Filtered by Topic: Monetary Policy Use setting Monetary Policy
While today’s Norges Bank announcement implies that it still expects to raise interest rates this autumn, we think that below-target inflation and weakness in the housing market will cause the Bank to wait until next year. Along with our forecast for oil …
25th January 2018
The Economic Tendency Survey suggests that the Swedish economy lost some momentum at the start of 2018. But this is unlikely to prevent the Riksbank from tightening policy later this year. … Sweden Econ. Tend. Survey (Jan.) & Unemploy. …
For all the talk about how the incoming Governor will deal with employment being added to the RBNZ’s mandate, the latest data suggest he may spend most of his time wondering why inflation is so low. … New Zealand Consumer Prices …
24th January 2018
Janet Yellen’s final FOMC meeting will pass with little fanfare, but the language of the accompanying policy statement looks set to strike a more hawkish tone. That would leave the Fed on course to raise rates at Jerome Powell’s first meeting as Chair in …
December’s retail sales figures were pretty disappointing, suggesting that the sector grew by 0.4% in Q4 as a whole, half of Q3’s 0.8% rate. What’s more, growth in non-retail spending is likely to have been subdued in Q4 too. The rebound in car sales …
23rd January 2018
For the first time since July 2014, the Bank of Japan didn’t lower its inflation forecasts any further. However, we believe that the Bank is too optimistic about the inflation outlook and we remain convinced that policy won’t be tightened anytime soon. … …
The ECB has effectively introduced a “put” option on peripheral bonds, pushing yields and spreads down to record lows. Given recent fiscal progress and the likelihood that the ECB normalises policy very slowly, we doubt that yields will soar. But there is …
22nd January 2018
Interest rates were kept hold today in Kenya & Ghana, and we expect that both will see rate cuts in 2018. Nigeria’s MPC was unable to meet, but policy there will probably also loosen later this year. … Africa: Cuts on the cards in Kenya, Ghana, & …
Prospects for the Nordic economies and Switzerland are strong, but there are divergent outlooks for monetary policy. In Sweden, inflation is already close to the Riksbank’s target and, with capacity constraints starting to bite, inflationary pressures are …
Capital outflows from China rose slightly in December as Chinese households and firms added to their foreign asset holdings. Looking at the year as a whole, capital outflows fell by 80% in 2017. … Capital Flows Monitor …
Rapid economic growth, surging imports and strong credit growth have fuelled fears that the Philippines is overheating and that the central bank will soon be forced to hike interest rates to bring the economy under control. We think such fears are …
The Bank of Canada’s upgraded GDP growth forecast for this year looks overly optimistic given NAFTA and housing-related risks. Despite further increases in household borrowing costs and tougher new mortgage lending rules, the contribution to growth from …
19th January 2018
The news flow in Central and Eastern Europe (CEE) in the past few weeks has been dominated by political troubles, but currencies have performed surprisingly well. One reason for this is likely to be the region’s relatively strong economic fundamentals. … …
The 2018 Winter Olympics, which get under way in South Korea next month, will not provide much of a boost to the country’s economy. But this will not stop South Korea from recording another year of strong growth. … Korea set for strong 2018, but not …
We expect the price of Brent crude oil to moderate from $70 per barrel to $55 by the end of 2018. But even if global oil prices remain close to current levels, inflation in Japan would only average 1% this year instead of our existing forecast of 0.7%. …
The stronger 0.3% m/m gain in core consumer prices in December provided clearer evidence that the forces weighing on core inflation last year are now firmly in reverse. Admittedly, core CPI inflation only edged up to 1.8% in December and will remain …
18th January 2018
While the ECB maintained all elements of its policy support last month, the recent news that it would soon “revisit” its forward guidance saw rate expectations rise and the euro strengthen. At its meeting on 25th January, we see the Bank dropping its …
The Bank of Canada’s decision to raise interest rates to 1.25% yesterday has reinforced expectations of further rate hikes later this year. According to futures markets, there is a 22% chance of a rate hike to 1.50% as soon as March. Our view is that the …
In the long run we suspect the Fed will move away from rules-based inflation targeting and shift to a more discretionary regime that focuses on financial stability as well as price stability and full employment. In the short run, however, the Fed’s …
The euro-zone’s impressive upturn looks set to continue apace as reduced political uncertainty, high levels of business confidence, and continued strong policy support allow investment to take off. Growth has also broadened across the region, with labour …
With consumer price inflation set to rise gradually, but house prices falling, we think that the Norges Bank will reiterate next week that interest rates will not rise until the autumn. We suspect that it will ultimately wait until 2019 before tightening …
South African policymakers held their key rate at 6.75% today, but a dovish tone suggests that they have abandoned November’s tightening bias. We expect that the next move will be a 25bp cut in early 2019. … South Africa: SARB walks back its hawkish …
After some brief respite, US Treasuries have come under fire again. Indeed, the 10-year yield has now rebounded to its highest level since last spring. We expect its rise to continue this year, as the Fed tightens policy by more than investors are …
Today’s decision by Bank Indonesia (BI) to leave interest rates unchanged at 4.25% came as no surprise. Although the central bank’s accompanying statement suggests that further easing is not imminent, with growth likely to struggle and inflationary …
The Turkish MPC’s decision to keep all of its key interest rates unchanged today was accompanied by a statement that indicates the Committee is more determined to bring inflation back under control. This supports our view that rates will be kept at …
