Filtered by Topic: Monetary Policy Use setting Monetary Policy
The slight increase in Brazilian inflation in the first half of this month, to 2.6% y/y from 2.5% y/y in August, is the first real sign that the headline rate may have now bottomed out, and reinforces COPOM’s message that the easing cycle is nearing an …
21st September 2017
With economic growth fairly strong and inflationary pressures subdued, Taiwan’s central bank (CBC) decided to keep its policy rate on hold today at 1.375%. The dovish tone of the Bank’s accompanying statement reaffirms our view that rates will remain …
Despite the recent rebound in inflation, it was no surprise that the Philippines central bank (BSP) kept its policy rate unchanged at 3.0% today. There was nothing in its statement to suggest BSP is in any rush to change its stance – we expect it to leave …
The Norges Bank today raised its interest rate forecast, implying that it will begin tightening monetary policy mid-way through 2019. By contrast, we think that it will wait until 2020. … Interest rate hikes in Norway a very long way …
Today’s Riksbank minutes suggest that at least two of the six Board members would support an extension of the Riksbank’s QE programme beyond the current December end date. But given our forecast for inflation to remain above the Riksbank’s target between …
The Bank of Japan left its upbeat assessment of economic conditions intact at today’s meeting. But inflation remains a long way below its projections, so further reductions in the Board’s forecasts next month are all but guaranteed. The upshot is that …
Some have argued that the recent jump in inflation is all about a surge in volatile food prices, with the implication that it shouldn’t have a significant bearing on monetary policy. But this ignores the fact that underlying price pressures are rising …
While Grant Spencer will almost certainly decide to keep interest rates on hold at 1.75% at his first meeting as Governor of the Reserve Bank of New Zealand (RBNZ) on Thursday 28 th September, the upcoming general election creates some uncertainty around …
The 0.8% q/q rise in the production measure of GDP in the second quarter won’t prevent the RBNZ from leaving interest rates at 1.75% at next Thursday’s policy meeting and striking a dovish tone too, but it may give the National Party a bit of a boost …
The Fed’s decision today to keep interest rates unchanged at 1.0-1.25%, as well as its long-anticipated move to formally announce the start of the balance sheet normalisation process next month, came as little surprise. The bigger news was that, despite …
20th September 2017
The latest data suggest that, following a strong Q2, growth in Emerging Europe as a whole picked up further in Q3. Activity figures from Poland improved in July and August and the early signs are that Turkey’s economy will record very robust growth in Q3, …
Inflation in South Africa was weaker than expected in August, which supports our view that the South African Reserve Bank will cut its key policy rate from 6.75% to 6.50% at its meeting tomorrow. … South Africa CPI …
The decision by the Hungarian MPC to ease monetary conditions further today looks like a policy misstep. Mounting capacity constraints and rapid wage growth mean that we think inflation will turn out to be much stronger next year than the central bank …
19th September 2017
Some have pointed to a rise in home sales and housing starts growth in August as evidence that China’s property sector is holding up well despite the government’s curbs. But while the property sector has not crashed this year, it has cooled significantly. …
The Fed’s reversal of QE is another sign that the world is inching away from ultra-loose monetary policy. But it is planning to proceed slowly and avoid surprises, and no other central bank is likely to start reversing QE for at least two years. As such, …
In seasonally-adjusted terms, capital outflows fell to a three-year low last month as Chinese firms and individuals reduced their foreign currency deposits at the fastest pace in half a year. Looking ahead, while outflows are likely to persist, we think …
18th September 2017
The Kenyan MPC kept rates unchanged today, but we expect that they will loosen policy next year as inflation falls towards the middle of the target range. … Kenyan MPC holds rates again, but will ease in …
There are no clear signs yet that Hungary’s economy is overheating but, by the same token, growing signs that the economy is hitting capacity constraints sit uncomfortably with the MPC’s continued dovish rhetoric. Any move to loosen policy, as looks …
We think that corporate bond yields will rise only gradually as the ECB tapers its asset purchases next year. After all, the economy looks set to continue performing well. And the Bank is likely to keep enough flexibility in the programme to increase …
Although we expect the Fed to raise its key policy rate more rapidly than financial markets anticipate next year, our forecast is for it to peak at only 2.25-2.50%, in 2019. In the euro-zone and Japan, where inflation is likely to stay below central bank …
15th September 2017
Russian central bank governor, Elvira Nabiullina, struck a predictably cautious tone at today’s postmeeting press conference. But the large amount of spare capacity in the economy is likely to keep inflation lower than the Bank expects, allowing interest …
The next stage of monetary policy normalisation in the developed world – balance sheet reduction by the US Fed, and the shift towards QE tapering in the euro-zone – will not have a major impact on Emerging Asia. Instead, domestic factors will determine …
Peru’s central bank cut its policy interest rate by 25bp last night, to 3.50%, and confirmed our view that rates are unlikely to fall further. What’s more, the surprise decision by Congress to dismiss the president’s cabinet is likely to trigger a …
Nigerian inflation remained high in August, but we expect that it will ease over the coming months, prompting policymakers to cut interest rates. … Nigeria Consumer Prices …
With long-term interest rates at home anchored by the Bank of Japan, the key determinants of the value of the yen are both outside Japanese policymakers’ control: geopolitics and the actions of the US Fed. The yen barely moved following today's North …
