Filtered by Topic: Monetary Policy Use setting Monetary Policy
Peruvian economic activity rebounded strongly in May as the effects of severe flooding at the start of the year started to fade and we expect the recovery to continue over the coming months. … Peru Economic Activity …
14th July 2017
Markets focused this week on supposedly dovish comments in Fed Chair Janet Yellen’s semi-annual testimony to Congress, but in truth she did little more than repeat the existing Fed line. As long as core inflation starts to rebound, we still expect a …
Government bond yields have risen recently by more in Germany than in some “peripheral” countries of the euro-zone. This has happened even though the sell-off in bonds has been caused by concerns that the ECB will scale back its purchases, from which the …
The Bank of Canada’s new-found confidence in the economy and forecast rebound in core inflation have prompted speculation that interest rates might rise much higher this year. But with household debt at extremely high levels and the housing bubble already …
The change of Romania’s government late last month has prompted a shift in the direction of fiscal policy from loosening to tightening. But the new administration has struggled to put together a legislative agenda and has already backtracked on several …
Peru’s central bank cut its policy interest rate by another 25bp, to 3.75%, and we expect at least one further quarter point reduction this year. Elsewhere, the Central Bank of Chile left its policy rate on hold at 2.50% for a second month, but we think …
The announcement earlier in the week from the US government that it is formally seeking to renegotiate the Korea-US free trade pact (KORUS) is not a big threat to the Korean economy. The negotiations are most likely to focus on eliminating non-tariff …
The drop in headline Indian wholesale price inflation in June will increase the clamour for rate cuts. But stripping out the effect of volatile fuel and food prices, our measure of core WPI inflation held steady, and there are reasons to think it core …
The Bank of Canada may end up reversing the rate hike it made yesterday. But central banks elsewhere are likely to begin raising rates over the next year or two and are less likely to reverse course. Their economies are approaching full capacity and are …
13th July 2017
We expect the ECB to renew its hints of future QE tapering at its forthcoming meeting, despite the modest tightening of financial market conditions that such hints have caused already. We still see the Bank tapering its purchases to zero in the first half …
We’ve argued for some time that the debate around monetary policy in Mexico would shift from tightening to loosening over the second half of this year. While the potential for market volatility in the run-up to next year’s presidential election may cause …
With inflation falling and growth rebounding, it was no surprise that Malaysia’s central bank (BNM) kept its policy rate unchanged at 3.0% today. Looking ahead, we expect that BNM will keep interest rates on hold until at least the end of the year. … …
The Bank of Korea (BoK) left interest rates on hold today and there was little indication in the governor’s accompanying press conference that the central bank is in any hurry to adjust policy. We continue to expect the policy rate to be kept at 1.25% …
The Bank of Canada’s decision to begin raising interest rates is a gamble that might have to be reversed before long. With the housing bubble already showing signs of bursting and household debt at extremely high levels, higher borrowing costs will dampen …
12th July 2017
Household debt has remained elevated in the euro-zone as a whole, but there has been significant deleveraging in the countries that needed it most. Given positive trends in the labour market, we expect households across the region to withstand ECB policy …
11th July 2017
With Turkish inflation now on a downwards path, it seems increasingly likely that the central bank will start to loosen monetary conditions before the year is out. The easing cycle will probably begin slowly, but overall we think the average cost of …
Vietnam’s decision to cut interest rates today risks fuelling a further surge in credit growth, increasing the risk of a sharp rise in non-performing loans further down the line. We think the rate cut will have to be reversed over the coming years. … …
7th July 2017
The “devaluation” of the Pakistani rupee earlier in the week is a reminder of the country’s precarious balance of payments position. Pakistan will soon be forced to either let the currency fall much further, tighten monetary policy aggressively, or make …
The Egyptian central bank’s surprise decision late last night to hike its benchmark overnight deposit rate by 200bp, to 18.75%, was largely a response to recently-announced subsidy cuts, which will temporarily push up inflation. However, the accompanying …
We now expect the government to delay the sales tax hike currently scheduled for October 2019 beyond 2020. While this would remove one obstacle to policy tightening by the Bank of Japan, the bigger picture is that price pressures will strengthen only …
The rising level of household debt in Australia presents a clear risk to the economic outlook and helps in part to explain why we expect the pace of consumer spending to slow this year. What’s more, given the risk it poses to financial stability, it is a …
While there is no urgency for the MPC to dampen inflationary pressures, the extraordinary starting point of policy and general resilience of the economy suggest that UK interest rates are likely to rise a bit sooner and a bit more quickly than markets and …
6th July 2017
The press statement that followed today’s MPC meeting in Poland remained extremely dovish, but it does seem that there are growing divisions within the Council. With wage growth and core inflation likely to rise over the coming months, we expect more MPC …
5th July 2017
The Bank of Canada’s new-found optimism in the economy means that there is a risk it could raise interest rates very soon, but we don’t think a rate hike next week to 0.75%, from 0.50%, is a foregone conclusion. Although markets are betting that way, we …
