Filtered by Topic: Monetary Policy Use setting Monetary Policy
With growth strong and inflation moderating, it came as no surprise that Malaysia’s central bank (BNM) kept its policy rate unchanged at 3.0% today. In its statement, BNM stressed the positive outlook for the economy but gave no indication that it was …
7th September 2017
The Bank of Canada’s decision to raise interest rates for a second consecutive time is a clear sign that policymakers are supremely confident in the economy. Considering the strong pace of recent GDP growth, we can’t rule out another rate hike in October. …
6th September 2017
The tone of the press statement and conference that followed today’s MPC meeting in Poland remained dovish. However, there is a hawkish minority on the Council and, as core inflation picks up in the coming months, we expect more MPC members to join this …
In contrast to some forecasters who have suggested that the pound could reach parity with the euro before the end of the year, we expect sterling to reverse some of its recent losses against the euro. For a start, we don’t share other forecasters’ …
The breathless commentary surrounding the recent bailout of Otkritie by Russia’s central bank appears to have missed some of the more salient points about Russia’s banking sector. As we explain in this Watch, the risk of systemic problems that affect even …
The Reserve Bank of Australia has now left interest rates at 1.5% for 13 months and we suspect the combination of subdued GDP growth, low inflation and a growing focus on financial stability will mean it keeps rates there for another two years yet. Our …
5th September 2017
The upward revisions to second-quarter GDP growth, which is now estimated to have been 3.0% annualised, suggest that the ambitious growth targets set by the White House may already have been achieved. However, while the economy looks set to continue …
1st September 2017
Although the real economy grew strongly over the first half of this year, that growth still appears to be overly dependent on the heavily indebted household sector. That arrangement was possible when interest rates were near record lows and house prices …
In our view, EM assets are likely to weather the gradual tightening of monetary policy in advanced economies this year and next. But the effects of this tightening may start to bite further ahead. … How vulnerable are EM assets to tighter DM monetary …
Subdued inflation and a relatively low level of foreign currency debt mean the weakness of the Philippine peso, which has recently been hitting multi-year lows against the US dollar, is not a major threat to the economy. In fact, policymakers appear to be …
We are lifting our GDP forecasts for both this year and next to reflect the strength of recent data. We are not making any changes to our inflation forecasts though, as price pressures still appear extremely weak. If we are right, the Bank of Japan will …
One recent data release showed that mining investment in Australia is still plunging while another suggested it has started to rebound. Both are technically right, as it all depends on how you measure investment. The broader point, though, is that mining …
The appreciation of the single currency since the ECB’s last meeting has strengthened the case to delay the formal announcement of asset purchase tapering until October. But with growth strong and inflation edging up, President Draghi is likely to hint …
31st August 2017
Economic growth and inflation have been stronger than expected since the Riksbank last met. Despite these developments, policymaker’s concerns about a sharp rise in the krona suggest that the Bank will hold off from altering its forward guidance at next …
The Bank of Korea (BoK) today left interest rates unchanged and there was little sign in the central bank’s statement that the central bank is in any rush to adjust policy. With the economy growing at a decent pace but price pressures under control, …
The past month has brought some signs that the continuing political crisis in Brazil is starting to weigh on the more ambitious elements of the government’s reform programme. While President Temer’s administration has already passed labour reforms and …
30th August 2017
The US Fed is still on track to start shrinking its balance sheet in the coming month or two, and we think it will raise rates again in December. Meanwhile, the ECB will probably announce in October that it will wind down its asset purchases during 2018, …
The incoming economic data have been generally strong and will encourage the Bank of Canada to raise interest rates further to 1.00%, from 0.75%, before the end of this year. We wouldn’t rule out a rate hike next week, sooner than the October meeting …
Although surveys of overall economic sentiment in both Switzerland and Sweden fell in August, they still point to a healthy pace of GDP growth in both countries. But with inflation much stronger in Sweden than in Switzerland, we see the Riksbank starting …
While we agree with the assessment of the financial markets that there is next to no chance of an interest rate hike when the Reserve Bank of Australia (RBA) meets on Tuesday 5 th September, we believe that the markets have got ahead of themselves by …
29th August 2017
Household consumption grew very strongly in the second quarter, supported by a further decline in the household saving rate and an acceleration in household borrowing. In the tougher banking regulatory environment this year, however, those trends aren’t …
25th August 2017
Economic growth held up well across most of Emerging Asia last quarter. Poor prospects for domestic demand mean growth has probably already peaked in many countries, but with exports likely to remain buoyant, most of Asia should continue to grow at a …
The general election in New Zealand could have a bigger influence on the economy than seemed possible a few weeks ago. If National needs the support of NZ First to form a majority government then the economy would probably be a little weaker than …
Whoever is leading the Fed next February, policy will be driven mostly by economic developments, which we think will prompt the FOMC to raise rates four times in 2018. But a new Chair, along with other board appointees, could shift the Fed’s stance in …
24th August 2017
After a torrid couple of years, the economies of Latin America have turned a corner and we expect growth to strengthen over the rest of 2017 and into 2018. Inflation has fallen in most countries and should remain low, allowing central banks across the …
