Filtered by Topic: Monetary Policy Use setting Monetary Policy
Having announced a plan to buy assets at a reduced pace of €30bn per month from January until September 2018 after its last meeting, the ECB seems very unlikely to make any changes this month. It should confirm that corporate bonds will make up a greater …
7th December 2017
Although the Swiss franc has weakened further over the past three months, we doubt that the Swiss National Bank (SNB) will sound any more relaxed about the exchange rate in its policy statement next week. Admittedly, the ECB’s gradual shift towards policy …
Provided that they follow the blue-print set out by the US Fed, the world’s major central banks should be able to scale back their balance sheets over the coming years without huge adverse economic consequences. The key is for them to do so slowly, …
We expect a spike in food price inflation to push headline CPI inflation up sharply over the months ahead. But with core inflation unlikely to pick up much further and PPI inflation set to fall, policymakers will look through the rise in the headline CPI …
A long period of sustained economic growth has helped drive unemployment in Japan to its lowest level in nearly a quarter of a century. Nonetheless, inflation and wage growth are both barely positive and look set to remain subdued. The Bank of Japan is …
At this stage, a 25bp rate hike at next week’s FOMC meeting is all-but guaranteed. Of more interest will be whether the increased prospect of a near-term fiscal stimulus prompts officials to revise up their projections for GDP growth, inflation and …
6th December 2017
The Bank of Canada’s decision to keep interest rates at 1.00% today and its cautious policy statement indicate that, in contrast to the market view, it is in no hurry to raise rates again soon. We think that markets are over-estimating the economy’s …
At its last meeting in November, the Central Bank of Iceland (CBI) kept policy on hold. Nothing has happened since then to alter our view that interest rates will remain unchanged until 2019. … Icelandic interest rates to remain on …
The soon-to-be-finalised fiscal stimulus could prompt the Fed to tighten monetary policy slightly more aggressively next year, although the potential interactions between fiscal and monetary policies over the next few years go well beyond that. … How will …
The RBI kept its repo rate on hold at 6.00% today, defying calls from prominent members of the government for further rate cuts. In fact, with core price pressures building, we think the debate may shift towards tighter policy later in 2018. … RBI on …
We’ve revised down our forecast for China’s growth next year on the back of the weakness in recent data. There will be little movement in the official GDP growth numbers but we now expect actual growth of 4.5% in 2018, compared with the above-trend 6.0% …
5th December 2017
The surprisingly dovish tone taken by Governor Glapinski in the press conference accompanying today’s MPC meeting belies the hawkish shift in sentiment across the Council as a whole. In spite of the governor’s rhetoric, we think the first interest rate …
The Office for National Statistics confirmed that GDP grew by 0.4% in Q3 and the economy appears to have maintained its recent momentum so far in the fourth quarter. Indeed, November’s Markit/CIPS activity surveys indicate that quarterly GDP is on course …
The Reserve Bank of Australia didn’t say as much in the statement released after it left interest rates at 1.5% for the 16th month today, but its Christmas wish must surely be for much more economic growth and a lot more inflation next year. We don’t …
The jump in Turkish inflation to a fourteen-year high of 13.0% y/y in November, from 11.9% y/y in October, will undoubtedly alarm policymakers at the central bank. With the government seemingly willing to tolerate tighter monetary policy, we have …
4th December 2017
The rise in inflation, primarily driven by sterling’s post-referendum slide, has taken its toll on consumer spending growth this year. However, we think that the worst of the real pay squeeze has probably now passed. With consumer confidence still solid, …
1st December 2017
The central banks in Asia most likely to follow the Bank of Korea over the coming year in raising interest rates are those of Malaysia, India and Pakistan. However, with the exception of Pakistan, the tightening cycles are likely to be very gradual. … Who …
Governor Kuroda has recently discussed the idea that extremely low interest rates could undermine bank profits and capital and, ultimately, lending. Evidence for this idea is lacking in Japan, where the main pressure on bank profits is coming from …
While the notable strengthening in the Australian labour market this year has led to some reduction in the high levels of existing spare capacity, wage growth has remained around record lows. And the experience of other advanced economies suggests that …
Rumours that members of the government are attempting to pressure the Reserve Bank of India (RBI) to loosen monetary policy are nothing new, although continued efforts to undermine the central bank’s independence are worrying. For its part, the RBI under …
We forecast a 200,000 gain in non-farm payrolls in November, with the unemployment rate holding steady at a 17-year low of 4.1%. The latter will concern those Fed officials worried that diminishing labour market slack is laying the foundations for a more …
30th November 2017
The Bank of Korea (BoK) raised its policy rate for the first time since 2011 today. Looking ahead, the tone of the governor’s accompanying press conference suggests aggressive monetary policy tightening is not on the cards, and we expect only one more …
The Bank of Canada will leave interest rates at 1.00% at its policy rate meeting next week and, by putting emphasis on the uncertainties clouding the outlook, will signal that it isn’t contemplating raising rates early next year as markets expect. We …
29th November 2017
The monetary aggregates reveal a divergence, with M2 growth slowing to a six-year low of 5.0% in October, while growth in our M3 measure accelerated to a two-and-a-half-year high of 6.1%. As short-term interest rates continue to rise, that divergence will …
Today’s announcement by the Reserve Bank of New Zealand (RBNZ) that it intends to ease existing loan-to-value (LVR) restrictions from the start of next year should provide a modest boost to housing demand. But the new coalition government’s tighter …