Hungary’s central bank has started two new policies this week aimed at bringing down bond yields, including the first QE programme in an emerging market. But there are reasons to think that the impact of these measures on yields may not be as large as …
Speculation that the Bank of Japan is about to increase its yield target has pushed the yen higher. However, we think that policy tightening remains a distant prospect and that the yen will weaken as this become clear. … Bank of Japan to keep policy loose …
The Bank of Korea (BoK) kept its policy rate on hold at 1.50% today, and the governor’s accompanying press conference signalled aggressive tightening is not in the pipeline. With the economy set to grow at a robust pace, but inflation benign and concerns …
The Bank of Canada’s raised interest rates to 1.25% today, from 1.00%, and its more upbeat economic outlook suggests that it will hike rates again later this year, probably in April. In contrast to the consensus, we wouldn’t bet too heavily on further …
17th January 2018
Growth in Emerging Asia reached a five-year high in 2017 but we think that it has now peaked and will slow gradually over the next couple of years. The main headwind will come from the export sector. Despite the decent outlook for the global economy, the …
16th January 2018
The announcement on Friday by Morocco’s central bank that it will move to a more flexible exchange rate regime has raised concerns that the dirham will follow the path of currencies in the rest of North Africa, where similar policy shifts have been …
15th January 2018
The three major Nordic and Swiss central banks met in December and provided very different messages about the outlook for monetary policy in their respective countries. First, the Swiss National Bank (SNB) left policy unchanged and, despite the franc’s …
Bank lending has continued to slow. However, this doesn’t seem to reflect a tightening in bank lending attitudes, which remain very accommodative. What’s more, overall borrowing by the private sector is growing at the fastest pace since the early 1990s as …
Headline wholesale price inflation edged down in December. 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 over the coming …
Swedish policymakers will be discouraged by the fact that the decline in inflation in December was due to slower inflation for domestic goods and services. But with resource utilisation strong, domestic inflation looks set to pick up this year. We think …
12th January 2018
A reduction in the size of the BoJ’s JGB auction moved markets this week. This wasn’t policy tapering in an effort to reduce stimulus: the Bank now only buys what is needed to maintain the yield target and that amount has been falling for a while. Indeed, …
The Saudi government looks set to loosen fiscal policy this year which should support a pick-up in economic growth. However, as we explain in this Watch, households won’t be net beneficiaries from this. The introduction of a new household allowance and …
Our tracker suggests that EM capital outflows picked up a bit in December, but remained slow over the year as a whole. Portfolio flows into EMs hit a record high last year, and look strong going into 2018. … Emerging Markets Capital Flows Monitor …
Peru’s central bank cut its policy interest rate last night by 25bp to 3.00% and, while the statement didn’t give much away regarding future moves, we still think there’s room for another 25bp cut in the policy rate (to 2.75%) in this cycle. … Peru’s …
2018 may be the year that the Australian economy fails to grow at a much faster pace than the majority of its peers and its interest rate premium is wiped out. This may mean that 10-year bond yields in Australia end the year no higher than in the US and …
The Polish MPC left interest rates unchanged today, but the post-meeting press conference highlighted that a hawkish faction exists on the Council. We think inflation will rise above target in the coming quarters, which should be enough to prompt a …
10th January 2018
Our indicators suggest that, while financial risks in EMs have diminished over the past couple of years, pockets of vulnerability exist in several countries including Turkey, Hong Kong and Singapore. … Vulnerabilities linger in a handful of …
While the global economy is set to grow strongly again in 2018, the recovery is likely to de-synchronise somewhat as China slows before the US, and Europe remains strong. This could have important implications for both policymakers and financial markets. …
The Fed’s quantitative tightening has so far had little impact on the monetary aggregates, but the effects of rising short-term interest rates are becoming more visible. Meanwhile, after slowing sharply in early 2017, bank lending growth is now …
A Bloomberg report that Chinese officials are considering halting purchases of US government debt triggered a sell-off in the US Treasury market today. In fact, China has not been buying US debt for most of the last few years. And, in practice, the …
The Bank of Canada will increase interest rates again early this year, possibly as soon as next week, particularly after learning that businesses are more optimistic. That said, we still believe housing woes will become a bigger drag on the economy, …
The rise in Brazilian inflation to 3.0% y/y last month leaves it right at the lower bound of the central bank’s 4.5±1.5% target range, which should provide room for a further 25bp cut in the Selic interest rate at the next Copom meeting in February. But …
This week’s reduction in the Bank of Japan’s scheduled government bond purchases doesn’t signal that it is about to lift the yield target. The Bank purchases whatever is needed to maintain the target and the credibility of its commitment to the target has …
While the Riksbank’s early bond reinvestments will make policy slightly more expansionary in the short term, the minutes of December’s meeting suggest that the decision to bring forward reinvestments was taken mainly to avoid liquidity problems. There was …
Inflation ended 2017 on a softer note, with a decline in both producer price inflation and non-food consumer price inflation. This is consistent with our view that cooling price pressures will open the door to monetary easing this year. … Consumer & …
