Filtered by Topic: Monetary Policy Use setting Monetary Policy
The fall in Philippines inflation from 3.4% y/y in April to 3.1% y/y in May adds weight to our view that it is now past its peak. The modest decline was a touch lower than our forecast of 3.2% (Bloomberg consensus: 3.3%). … Philippines and Taiwan Consumer …
6th June 2017
The combination of strong growth and rising core inflation has led some members of Poland’s MPC to strike a more hawkish tone in recent months. However, while this is consistent with our view that interest rates will ultimately be raised by more than the …
5th June 2017
We think that the ECB will taper its asset purchases to zero in the first six months of 2018 and begin raising interest rates in 2019. The euro-zone economy as a whole should continue to perform well regardless, but there is a risk of more damaging …
The weakness of the latest GDP and inflation data has reignited talk that the Reserve Bank of India (RBI) may loosen at the upcoming policy meeting on 7th June. However, more timely indicators suggest that there has been a big improvement in activity …
2nd June 2017
The region’s rate cutting cycle has come to an end, but with inflation set to remain fairly subdued, interest rates are likely to remain low for some time yet. … Policy rates to remain low for longer than consensus …
Most of the recent gloomy headlines on Australia’s housing market are simply because people are mistaking the normal soft patch after the Easter school holidays for something more worrying. When you adjust for such seasonal swings, house prices actually …
At its meeting on 8th June, the ECB is likely to change its forward guidance, dropping the references to lower interest rates and expanding QE. But Mr Draghi will want to avoid stoking expectations of imminent policy tightening. So he is likely to repeat …
1st June 2017
May’s decline in euro-zone inflation to a five-month low does not change our view that the ECB will alter its forward guidance next week. … Euro-zone Flash CPI (May) & Unemployment …
31st May 2017
We expect energy inflation to peak next quarter and then drop back, providing another challenge to the Bank of Japan’s efforts to reach a 2% inflation target. … When will energy inflation …
OPEC’s decision this month to roll over its oil output cuts displayed a rare sense of cohesion from the cartel, but there are signs that de-facto leader Saudi Arabia is seeking an eventual end to intervention. The extension of the cuts to the end of March …
30th May 2017
While there is growing evidence that consumption growth has begun to falter, this won’t be enough to prompt the Reserve Bank of Australia (RBA) to cut interest rates from 1.5% when it meets on Tuesday 6 th June. That said, we expect that slow economic …
The US Fed is likely to raise interest rates in June and to begin a very gradual process of balance sheet normalisation before the end of the year. But other major central banks are a long way behind. We expect the ECB to change its forward guidance …
26th May 2017
The change in the renminbi fixing mechanism announced today shouldn’t rattle markets, not least because it appears to be an attempt to strengthen rather than weaken the currency. It suggests though that policymakers’ tolerance for letting market forces …
Given the improvement in the euro-zone’s political and economic outlook and the relative stance of monetary policy, we no longer expect the Swiss franc to appreciate against the euro. But the franc will remain historically strong, leading the SNB to keep …
25th May 2017
Today’s MPC statement from the governor of the South African Reserve Bank supports our nonconsensus view that policymakers will cut their key policy rate to 6.50% by the end of the year. … South Africa: MPC strikes a dovish …
News that the Fed will proceed very cautiously in scaling back its huge balance sheet does not change our view that US monetary policy will be tightened more rapidly than the markets anticipate this year and next – and that the world economy should be …
While the pound could fall again if the economy weakens or Brexit prospects worsen, there are good reasons to think that its recent appreciation can continue. … Sterling’s Brexit recovery can go …
The combination of strong growth and rising inflation in Central and Eastern Europe (CEE) has shifted attention to when and how policymakers might respond. To help answer this, we’ve created Taylor Rules for the region’s economies. These suggest that …
The Bank of Korea (BoK) left interest rates on hold today and the governor’s accompanying press conference makes clear the central bank is in little hurry to adjust rates anytime soon. We continue to expect the policy rate to be kept at 1.25% not just for …
The ongoing regulatory crackdown on banks’ off-balance-sheet activities has contributed to the mild slowdown in growth we’ve seen recently. But it is also bringing into focus the challenges that China’s policymakers face in putting credit growth onto a …
The latest FOMC meeting minutes revealed that the Fed intends to gradually phase out the reinvestment of maturing securities in its portfolio. The upshot is that the balance sheet will shrink more slowly than we previously suspected. That means that the …
24th May 2017
The Bank of Canada’s decision today to keep its policy interest rate at 0.50% and to remain neutral on the outlook for rates shows that, despite strong economic growth and employment gains, policymakers aren’t convinced that the economy is on a …
The ECB is edging towards ending asset purchases and raising interest rates. But there are good reasons to think that it won’t repeat the mistake that it made in 2011 of tightening policy too soon. … Will the ECB tighten prematurely …
With the economy gaining momentum and price pressure benign, it was no surprise that the Bank of Thailand (BoT) left its policy rate on hold at 1.50% today. Looking ahead, we expect the BoT to keep interest rates unchanged for the rest of this year and …
Our China Activity Proxy (CAP) shows growth stayed in April at the slowest pace in half a year. Looking ahead, as officials continue their efforts to rein in credit risks, we think activity will slow further in the quarters ahead. … Growth remains at …