Recent comments by Governor Lowe about the outlook for monetary policy all but confirmed that the Reserve Bank of Australia will leave interest rates at 1.5% at its final policy meeting of the year on Tuesday 5th December, and probably for a good while …
Euro-zone lending growth strengthened in October, and with the ECB set to normalise monetary policy only very slowly, we think that bank lending will continue to support the economic recovery. … Euro-zone Monetary Indicators Monitor …
28th November 2017
Our reading of the minutes of the ECB’s October policy meeting is that the Bank has begun to prepare the ground for an end to its asset purchases. Before long, the ECB seems set to stop promising to buy assets until the inflation target has been met and …
24th November 2017
Recently-released figures showed that GDP growth in Central and Eastern Europe (CEE) picked up to a post-financial crisis high of 5.3% y/y in Q3. Growth strengthened in most countries in the region – the exceptions being the relatively small economies of …
With Q3 GDP figures now published for most of the major economies in Emerging Asia, the region looks to have grown by 4.6% y/y in the third quarter – a full 1.5%-points faster than just 18 months ago. But with exports set to weaken and domestic demand …
The South African Reserve Bank (SARB) made it pretty clear at today’s MPC meeting, at which the policy rate was left unchanged at 6.75%, that any additional easing is off the cards. As a result, we have taken the rate cuts that we had previously expected …
23rd November 2017
The tightening of global monetary policy over the next few years represents a headwind to commodity prices, especially precious metals. However, the reduction in equilibrium interest rates over the past decade means that central banks will not need to …
22nd November 2017
We expect economic growth in most countries in Latin America to accelerate further in 2018. Of the region’s major economies, we anticipate a pick-up in growth next year in Brazil, Mexico, Colombia, Chile and Peru. Argentina is the only major economy where …
The latest data continue to show a broad acceleration in GDP growth across most of the emerging world. A common thread has been a pick-up in exports, with volumes growth now up on the start of the year in every EM region with the exception of the Middle …
The decline in South African headline inflation last month, to 4.8% y/y, and softening core price pressures may temper expectations in the market for interest rate hikes in the next few months. But with inflation set to rise this month on the back of the …
The surge in Indian equities since the start of the year has continued over the past month, with the benchmark Sensex stock index hitting an all-time high in early November. The latest leg up has been driven primarily by financial stocks following the …
The Hungarian MPC left both its three-month and overnight deposit rates on hold today but the Council announced unconventional measures to ease policy, including interest rate swaps and a mortgage bond purchase programme. Further details of these measures …
21st November 2017
The narrowing in Brazil’s current account deficit over the past couple of years has been driven almost entirely by a recession-induced collapse in imports. As a result, the deficit is likely to widen once again as the economy recovers. This supports our …
17th November 2017
Although their finances will come under some pressure as interest rates rise, households in most advanced economies should be able to cope. Debt burdens are low by past standards and, provided that policy rates don’t rise much further than we expect, debt …
Deputy Governor Carolyn Wilkin’s speech earlier this week suggested that the Bank of Canada is already beginning to doubt its earlier upbeat assessment of the economic outlook, which was behind its decision to hike interest rates twice this year. This …
Thailand’s economy has rebounded strongly over the past year, with Q3 GDP figures due to be published on Monday likely to show the country growing at its strongest pace in over four years. The recovery is leading to speculation that the Bank of Thailand …
Some commentators are arguing that the costs of continued loose monetary policy outweigh the benefits as house and stock prices have soared and banks’ lending margins have slumped. By contrast, we believe that these development should not be major causes …
If the Reserve Bank of Australia were to learn from its recent forecasting failures, it would conclude that the unemployment rate will continue to fall by more than it expects but that underlying inflation still won’t rise much. Such a lesson could …
Today’s decision by the Central Bank of Egypt to keep interest rates on hold was not a major surprise given that the recent falls in inflation have been fairly modest. But data to be released in the coming weeks should show inflation dropping back more …
16th November 2017
House price inflation in several Nordic economies is slowing, and in some cases sharply. In Sweden housing inflation fell to 6.7% in October, its slowest in four years. And in Stockholm, where prices have risen much more than the national average in …
Today’s decision by Bank Indonesia to leave interest rates unchanged at 4.25% does not mean the easing cycle is over. However, with worries growing about the strength of the rupiah, we think any further easing is likely to be very gradual. We are …
In our view, the tightening of global monetary policy in the coming years need not be all that substantial. This is largely because equilibrium interest rates have fallen a long way in the past few decades, which in turn means that central banks will not …
Periodic bouts of investor concern over Fed policy tightening appear to be having less and less effect on financial markets in EMs. That being said, the one consistent theme that emerges from our analysis of recent Fed-related sell-offs is that one EM …
15th November 2017
Following today’s decision to keep interest rates unchanged, the Central Bank of Iceland (CBI) appears to have reached the end of its loosening cycle. We expect the Bank to keep rates on hold until the second half of 2019, when it is likely to respond to …
Bank lending has slowed in recent months and the BoJ’s Senior Loan Officer Survey points to a further weakening in coming months. However, brisk corporate bond issuance and record corporate profits imply that firms have sufficient funds to finance capital …
14th November 2017
