in recent years. Although the sector should continue to grow strongly in the near term, the medium-term outlook is becoming more challenging. … Philippines: Will …
Peru’s central bank left interest rates unchanged at 3.00% yesterday as expected, but the accompanying statement left the door open for further easing. We think that a further drop in inflation in the next few months will give policymakers the room to …
If global equity markets are fearing higher interest rates, as this week’s fall suggest, then Australia and New Zealand offer something of an oasis as both the RBA and RBNZ dropped some heavy hints last week that they are in no rush to raise interest …
The Reserve Bank of Australia used today’s Statement of Monetary Policy to hint for the third time this week that interest rates are unlikely to rise this year. We’ve been saying exactly that since early last year and the financial markets and other …
The “Super Thursday” releases from the Bank of England support our long-held view that the Monetary Policy Committee would become less dovish as the economy beat expectations. Indeed, we expect the next hike to come in May and, with the MPC wanting to …
8th February 2018
Despite January’s jump in inflation, the Philippines central bank (BSP) left rates on hold at its first meeting of the year. While most analysts think that BSP will be forced to tighten policy this year, we continue to think that it will leave rates on …
With the Riksbank on track to raise interest rates this year, it is likely to test the water soon by dropping its pledge to loosen policy further if necessary. But as inflation expectations in Sweden have softened in recent months, we suspect that the …
It was no surprise that the Reserve Bank of New Zealand left interest rate at 1.75% today and again projected that rates won’t rise until the second half of next year at the earliest. More interesting was that the Bank hinted how it is going to deal with …
7th February 2018
The Polish MPC left interest rates unchanged today, but recent comments from Governor Glapinski suggest that he is becoming increasingly concerned about the strength of the labour market. We think this is justified and expect strong wage growth to feed …
The decline in Russian inflation to just 2.2% y/y last month, coming alongside weakness in the latest hard activity data and dovish comments from central bank governor Elvira Nabiullina, means we now expect a 50bp cut in the policy rate (to 7.25%) at …
The franc’s downward trend went into reverse last month and turbulence in global financial markets has since threatened to push it up further. In the event of a sustained rout in equity markets, the safe haven currency would probably appreciate. But as …
China’s foreign exchange reserves data suggest that the People’s Bank has not been directly intervening to limit the renminbi’s recent gains against the dollar. That partly reflects the fact that the renminbi has strengthened much less against other …
As the recent rise in inflation has been due to temporary exchange rate effects, it was little surprise that the Central Bank of Iceland left policy unchanged today. But with further rises in inflation set to put upward pressure on inflation expectations …
The RBI’s decision to hold its repo rate at 6.00% today came as no surprise but it sounded notably more hawkish in the policy statement. This supports our non-consensus view that rate hikes are likely later this year. … RBI turns more …
The usual pattern around Chinese New Year is for inflation to rise sharply either in January or February and fall in the other month. This year, we think inflation will have picked up in both. And rising food price inflation will probably keep the …
6th February 2018
The severity of any further sell-off in global financial markets may be limited by the general health of the global economy and the scope for policymakers to respond if necessary. Nonetheless, the episode supports our repeated warnings that markets were …
The jitters in the financial markets are due to concerns that global interest rates will rise rapidly, but the Reserve Bank of Australia (RBA) did its part to calm fears by leaving interest rates at the record low of 1.5% today and by providing a new hint …
Despite long-term Treasury yields rising sharply this week to their highest level in four years, broader measures suggest that overall financial conditions have actually continued to loosen. Corporate bond spreads have fallen to levels not seen since …
2nd February 2018
The 200,000 gain in non-farm payrolls in January, which was above the consensus estimate but in line with our own forecast, leaves the Fed firmly on track to raise rates in March. And with signs that wage pressures are starting to build, we expect that …
We have long-argued that interest rates would rise somewhat faster, and sooner, than markets expecting. Recent comments by Governor Carney offer tentative support to this view and suggest that February’s Inflation Report could strike a more hawkish tone …
German Bund yields continued to rise this week, with the 10-year yield hitting a 29-month high. Higher yields are unlikely to have much of a direct effect on the German economy, but by boosting the euro they may have significant indirect effects. Indeed, …
The Bank of Japan’s offer to buy an unlimited amount of bonds today for the first time since July has dampened expectations that policymakers are about to withdraw stimulus. As a result, the yen has now started to weaken again. We expect it to fall …
