Filtered by Topic: Monetary Policy Use setting Monetary Policy
Despite the relatively poor growth outlook, Bank Indonesia (BI) left its key policy rate on hold at 4.75% today. With inflation set to rise over the coming months and the rupiah vulnerable to sudden shifts in investor risk appetite, we expect rates will …
20th April 2017
As next week’s monetary policy meeting is the last before asset purchases are set to end in June, the Riksbank will probably signal whether they will be extended. While CPIF inflation, which excludes the direct effect of interest rate changes, …
With economic growth strengthening recently, a slim majority of analysts now expects the Bank of Japan to start tightening policy by the end of next year. But stronger growth has failed to generate price pressures – in fact, the Bank looks set to revise …
The further strengthening in underlying price pressures in the first quarter has increased the chances that the RBNZ will raise interest rates earlier than we had been expecting. Both we and the RBNZ had thought rates would not be raised until 2019. … New …
The euro-zone has continued to perform very well and we now expect growth to be stronger than the consensus forecast this year and next. Inflation has been lower than we had assumed, meaning that household spending growth should not slow too sharply. …
19th April 2017
Consumer price inflation in Malaysia accelerated to a new eight-year high in March, but we see little prospect of a rate hike any time soon. … Malaysia in no rush to hike rates despite further rise in …
Confirmation that the US is seeking to renegotiate but not scrap the Korea-US free trade agreement (KORUS) is the latest sign that President Trump’s bark, at least when it comes to trade, is turning out to be worse than his bite. On the campaign trail, …
Indian wholesale price inflation edged down in March, but the bigger picture is that it remains close to its highest rate in three years, and that price pressures are still elevated. … Wholesale Prices …
17th April 2017
President Donald Trump’s new-found enthusiasm for realpolitik rather than the “America First” doctrine he championed in his inaugural speech is encouraging, but his administration still faces several key tests over the next few months. We suspect that …
13th April 2017
Activity surveys suggest that economic growth in the largest Nordic and Swiss economies is set to pick up. In Switzerland, the KOF Business Barometer points to annual GDP growth rising from Q4’s 0.6% to around 2.5%. In Sweden, the NIER Economic Tendency …
The Bank of Canada confessed this week that speculation is partly responsible for the recent upswing in house prices, but doesn’t believe that higher interest rates are a solution to the problem. The negative impact on the real economy from higher …
The highlight of the coming week is a scheduled monetary policy meeting in Indonesia. Despite the poor growth outlook, we think interest rates will be left on hold against a backdrop of rising inflationary pressures and concern over the outlook for the …
While there are good reasons to believe that inflation will continue to recover in coming months, the Bank of Japan’s most recent forecasts from January are far too optimistic. Downward revisions to the Bank’s projections at the meeting later this month …
The Bank of Korea (BoK) kept its policy rate unchanged at 1.25% today, and with the economy starting to show signs of improvement and underlying price pressures benign, we think the BoK will maintain its current stance for the rest of the year. … Korea …
With the growth outlook improving and inflation likely to remain fairly subdued, the Monetary Authority of Singapore (MAS), which today left its monetary policy settings unchanged, is likely to be in little rush to adjust its monetary policy settings. … …
The Bank of Canada’s decision today to keep its policy interest rate at 0.50% and to stay neutral on the outlook for rates is understandable given how uneven recent economic growth has been. Until there are clear signs of sustainable export-led growth, …
12th April 2017
The fact that the MPC is unlikely to start to reverse its QE programme for a considerable period supports our view that interest rates will rise sooner and more quickly than is generally expected. … When will the MPC start to reverse …
After hiking the fed funds rate at both the June and September FOMC meetings, the Fed will begin to phase out the reinvestment of maturing principal on its asset holdings at the December meeting. A pre-announcement of the reinvestment change should come …
March’s fall in inflation was partly due to temporary effects and inflation should rise in April. As there is now an increasing risk that inflation will overshoot the Riksbank’s target, later this month we expect the Bank to signal that its asset …
The latest data suggest that we are right to be more downbeat than most on the outlook for Australia this year but more upbeat than most on the prospects for New Zealand. While both economies will benefit to some degree from the recent improvement in …
A sharp rise in interest rates could result in large losses for the Bank of Japan if it were ever to sell its huge stock of government bonds. But the Bank is keeping a lid on bond yields and will continue buying rather than selling bonds. And even if QQE …
11th April 2017
Despite the Fed raising interest rates twice in the past four months, broad financial conditions in the US have actually loosened. The current calm in financial markets, if sustained, would be another reason for the Fed to accelerate the pace of rate …
