Filtered by Topic: Monetary Policy Use setting Monetary Policy
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, …
10th January 2018
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 & …
At the start of January, the euro reached a three-year high against the US dollar and a three-and-a-half year high in trade-weighted terms. While the euro’s climb over the past year or so may seem like a major headwind to economic growth, we remain …
9th January 2018
The rise in Mexican inflation to a fresh 18-year high of 6.8% y/y in December will probably lead to further calls for Banxico to raise rates again at its policy meeting on 9th February. While another hike is possible, with inflation set to fall sharply in …
2018 is widely expected to be the year that the Reserve Banks of Australia and New Zealand start to raise interest rates from their record lows. We disagree. In this Update, we outline five of our non-consensus calls for 2018 and highlight some potential …
The improvement in business sentiment in the fourth quarter of last year, most notably the marked rebound in investment and hiring intentions, suggest that the increased uncertainty around NAFTA isn’t likely to restrain economic growth this year. This …
8th January 2018
The Romanian MPC’s hawkish post-meeting press statement, which followed the decision to hike the policy interest rate earlier today, supports our view that monetary policy will be tightened by more than most anticipate over the course of 2018. … Romanian …
With euro-zone headline inflation falling in December and core inflation still subdued, the ECB will continue to emphasise that interest rate hikes remain a long way off. … Euro-zone Flash CPI …
5th January 2018
We expect consumer price inflation to surge over the coming months on the back of a spike in food price inflation. However, with core inflation probably close to a peak and producer price inflation now falling, we don’t think officials will respond to the …
While the budget for the coming fiscal year foresees record spending, expenditure will only rise marginally and revenues may climb even faster. The upshot is that the government is set to proceed with fiscal tightening. While there is no pressing need to …
Financial stability concerns were in the spotlight in Australia for much of 2017 and although actions by the RBA and APRA have gone some way to addressing these concerns, recent news that household debt reached a new record high in the third quarter of …
The latest survey evidence suggests that the economy ended 2017 on a reasonable footing. Indeed, despite a fall-back in both the manufacturing and construction PMI surveys in December, the all-sector PMI points to quarterly GDP growth of around 0.5%, a …
4th January 2018
After bringing its net asset purchases to a close last month, the Riksbank reiterated that it expects to raise interest rates in September this year. The Bank’s track record suggests that this forecast should be taken with a generous pinch of salt; …
Further sharp falls in Egyptian inflation in the coming months are likely to prompt the central bank to embark on a monetary easing cycle. We expect the benchmark interest rate to be cut to 13.25% by end-2018 and 11.25% by end-2019, from 18.75% at …
3rd January 2018
The euro-zone economy performed better in 2017 than we and most forecasters had anticipated at the year’s outset. Investment growth picked up despite intense political uncertainty. And while a rise in inflation dampened households’ real incomes growth as …
21st December 2017
With the People’s Bank last week tweaking the interest rates on its open market operations, it seems timely to highlight some of the peculiarities of China’s monetary policy framework. One key one is that, as the People’s Bank has still not made a full …
A rising number of analysts believe that the BoJ will start tightening policy by the end of next year. But with inflation set to remain below its 2% target, we think that the Bank will keep policy loose for longer. … Weak price pressures will prevent BoJ …
The minutes of the Reserve Bank of India’s (RBI’s) December policy meeting show that most MPC members are concerned about recent fiscal developments and the inflation outlook. Indeed, with consumer price inflation rising to a 15-month high in November and …
Frontier markets have enjoyed a recovery in 2017, with aggregate GDP growth set to reach close to 3%, up from a seven-year low of 2.3% in 2016. Frontiers in Latin America and Sub-Saharan Africa have exited recession, while growth has strengthened among …
20th December 2017
The Riksbank’s announcement that it will end its net asset purchases this month is the beginning of a shift towards tighter monetary policy in Sweden. We think that it will ultimately raise interest rates more quickly than most other analysts anticipate, …
With growth robust and inflationary pressures subdued, the Bank of Thailand (BoT) unsurprisingly kept its policy rate on hold today at 1.50%. The accompanying monetary policy statement reaffirms our view that the policy rate will remain unchanged for some …
There are reasons why the US Federal Reserve should be further along the path to policy normalisation than other major central banks. But there are also reasons why they should not lag too far behind. … Should other central banks follow the …
19th December 2017
Unsurprisingly December’s uneventful Monetary Policy Committee (MPC) meeting barely caused a ripple in financial markets, leaving market participants’ expectations for future interest rates all but unchanged. But we suspect that market expectations for …
In our final Watch of this year, we outline the prospects for India’s economy in 2018. We expect growth to accelerate, due to a pick-up in private consumption as well as looser fiscal policy. However, inflation is also likely to continue rising, which …