With the data continuing to surprise the Monetary Policy Committee (MPC) on the upside and the Governor sounding encouraged by progress in Brexit negotiations and a bit more upbeat on the outlook, there is a chance that the Inflation Report on February …
1st February 2018
The statement accompanying today’s Czech MPC meeting – at which the policy interest rate was hiked by 25bp – suggests that the Council will hold fire at its next meeting on 29th March. Even so, we think that the tightening cycle will ultimately be larger …
Inflation pressures seem to be rising faster than we had expected. As a result, we now see the Central Bank of Iceland raising interest rates this year. … Central Bank of Iceland to raise rates later this …
Contrary to suggestions that the ECB and Bank of Japan are gearing up to tighten monetary policy sooner than expected, we think they will be happy to trail a long way behind the Fed and Bank of England. Indeed, the case for the Fed to raise rates four …
The Reserve Bank of New Zealand (RBNZ) will almost certainly leave the official cash rate on hold at 1.75% at its policy meeting on Thursday 8th February and, in the accompanying Monetary Policy Statement (MPS), we doubt that the Bank’s interest rate …
Janet Yellen’s final meeting as Fed Chair pretty much summed up her entire tenure; policy was left accommodative but there were hints it will be tightened gradually in the future. The more hawkish statement confirms expectations of a March hike and we …
31st January 2018
Our analysis shows that dollar weakness can explain much of the recent strength in the price of gold. As such, given our view that the US currency will appreciate this year, we think that those gains will soon be reversed. … Is there more to the gold …
The price gains of recent years have left housing looking expensive and commercial property looking fully-valued. The good news is that interest rate rises on the scale that we anticipate are unlikely to be enough to push either market into a major …
Despite the strengthening of the activity data, the Reserve Bank of Australia won’t raise interest rates from 1.5% at the meeting on Tuesday 6th February and probably won’t hint in the following Friday’s Statement on Monetary Policy that rate hikes are …
Malaysia and Pakistan have both hiked interest rates over the past week, and while the consensus and financial markets are expecting most other central banks in the region to tighten policy in 2018, we think rates in the majority of countries will either …
30th January 2018
The household saving rate fell to a 12-year low of 2.4% of disposable income in December and, based on the recent surge in the values of equities and real estate, it could fall all the way to zero. … Saving rate going to zero…and that’s okay …
We expect that economic growth in Sub-Saharan Africa will continue to accelerate in 2018. This recovery will be driven largely by faster growth in South Africa and Nigeria, the region’s two biggest economies. Indeed, our views on South Africa are …
29th January 2018
2018 will be the first year this century that the Australian economy won’t benefit from either a mining or housing boom. In those circumstances, we doubt that GDP growth will rise above 2.5%. And despite a decent fiscal boost in New Zealand, a still-weak …
28th January 2018
There are some reasons to think that the pound’s recent rally may struggle to go much further. Rising US interest rates could prompt something of a recovery in the ailing dollar, while Brexit uncertainty could rise again as the negotiations move on to the …
26th January 2018
The Canadian dollar hit 81 cents against the US dollar earlier this week but, rather than blaming the loonie’s rally on the Bank of Canada and its recent interest rate hike, the rebound appears to be linked more to the recent resurgence in crude oil …
While ECB President Mario Draghi sounded positive on the outlook for inflation at this week’s press conference, he did so with a justified degree of caution. After all, there is still economic slack in some member states that will keep a lid on wage …
The gradual strengthening in core inflation evident in December’s consumer price figures would seem to justify the Bank of Canada’s recent decision to raise interest rates again. … Consumer Price Index …
The party in the markets has remained in full swing while the Fed has emptied its punchbowl slowly. This year, though, the US central bank is likely to drain it more quickly. And in some other major economies, monetary policy is also likely to be …
Most economies in Emerging Europe had a very strong end to 2017, but we expect regional growth to soften in the coming quarters. The economic cycle in Central Europe is now looking mature and growth is likely to weaken gradually. Inflation will rise …
The ECB did not alter its forward guidance today, stressing that it will exercise patience and persistence when normalising policy and voicing concern about the strong euro. The currency’s further rise is puzzling against this backdrop, but only …
25th January 2018
Our China Activity Proxy (CAP) suggests that economic conditions stabilised at the end of last year after a fairly sharp slowdown since the middle of 2017. Growth may pick up slightly in the near term as disruption caused by the pollution crackdown eases. …