The outlook for Latin America is improving and we expect economic growth to accelerate over the next year. The latest political crisis to engulf Brazil has cast fresh doubts over the outlook there but the early signs suggest that this is unlikely to …
23rd May 2017
Nigeria’s central bank held its key rate on hold again, but we expect that policymakers will cut rates later this year as inflation slows and the economy remains weak. … Nigeria: CBN holds rates, but hints that cuts are …
The euro’s recent appreciation against the US dollar appears to reflect better prospects for euro-zone growth and has occurred despite expectations that ECB monetary policy will remain very loose. Accordingly, while we still expect interest rates to rise …
After a sharp decline at the start of the year, net capital outflows have crept up again recently. Unless we witness another misstep on exchange rate policy though, outflow pressure should remain manageable. … Capital Flows Monitor …
First quarter GDP estimates for Emerging Europe published this month beat expectations across the board and suggest that growth in the region as a whole picked up to a three-year high of 2.3% y/y. Romania was the region’s star performer, growing by close …
The consensus reached between India’s national and state governments on how different products will be dealt with under the Goods and Services Tax (GST) marks another important step towards its implementation. The finance ministry on Friday confirmed both …
The Egyptian central bank’s surprise decision late last night to hike its benchmark interest rate by 200bp, to 16.75%, appears to the result of pressure from the IMF. The move is likely to be a one-off and we expect the next change in interest rates to be …
22nd May 2017
The decision on Friday by the rating agency, S&P, to upgrade Indonesia to investment grade rating was long overdue. At under 30% of GDP, Indonesia has one of the lowest levels of government debt in the region. Last year the government demonstrated its …
19th May 2017
The overall trend in EMs has remained towards looser monetary policy in recent months, with more EM central banks cutting interest rates than hiking them. But significant divergences exist at a country level. The central banks that are loosening policy …
Diminishing political risk and early expectations of ECB asset purchase tapering have driven the euro up to around its highest level since before QE began. We think that the single currency will fall back again later in the year. But its rise has added to …
Chile’s central bank cut its policy interest rate by another 25bp, to 2.50%, but with the economy showing tentative signs of recovery, we think the easing cycle is over for now. We expect the policy rate to remain on hold for the rest of this year and all …
With inflationary pressures rising, Bank Indonesia’s (BI) decision to leave interest rates on hold today came as no surprise. The central bank’s accompanying statement struck a fairly cautious tone, supporting our view that interest rates will remain on …
18th May 2017
While the recent pick-up in euro-zone growth has owed much to temporary factors, the economy now seems to be gaining its own momentum and we expect it to outperform consensus forecasts this year and next. But a lack of price pressures should keep ECB …
The latest decline in the core CPI inflation rate to 1.9% in April, at the same time as the unemployment rate dropped to a decade low of 4.4%, presents a dilemma for the Fed. The price stability part of its dual mandate suggests that it would be prudent …
17th May 2017
The statement that followed today’s MPC meeting in Poland was broadly unchanged from previous months and suggests that any change in interest rates is unlikely in the coming months. But with core price pressures set to build over the second half of the …
Today’s decision by the Central Bank of Iceland to cut interest rates is likely to be followed by another cut later this year. Granted, strong economic growth will put pressure on domestic inflation. But we think that the CBI is still underestimating the …
While the Bank of Canada will likely hold interest rates at 0.50% next week, the balance of risks around its neutral stance on the interest rate outlook are beginning to tilt to the downside, mainly due to oil price volatility, trade policy uncertainty …
The Riksbank has stated that its new inflation tolerance band will have no effect on policy. But with some Board members growing increasingly concerned about the effects of ultra-loose monetary policy on the housing market, the added flexibility could …
16th May 2017
The weak activity and spending data published yesterday add to evidence that growth in China is starting to slow. We think the deceleration in the economy will be gradual and expect official efforts to contain credit risks to continue in the months ahead. …
Credit growth is the strongest it has been in years but continues to fall short of growth in bank deposits. Meanwhile, the volume of external lending dipped slightly in Q4 but remains close to a record high. … Monetary Indicators Monitor …
In the minutes of its latest meeting, the MPC commented that if the economy evolves in line with its forecast, rate hikes would be justified before markets currently expect. But judging by the market reaction following the meeting, others are clearly more …
12th May 2017
The election of Emmanuel Macron as France’s next president has removed a big risk to the euro-zone economic outlook. This could allow the ECB to stop worrying about political risks and to concentrate more on the euro-zone’s healthy economic performance. …
One of the biggest challenges facing South Korea’s newly elected president, Moon Jae-in, is the country’s dreadful demographic outlook. Although there are steps the new government could take to boost fertility rates and encourage more women into the …
In a recent Quick Take audio recording (available here) , we discussed why the Central Bank of Russia had caught the markets (but not us) off guard at its last two meetings and why interest rates are likely to fall further than most expect in the coming …
The Central Reserve Bank of Peru’s decision to cut its policy interest rate by 25bp, to 4.00%, took most analysts by surprise, but not us. We expect one further 25bp cut, to 3.75%, over the coming months, although we don’t think that this marks that start …