23rd August 2017
Despite the current subdued rates of inflation across most of Emerging Asia, we don’t expect many of the region’s central banks to copy Bank Indonesia, which yesterday surprised markets by cutting interest rates. The main reason why other central banks …
While the Central Bank of Iceland (CBI) left rates unchanged today, our expectation that the króna will appreciate in the coming months means we expect one more rate cut this year, in November. … Central Bank of Iceland nearing the end of its loosening …
Just as the dollar’s earlier surge weighed on economic growth last year, the drop back in the exchange rate this year will provide a boost to growth over the next 12 months. The pick-up in global economic growth will also help. Real export growth has …
22nd August 2017
Given the improving outlook for inflation in Indonesia, we think today’s 25 basis point cut in the main policy rate is unlikely to be the last in the current cycle. We expect one further rate cut this year, although the timing and pace of further cuts …
Despite the focus in advanced economies on the timing of monetary policy tightening, the majority of EMs remain in easing mode. More EM central banks cut their policy interest rates than raised them for the fourth consecutive month in July. The bulk of …
The raft of second quarter GDP data released over the past few weeks showed that growth in Emerging Europe as a whole accelerated to around 3.7% y/y, its fastest pace since 2011. The pickup in growth was widespread across the region. It’s tempting to pin …
The Reserve Bank of India cut its policy rate by 25bp earlier this month, and subsequently called upon commercial banks to pass on the cut to borrowers. But the move is likely to have a negligible impact on lending growth to the private sector. After all, …
The euro-zone’s economic growth is unusually synchronised across the region. Economies in the core continue to do well, while previously-struggling countries like Italy and Portugal are growing again. This makes it less likely that a crisis will erupt in …
18th August 2017
Chile’s central bank left its policy interest rate unchanged at 2.50% for the third consecutive month and, while the accompanying statement gave no hints that rate cuts are being considered, we suspect policymakers remain divided over the need for …
If a cyclical rise in wage growth in Australia was underway, it would show up first in the strongest states and sectors. But wage growth hasn’t risen in New South Wales and Victoria. What’s more, labour market conditions in Queensland, Western Australia …
The minutes of the Reserve Bank of India’s (RBI’s) August policy meeting show that, despite voting to cut interest rates, most members remain cautious about the outlook for inflation. Indeed, with inflation data for July confirming a pick-up in price …
17th August 2017
At its last meeting in June, when it cut interest rates for the second time this year, the Central Bank of Iceland (CBI) left the door open to further rate cuts. But given that the króna has slumped since then, it now seems more likely that the CBI will …
16th August 2017
The Bank of Thailand (BoT) left interest rates on hold today and the accompanying monetary policy statement suggests the central bank is in no rush to adjust rates any time soon. We are maintaining our view that the BoT will keep interest rates unchanged …
Official data published on Monday show that commercial banks’ non-performing loan (NPL) ratio held steady at 1.74% in Q2 and that their net profits grew almost 12% y/y, the fastest pace since 2014. That said, we think it would be a mistake to conclude …
New lending declined in July, masking an uptick in underlying credit growth. We doubt this will translate to a sustained pick-up, however, since efforts to slow the build-up of debt mean that market rates should remain elevated in coming months. … Bank …
15th August 2017
History may be turned on its head over the next decade with Australia and New Zealand experiencing lower inflation rates than some of their peers. It follows that their exchange rates may be weaker than otherwise and their government bonds yield may be …
Indian wholesale price inflation rose in July, and looks set to accelerate further over the coming months. As such, we think that there is no scope for further monetary loosening. … Wholesale Prices …
14th August 2017
The surge in business confidence in Australia has made us a little more upbeat on the outlook for business investment. But with households showing some signs of struggling, a bit more investment won’t prevent GDP growth from falling short of most people’s …
11th August 2017
Today’s decision by the central bank in the Philippines (BSP) to keep its main policy rate on hold at 3.0% was widely expected. The accompanying statement, which was the first to be published since Nestor Espinalla took over as governor, suggests the …
10th August 2017
Egyptian inflation rose to its highest rate since 1986 in July, but it has been pushed up by a number of one-off factors that will fade over the next six-to-nine months. Indeed, we think inflation has now peaked and will begin to fall more quickly than …
Graeme Wheeler didn’t go out with a bang at his last policy meeting as Governor of the Reserve Bank of New Zealand as interest rates were left at 1.75% for the ninth month in a row. But he stressed more strongly than before that rates are unlikely to rise …
China’s foreign exchange reserves suggest that outflow pressures eased further last month, which seems to have encouraged the People’s Bank to halt its FX sales entirely. This shift is helping to support the renminbi, which we think will continue to …
7th August 2017
Despite softening home sales, the incoming data point to solid GDP growth in the second quarter, possibly outpacing the 3.7% q/q annualised rate posted in the first quarter. Needless to say, the performance of the economy over the first half of this year …
4th August 2017
Annual revisions to the income and spending data released this week mean that the household saving rate is now estimated to have fallen sharply over the past year, calling into question the sustainability of recent economic growth. While those revisions …
The surprisingly-dovish reaction of sterling to the Bank of England’s August Inflation Report has led some commentators to conclude that the prospect of an interest rate hike this year is now dead and buried. However, while our central forecast assumes …