The euro’s rise has not yet been sharp enough to cause a significant tightening of monetary conditions and we doubt that it will dissuade the ECB from tapering QE next year. But a further appreciation might cause the Bank to opt for a long taper or to …
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 …
It is widely thought that recessions are generally triggered by central banks stepping on the brakes in response to rising inflation. But many recessions have not been preceded by an increase in inflation, particularly since the 1980s. This suggests that …
4th July 2017
By indicating that it no longer expects to cut interest rates, the Riksbank has taken a small step toward monetary policy normalisation. While the Bank indicated that it will continue to guard against a rapid appreciation of the krona, we expect its …
The Reserve Bank of Australia (RBA) left interest rates on hold at 1.5% for the tenth consecutive meeting today and retained its fairly optimistic tone on the outlook for economic growth in the accompanying statement. Nonetheless, we expect rates will …
The decision by Colombia’s central bank to step up the pace of easing caught the consensus off guard, but supports our view that the policy rate will be cut by more than most expect this year. We remain comfortable with our forecast for it fall to 4.50% …
3rd July 2017
The Bank of Canada’s recent hawkishness doesn’t fit with the weaker core inflation data. Amid further warnings from the BIS about the dangers of sticking too closely to inflation targets when asset bubbles are forming, the Bank might be stealthily heeding …
30th June 2017
Bond yields across the Nordic and Swiss economies increased in June, in line with global market moves following major central bank speeches that prompted investors to bring forward their expectations for monetary policy normalisation. Meanwhile, equity …
ECB President Draghi’s speech earlier this week prompted investors to re-assess the outlook for monetary policy. They now seem to expect the Bank to raise interest rates around the middle of next year. However, nothing in his speech changes our view that …
While the recent run of positive news on the health of the Australian labour market is certainly encouraging, it doesn’t alter the bigger picture that there is still plenty of spare capacity. This will prevent a sustained pick-up in wage growth from …
The hawkish tone of today’s post-meeting statement and press conference supports our non-consensus view that the first interest rate hike in the Czech Republic will come at August’s MPC meeting. Following that, we see the policy rate being raised to 1.00% …
29th June 2017
June’s rise in German HICP inflation and a sharper fall in the Spanish rate suggest that euro-zone inflation probably edged down from May’s 1.4%. German core inflation is now rising, but underlying price pressures remain weak elsewhere in the euro-zone. … …
We still think the US Fed is likely to raise interest rates two more times this year and to start gradually shrinking its balance sheet in Q4. But the ECB will probably not start tapering its asset purchases until next year and will leave interest rate on …
28th June 2017
We think that the euro’s latest rise against the US dollar was a justified reaction to Mario Draghi’s hints that QE will be tapered early next year, despite warnings from the ECB that the comments were over-interpreted. We still expect the euro to edge …
The Norges Bank’s latest projections suggest that it is unwilling, or unable, to loosen policy by enough to hit its inflation target. This will weigh on economic growth over the coming years, and probably hinder the necessary medium-term rebalancing of …
Since the Riksbank last met in April, underlying inflation has been stronger than expected, international political risks have diminished and economic conditions in Sweden’s trading partners have improved. In light of these developments, next week we …
The publication today of the Financial Stability Report revealed that while the Bank of England’s Financial Policy Committee is fairly sanguine about the resilience of the financial system as a whole, it is keen to tighten lending standards for unsecured …
27th June 2017
The Reserve Bank of Australia (RBA) will almost certainly keep interest rates on hold at 1.50% when it meets on Tuesday 4 th July. And while the sustained improvement in the labour market in recent months has quashed any talk of a further interest rate …
The sharp drop in Argentine inflation to an 18-month low in May is likely to prompt the central bank to shift into easing mode over the coming quarters. But with core inflation likely to be slow to fall back, we think interest rate cuts will be more …
23rd June 2017
After a surprisingly large split in the vote at June’s Monetary Policy Committee meeting, two speeches this week provided further signs of a growing rift on the Committee. Indeed, the fact that Andy Haldane – Bank of England Chief Economist – appears to …
Sri Lanka’s central bank left interest rates on hold today, and the less hawkish tone of the statement suggests the central bank’s tightening cycle may be nearing an end. We are changing our forecast for this year, and now expect policy rates to rise by …
If the relative performance of the economies of New Zealand and the UK/Ireland over the next few years is anything to go by, the All Blacks will beat the British & Irish Lions 2-1 in the rugby test series. In our three economic tests, New Zealand come out …
Janet Yellen’s remarks about the case for reconsidering the Fed’s inflation target have generated some attention this week. But in practice, there is little prospect of the inflation target being raised in the near future, either in the US or in any other …
22nd June 2017
With the economy experiencing a steady recovery and inflationary pressures still very subdued, it was no surprise that Taiwan’s central bank (CBC) decided to keep its policy rate on hold today at 1.375%. The dovish tone of the CBC’s accompanying statement …
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. But while the consensus among analysts is that the BSP will hike rates twice this year, we continue to think that rates will be …
The Norges Bank revised up its forecast for interest rates this year, so a cut now looks unlikely. But while the Bank expects to raise its policy rate in 2019, we think that it will be unchanged until 2020. … Norway rate cut off the table, but a long way …
