Filtered by Topic: Monetary Policy Use setting Monetary Policy
The financial markets need to wake up to the fact that there is going to be fewer interest rate changes than in the past and more policy inertia. This is very much a global development, but the trend is more acute in Australia and New Zealand. The lower …
4th August 2017
The statement accompanying the Czech MPC’s meeting, at which it hiked interest rates for the first time in nine years, was relatively dovish and adds to the impression that this will be a gradual tightening cycle. That said, we think inflation is likely …
3rd August 2017
While the Monetary Policy Committee (MPC) remained split on whether to increase interest rates at August’s meeting, the hawks are likely to remain in a minority for a while longer yet. Nonetheless, we still think that the first hike will come earlier than …
After the recent run of softer economic news, the improvement in the Markit/CIPS services survey in July provides reassurance that the economy has maintained the momentum it gathered over Q2. … Markit/CIPS Services PMI …
Sri Lanka’s central bank left interest rates on hold today, and the less hawkish tone of the statement suggests that its tightening cycle may now be at an end. We now expect rates to be left on hold for the remainder of the year, having previously …
The Reserve Bank of India (RBI) went with consensus expectations in cutting its repo rate by 25bp to 6.00% today. But it also acknowledged that inflation would soon be rising again. As such, further policy loosening is unlikely. … RBI rate cut to be …
2nd August 2017
Comments today by BoJ Board Member Funo suggest that the Bank has given up on reaching its inflation target any time soon. Market expectations of policy tightening are likely to recede further as a result … Is the Bank of Japan giving up on its 2% …
The recovery in frontier economies continued over the first half of this year. GDP growth averaged around 2.0% y/y in Q1, twice the rates seen in mid-2016. It would have been stronger still were it not for weakness in the largest frontier market, Saudi …
31st July 2017
After a soft patch at the beginning of this year, jobs growth has soared in Australia in recent months. What’s more, of the net new 154,000 jobs that have been created since March all of them have been full-time ones. And business surveys remain …
The Fed’s latest policy statement suggests that, barring any disruptive debt-ceiling stand-off, the FOMC is ready to announce it will begin reducing the size of its balance sheet at its September meeting. But policymakers are keeping their options open on …
28th July 2017
There is growing speculation that Malaysia’s prime minister, Najib Razak, will take advantage of the recent strength of the economy by calling an early general election. The weak state of the opposition means another victory for the ruling UMNO party is …
Once again the business surveys provided an over-optimistic reading of the economy’s health in the second quarter. This raises questions about their usefulness as a leading indicator, and suggests that we should perhaps put less weight on their current …
The statement accompanying the Colombian central bank’s decision to slow the pace of interest rate cuts to 25bp (from 50bp previously) suggests that policy might not be loosened as aggressively in the upcoming meetings as we had initially expected. …
Abenomics appeared to run out of momentum well before a recent slump in Prime Minister Abe’s popularity put his political future in doubt. In particular, his departure would matter little for structural reform. Monetary policy should also continue along a …
Most people are right to believe that their inflation rate is not 1.9% as the official ABS data show. As different people spend different shares of their income on different items than the ABS assumes, their own inflation rates are different. But most …
While the softer tone of recent economic data may not be enough to prevent another split on the Monetary Policy Committee at August’s meeting, it supports our view that the MPC is still a way away from raising interest rates. … Sluggish GDP growth to keep …
27th July 2017
Financial markets and a large majority of analysts are braced for a rate cut at the Reserve Bank of India’s policy meeting next week. But the RBI has developed a taste for springing surprises recently, going against the analyst consensus at four out of …
The tone of the Turkish MPC statement published at today’s meeting remained relatively hawkish, but we think that falling inflation is likely to prompt the Council to start loosening monetary policy later this year and in 2018. … Turkish MPC stands pat, …
The global picture for monetary policy has changed a little recently because inflation has been lower than expected in many countries. We now think the Fed is likely leave its policy rate on hold in September, but to resume its rate hikes in December. …
The Reserve Bank of Australia will almost certainly keep interest rates on hold at 1.5% when it meets next Tuesday 1 st August, and we expect it to retain its fairly upbeat view on the outlook for the economy when its latest forecasts are published in …
As widely expected, the Fed left its policy settings unchanged today, while hinting that it will begin the process of winding down its balance sheet as soon as September. The Fed will have plenty of opportunity to clarify its intentions before then, not …
26th July 2017
Inflation has continued to fall across Latin America – our measure of regional inflation (excluding Argentina and Venezuela) dropped below 4% y/y for the first time since 2010 last month. This is due largely to the collapse in Brazilian inflation, which …
The scale of the decline in inflation in Central Europe over the past month has taken many by surprise and reinforced expectations in the financial markets that monetary policy will remain very loose. However, this fall in inflation was due almost …
The RBA will probably look through the decline in headline inflation in the second quarter, especially given that underlying price pressures were slightly stronger than it had anticipated. That said, we believe underlying inflation will remain subdued for …
Nigeria’s central bank kept its key interest rate on hold at 14.00% today, but the governor’s speech made it clear that policy loosening is on the agenda. We expect 200bp of cuts by the end of this year. … Nigeria’s central bank pauses before launching …