While the acceleration in full-time jobs growth in Australia since the start of the year is clearly a positive development for income and consumption growth, the impact on wage growth and inflation is unlikely to be as good. That’s because it hasn’t eaten …
The Norges Bank is likely to leave the key policy rate at 0.50% next week, and we think that it will also leave its interest rate forecast unchanged, showing no change in rates until 2019. Although the economy is performing well, interest rate hikes look …
14th September 2017
The Monetary Policy Committee (MPC) gave a pretty clear signal today that it intends to raise interest rates within the next few months. We now expect a 25bp hike in November. … MPC signals rate hike as soon as …
Last month’s jump in inflation prompted the Turkish MPC to adopt a more hawkish line in the statement accompanying today’s meeting, at which interest rates were left unchanged. Even so, with inflation set to ease and growth likely to slow, and government …
The Swiss National Bank today acknowledged the depreciation of the franc over recent months but stressed that it was still necessary to keep interest rates at rock-bottom levels and maintain the option of currency intervention to reduce any upward …
Indian wholesale price inflation rose in August, and looks set to accelerate further over the coming months. This is another reason to think that there is no scope for further monetary loosening. … Wholesale Prices …
The Bank of Japan at its upcoming meeting will acknowledge that the economic recovery has accelerated. But policymakers will again leave policy settings unchanged and, with inflation set to continue undershooting the Board’s forecasts, tightening will …
The Bank of Canada’s bold call to raise interest rates again so soon after its well-telegraphed July hike caught some investors completely by surprise, resulting in a sharp increase in rate expectations over the next 12 months. As things stand, the market …
13th September 2017
Given upward pressure on the single currency, we now see the ECB tapering its asset purchases over nine months instead of six next year. We still expect it to announce the full programme in advance, which is arguably more hawkish than the step-by-step …
The latest activity data from EMs suggest that the economic recovery continued at the start of Q3. Consumer spending has continued to pick up across most regions, while both industrial production and export growth have remained relatively robust. Overall, …
A plethora of recent developments mean that the Fed is unlikely to raise interest rates again until next year now, although we do expect it to announce the start of its balance sheet normalisation at next week’s FOMC meeting, which concludes on Wednesday …
Indian consumer price inflation accelerated sharply in August, and looks set to rise further over the coming months. As such, there is no scope for further monetary loosening. … Consumer Prices (Aug.) & Industrial Production …
12th September 2017
The United Nations has agreed a new set of sanctions on North Korea, which while falling short of what was originally demanded by the US, constitute the strongest sanctions ever imposed on the country. The measures include a complete embargo on textile …
Most commentators hailed the Kenyan Supreme Court’s decision to annul the result of last month’s presidential election as a key win for the country’s democracy. This is, as yet, premature. The real test of the country’s institutions is still to come. … …
While GDP growth should hold up fairly well over the next year, we expect there will be a sharper slowdown than the RBNZ and most analysts are anticipating in 2019 as the impacts of a cooling housing market and slower net migration take full effect. As a …
The housing investment boom may have breathed its last gasp last quarter. With existing home sales floundering and average sale prices dropping, tighter mortgage financing rules and ill-timed interest rate hikes from the Bank of Canada have created what …
8th September 2017
The ECB’s new forecasts show that it expects inflation of just 1.2% next year and 1.5% in 2018. As the economy is performing well and core inflation has picked up recently, the Bank should still feel confident enough to taper its asset purchases to zero …
A number of developments this week – including Vice Chair Stanley Fischer’s resignation from the Fed, the stopgap deal to keep the government funded for only three months and the arrival of Hurricane Irma on the heels of Harvey – make it less likely that …
Part-time wages have been rising at a reasonable rate for a while but, with evidence now building the firms are finding it harder to hire sufficient full-time workers, a pick-up in broader wage growth is likely soon. The key question is whether it will be …
At its meeting on 14th September, the Swiss National Bank will surely draw some comfort from the depreciation of the franc since it last met in June. But renewed geopolitical tensions and the ECB’s reluctance to commit fully to QE tapering suggest that …
7th September 2017
Despite reiterating the Governing Council’s concern about the strength of the euro exchange rate today, ECB President Draghi indicated that the Bank’s plan to taper asset purchases will be unveiled at the October meeting. He stressed, however, that …
The MPC is unlikely to spring any surprises at its meeting on 14th September. However, the economy has performed broadly in line with its expectations. Moreover, the pound has fallen further since the Inflation Report, which will put more upward pressure …
A rise in China’s foreign exchange reserves suggests that the People’s Bank may have become a net buyer of FX last month for the first time since 2015. This would signal that the central bank’s concerns about capital outflow pressures are being replaced …
While inflation in Sweden is higher than the Riksbank’s 2% target, the Bank’s decision to keep its forward guidance unchanged was not a major shock. The Riksbank is unlikely to shift its guidance until after the ECB signals that it is set to taper its own …
The Brazilian central bank cut its benchmark Selic interest rate by 100bp, to 8.25%, last night and confirmed our view that the end of the easing cycle is not far off. As things stand, our forecast is for an additional 75bp cut in the policy rate, to …