The state election victories for Prime Minister Modi’s BJP in both Gujarat and Himachal Pradesh ensure that the ruling party remains firmly on track to secure a majority in the Rajya Sabha (upper house of parliament) in the not-too-distant future. They …
The subdued November CPI figures and the news that the Fed left its inflation and interest rate projections unchanged triggered a mini-rally in the bond markets, but arguably investors should be paying closer attention to the surge in producer price …
15th December 2017
The decision by Russia’s central bank to cut interest rates by a larger-than-expected 50bp today caught the market (and ourselves) by surprise but the scale of the cut, as well as the tone of subsequent comments from Governor Nabiullina, reinforce our …
We think that the euro-zone economic recovery is strong enough to cope with a gradual removal of policy support by the ECB over the coming years. The weak outlook for inflation will allow the ECB to tread carefully, limiting the adverse impact on …
Central banks in Chile and Peru left interest rates unchanged last night, but both accompanying statements left the door open for further easing. With inflation rising in Chile, the window for cuts is closing, but as things stand we continue to expect …
We expect Japan’s GDP growth to slow next year as the economy is now operating above capacity. Price and wage pressures should strengthen somewhat but inflation will remain well below the Bank of Japan’s 2% target and monetary policy settings will …
While ECB President Draghi was upbeat about the economy at today’s press conference, he stated that the desire of some Governing Council members to signal an end to asset purchases is far from a consensus view. With the inflation outlook still reliant on …
14th December 2017
As was widely expected, December’s Monetary Policy Committee meeting was a bit of a non-event. However, if we are right in expecting the economy to perform more strongly than the MPC expects, that should allow interest rates to be raised several more …
The emerging world is currently expanding at its fastest pace in four years, but we don’t think this will last in 2018. In this Focus we outline our key calls for next year. … Key calls for EMs in …
The Philippines central bank (BSP) left rates unchanged at 3.0% today while also downplaying fears that the economy is overheating. While both financial markets and the consensus are expecting monetary policy to be tightened next year, we continue to …
The Norges Bank left its key policy rate unchanged after its meeting today and brought the date at which it forecasts raising interest rates forward to autumn 2018. We think that it will wait until late 2019. … Interest rate hikes in Norway still a long …
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 markets as necessary. And with inflation set to remain low, we …
Wholesale price inflation rose to an eight-month high in November. Policymakers put less weight on the WPI measure, but it nevertheless supports our view that the debate will shift towards monetary tightening later next year. … Wholesale Prices …
The People’s Bank has raised the rates it charges when providing funds in China’s interbank market. But unlike in the US, the move seems unlikely to result in higher short-term funding costs for most banks. … The PBOC pretends to follow the …
As widely expected, the Fed hiked interest rates by 25bp today, taking the fed funds target range to between 1.25% and 1.50%. Despite factoring in the imminent fiscal stimulus into their GDP growth projections for 2018, however, officials still anticipate …
13th December 2017
While there are some reasons to think that the Riksbank will extend its quantitative easing programme when it meets next week, we think that policymakers will let it expire. We also think that the Bank will keep its forward guidance on interest rates …
Following today’s decision to keep interest rates unchanged, the Central Bank of Iceland (CBI) noted that looser fiscal policy is a short-term risk to the monetary policy outlook. While we expect the new Government to announce a small fiscal expansion in …
There are many reasons to think that inflation targeting has had its day. The framework has already evolved to some extent, with central banks adopting “flexible” inflation-targeting and macroprudential tools. But arguably this flexibility does not go far …
Indian financial markets have had a mixed year in 2017. Equities have surged and the rupee has strengthened a touch, but bonds have sold off. Looking ahead to 2018, we think that equities are unlikely to make many further gains, while the currency and …
With yields set to rise overseas and concerns that low policy rates may curtail lending likely to linger, speculation about policy tightening in Japan will not subside next year. However, we believe that subdued price pressures will force the Bank to keep …
We think that investors are still underestimating the extent to which the Fed will tighten policy next year. As a result, we forecast that the dollar and Treasury yields will rise in 2018. We don’t think that this will take a big toll on US equities, …
11th December 2017
We think that consumer price inflation rose again in November, due to an acceleration in both food and fuel inflation. With core price pressures also continuing to build, the Reserve Bank may have to shift the policy debate to tightening in 2018. … Rise …
8th December 2017
The Norges Bank is very unlikely to change its policy rate next week, but we think that it will push back the date at which it forecasts raising interest rates to the end of 2019. After all, the mainland economy is expanding at a decent pace, but spare …
7th December 2017