25th July 2017
The unexpected decline in core inflation over recent months is only partly due to transient factors and suggests that, after raising rates twice in the first half of the year, the Fed will hike rates just once more this year. The Fed had argued that …
EM retail sales growth picked up for a third consecutive month in May and is now running at a 12-month high. What’s more, the improvement has been widespread across different EM regions. In Russia and Brazil, a drop in inflation has both helped to boost …
24th July 2017
Mexican inflation remained unchanged in the first half of July which, combined with the latest activity data suggesting that GDP growth slowed in Q2, reinforces our view that Banxico’s tightening cycle is over. … Mexico Bi-Weekly CPI (Jul.) & IGAE …
The rally in the Canadian dollar to a 14-month high of US$0.79, from US$0.74 a month ago, is likely to fade before year end. While higher oil prices might allow a temporary lift in the coming months, this will be offset by drag from shifting policy …
21st July 2017
The Argentine peso has been the worst-performing EM currency over the past month, and we think it has further to fall. Our forecast is for it to weaken by another 10% against the dollar to 19/$ by end-18 (from 17.2/$ currently). This is a particular …
Although the headline inflation rate fell to 1.0% in June, from 1.3%, the uptick in two of the three core inflation measures suggests that some of the temporary factors restraining inflation are now fading. Needless to say, this will reinforce the Bank of …
The Fed is unlikely to make any major policy changes at next week’s FOMC meeting, but the statement will probably concede that the recent drop back in inflation has been more broad-based than Chair Janet Yellen has previously argued. With core inflation …
At this week’s ECB press conference, President Mario Draghi highlighted the continued improvement in the euro-zone’s economic performance. He reiterated that the region looks set for a period of solid, broad-based growth. We agree. In fact, our forecasts …
Economic prospects are fairly bright in the Nordic and Swiss countries. Switzerland is benefitting from faster growth in the euro-zone, Swedish firms are optimistic about their prospects, and Norway is recovering from its oil-related slowdown. As Swedish …
The renewed rise in the euro since yesterday’s ECB press conference may increase speculation that the Bank will have to change tack. But we doubt that it will be too worried about the currency at current levels. A further appreciation might force it to …
After a marathon policy meeting today, Bank Indonesia confirmed that it was keeping its policy rates unchanged. Quite why the decision took so long is unclear – the decision was exactly what everyone had expected. A senior BI official has characterised …
20th July 2017
Today’s ECB press conference made us more confident that tapering will come next year. An announcement of the policy now seems most likely to come in October, rather than at the next meeting in September as we had previously assumed. But we still think …
The markets remain sceptical that the Fed will continue to normalise interest rates over the next couple of years. But even with inflation still below target, the simple policy rules that the Fed appears in practice to be following indicate that …
EM bond markets have, for the most part, shrugged off the rise in developed market bond yields since the end of June. This strengthens our view that policy normalisation in developed markets is unlikely to cause systemic problems for emerging markets. …
The SARB’s easing cycle will be gradual and data-dependent, but the key policy rate will fall to 6.00% by the end of 2018. Looser policy supports our non-consensus view that growth will pick up this year. … South Africa: Beginning of a gradual loosening …
The Bank of Japan upgraded its assessment of the economy yet again at today’s meeting. But the Board’s inflation forecasts remain far too optimistic even after renewed downgrades. We reiterate our longstanding view that the Bank will not tighten policy …
The result of India’s presidential election is due to be announced later today. It won’t have direct implications for the economy since the role of president is largely ceremonial. But the result could strengthen the ruling BJP’s position in future …
The resilience of home sales in China (up 18% y/y in June) has raised questions about the effectiveness of government efforts to cool the sector, which have been stepped up in recent months. In fact, they seem to have been performing well. The major …
19th July 2017
Given the continued weakness of core inflation, we now expect the Fed to delay the next interest rate hike until December. Accordingly, while there is a chance that the statement following next week’s FOMC meeting will be used to announce the start of …
We expect the current period of strong economic growth in advanced economies to continue for the next year or two, led by rising household consumption and business investment. In many countries the labour market is approaching full employment, but …
Policymakers across Africa are set to loosen monetary policy sooner and more dramatically than most think. We expect cuts in South Africa, Nigeria, Angola, Kenya, & elsewhere over the coming months. … Africa: Monetary policy easing cycle is getting into …
While inflation remains well below the Bank of Japan’s 2% target, Governor Kuroda deserves credit for a number of radical policy changes. His reappointment would therefore underline the government’s resolve in tackling deflation and repairing the public …
18th July 2017
The CBK’s decision to keep its key rate on hold signals its willingness to look through the current period of above-target inflation. With inflation having now peaked, we expect that the next move will be a cut. … Kenya: Rates on hold, next move will be a …
17th July 2017
Saudi Arabia’s official foreign exchange reserves have continued to decline sharply, despite the marked improvement in the current account position over the past year or so. This has raised concerns in some quarters but, as we explain in this Watch, it …
The Bank of Japan will probably upgrade its assessment of the health of the economy at the upcoming meeting. But downward revisions to the Board’s inflation forecasts will underline that policy tightening remains a distant prospect. … Lower inflation …
