Filtered by Topic: Monetary Policy Use setting Monetary Policy
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 …
24th November 2017
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
The nomination of the relatively inexperienced Jerome Powell as Fed Chair comes at arguably a bad time as the FOMC has fewer professional economists and less experience than it has had in decades. The large number of vacancies and high turnover on the …
Much like the consumer price inflation data released yesterday, wholesale price inflation came in above expectations in October. Policymakers put less weight on the WPI measure, but any lingering chance of a rate cut next month has diminished even …
We think the average inflation rate in advanced economies will remain lower than it was in the pre-crisis period for the foreseeable future, for several reasons. In some economies, there is more spare capacity around than meets the eye; in others …
13th November 2017
Almost 10 months after Donald Trump pulled the US out of negotiations to set up the Trans-Pacific Partnership (TPP), ministers from the remaining 11 countries are trying to salvage something from the deal. The concern is that in order to secure an …
10th November 2017
As a result of the rise in oil prices in recent weeks, CPI inflation will certainly be a bit higher than we had previously anticipated in the near term. This suggests that it won’t be long before the Governor of the Bank of England gets his letter writing …
Bank of Canada Governor Stephen Poloz’s speech earlier this week was too dismissive of the current weakness of underlying inflation, although that isn’t a surprise given the Bank’s interest rate hikes this year. Nevertheless, the speech did reveal that …
The decision by Peru’s central bank to cut its policy interest rate – by 25bp to 3.25% – caught most by surprise but was in line with our forecast, and we expect further easing over the coming months. With inflation set to fall sharply, our forecast is …
The Reserve Bank of Australia admitted in today’s Statement on Monetary Policy that underlying inflation will be below its 2-3% target for a year longer than it previously thought. We have been saying as much for over a year and we think the RBA may end …
Forecasters have been wrong-footed this year by the Central Bank of Iceland’s (CBI) rate cuts. This appears to be because the CBI has started to put more emphasis on a different inflation measure, and the cuts may also have been motivated by …
9th November 2017
The pick-up in Mexican inflation last month appears to be due in large part to temporary factors relating to September’s earthquakes. Nevertheless, the data strengthen the case for delaying interest rate cuts until the second half of next year. …
As today’s minutes show few signs that policymakers are concerned about the economy overheating, we have pushed back our forecast for a rate rise to September 2018. But we still expect rates to be increased at a faster pace than the Riksbank or markets …
The batch of preliminary Q3 GDP figures due next week in Emerging Europe are likely to show that growth accelerated in most of the region. While the pace of expansion probably softened a touch in Russia, it appears to have strengthened in Central Europe, …
Despite rising inflation, rapid credit growth and a weak currency the Philippines central bank (BSP) kept its policy rate unchanged at 3.0% today. While the consensus is expecting rate hikes next year, we continue to think that BSP will keep rates on hold …
The rise in Czech inflation to a five-year high of 2.9% y/y in October was driven entirely by a sharp pick-up in food inflation, and by our estimates, core inflation eased a little. As a result, while the chances of a rate hike at the MPC meeting in …
Malaysia’s central bank left its policy rate unchanged at 3.0% today, but the more hawkish tone of the statement suggests that monetary policy tightening may soon come back onto the agenda. We now expect BNM to hike rates by 25bp, possibly as early as its …
More interesting than the Reserve Bank of New Zealand (RBNZ) having now left interest rates unchanged at 1.75% for a year was the Bank’s verdict on the impact of the new government. It believes that GDP growth will be fast for longer, inflation will be …
8th November 2017
The monthly data suggest that consumer spending was behind the slowdown in quarterly euro-zone GDP growth in Q3. But September’s rise in retail sales provided a strong starting point for Q4. And the improving labour market should support spending. Indeed, …
The Polish MPC left interest rates unchanged today, but the post-meeting press release seems to confirm that the Council is becoming more hawkish. We think inflation will rise above target in the first half of next year, which should ultimately prompt …
The decision by Argentina’s central bank to follow up last month’s surprise interest rate hike with another increase last night reinforces the view that policymakers are getting tough on inflation. We expect another 50bp hike (to 29.25%) in the coming …
Against a backdrop of robust growth and subdued inflation, today’s decision by the Bank of Thailand (BoT) to leave its key interest rate unchanged at 1.50% came as no surprise. The accompanying monetary policy statement reaffirms our view that the central …
We think that consumer price inflation held steady in October as a slight rise in food inflation was offset by a drop in fuel inflation. But with core price pressures building, inflation is likely to resume accelerating over the coming months. Given this, …
The Romanian MPC’s decision to raise its overnight deposit interest rate represents a move to tighten monetary policy further. And the hawkish post-meeting press statement supports our view that interest rates are likely to be raised by more than most …
7th November 2017
Although the Reserve Bank of Australia (RBA) left interest rates at 1.5% for the 15 th month today, we don’t think it is placing enough weight on the recent weakening in retail sales and softer news on inflation. If GDP growth and underlying inflation …
Sri Lanka’s central bank (CBSL) left rates on hold today, and the accompanying monetary policy statement supports our view that rate changes are not on the horizon. CBSL will be wary of hiking rates at a time when growth is sluggish, but with inflation …
Data released by the ECB today imply that a significant volume of its German Bunds will mature next year, which the Bank will re-invest in German assets. But we don’t think that re-investments will benefit Bunds more than other countries’ government …
6th November 2017
October’s weak Swiss inflation data support our view that SNB interest rate hikes are a very distant prospect. Elsewhere, Swedish production data suggest that quarterly GDP growth slowed in Q3. … Swiss CPI (Oct.) & Swedish Production Index. …
Suggestions from Japan’s government that it has vanquished deflation are premature when wages are barely rising, core inflation is close to zero and inflation expectations are lower than a few years ago. As things stand, a drop back into deflation still …
While the Monetary Policy Committee’s (MPC) decision to increase Bank Rate for the first time in a decade was largely priced into financial markets ahead of the November meeting, the Committee struck a more dovish tone than expected on the future path of …
3rd November 2017