10th April 2017
Last week’s communications from the ECB confirmed our judgement that it is in no hurry to begin the process of policy normalisation despite the health of the economy. Indeed, the Bank still intends to stick to its plan to keep loosening policy by buying …
7th April 2017
Consumer spending has grown at a steady if unspectacular pace across Emerging Asia over the past few years, comfortably outperforming other EM regions. Spending in the region should continue to grow at a decent pace, but headwinds are starting to mount in …
Peru’s central bank kept its policy interest rate on hold at 4.25% and, while the accompanying statement struck a dovish tone, the risk of a surge in inflation means rate cuts are unlikely. That said, with the economy likely to have weakened further in …
While the economy should continue to grow at a robust pace, price pressures will strengthen only slowly. And with the sales tax hike scheduled for end-2019 clouding the outlook, the Bank of Japan is unlikely to tighten policy anytime soon. Growth has been …
Consumer price inflation is likely to have risen again in March, due in large part to another acceleration in food inflation. Further ahead, rising core price pressures could prompt the RBI to follow up yesterday’s hike to the reverse repo rate with a …
Venezuela has hit the headlines for all the wrong reasons over the past week, with the Supreme Court first annulling the National Assembly before then partly reversing its decision. However, a change in the so-called “Hydrocarbons Law” has slipped under …
6th April 2017
The Reserve Bank of India (RBI) opted to keep its benchmark repo rate on hold today, but the hike to the reverse repo rate represents a shift towards tighter monetary policy. Looking ahead, with inflation set to accelerate further, we think that hikes to …
March’s Swiss inflation data do little to alter the picture of extremely subdued price pressures. With the core rate barely positive and inflation expectations very low, we expect the Swiss National Bank to maintain supportive policies including FX …
Central banks in Switzerland, Sweden and Norway have all voiced concerns about overheating in their housing markets. In Switzerland, macro-prudential policies have already served to cool house price inflation and there is scope to do more. This should …
5th April 2017
The relatively dovish stance taken by the Polish MPC at today’s post-meeting press conference reinforces our view that monetary tightening is a long way off. We only expect interest rate hikes to come in 2018. While the Romanian MPC also struck a fairly …
We expect the Bank of Canada to hold interest rates at 0.50% next week and to remain neutral on the direction of interest rates in the near future. Despite economic slack and muted core inflation, economic growth has continued to surprise on the upside. …
While the outlook for UK monetary policy is highly uncertain, the economy’s continued resilience suggests that interest rates will rise sooner and more quickly than is generally anticipated. … Economy’s resilience points to earlier rise in interest …
The Reserve Bank of Australia (RBA) was always going to leave interest rates at 1.5% today, but there are some subtle signs that the Bank is becoming more concerned about the outlook for the labour market and underlying inflation, but less concerned about …
4th April 2017
Financial markets appear to be ignoring the Bank of Canada’s latest warnings about the uncertain economic outlook and are pricing in an interest rate hike before the end of this year. In contrast, we think there are good reasons why monetary policy in …
31st March 2017
March’s sharp slowdown in euro-zone inflation was partly driven by temporary factors that will reverse in April, but the big picture is that inflation is now on a downward trend. So we expect the ECB to continue purchasing assets and leave interest rates …
The US Treasury is due to report this month which of its major trading partners, if any, have been manipulating their currencies for unfair advantage. No country in Emerging Asia meets the criteria currently laid down by the US Treasury. However, the …
The Egyptian central bank’s decision to leave interest rates unchanged today confirmed that policymakers are looking through the recent surge in inflation but, while inflation should start to fall soon, any loosening of monetary policy is still some way …
30th March 2017
We think the next Czech MPC meeting on 4th May is the most likely date for a lifting of the koruna cap, but today’s comments by the Council have raised the risk that it happens outside of a scheduled monetary policy meeting (perhaps as soon as next …
Today’s statement by the governor of the SARB suggests that policymakers will look through the current political crisis. Indeed, the tone of the statement – and the fact that one member voted for a cut – supports our view that the tightening cycle is now …
A recent acceleration in producer prices of services combined with more upbeat survey evidence suggest that the prices that consumers pay for services will soon start picking up again. However, there is still a long way to go to reach the Bank of Japan’s …
Policymakers in the world’s major central banks have struck a more hawkish tone in recent weeks, but we expect policy to be tightened only in the US this year. While the ECB may announce plans to taper its asset purchases as soon as September, suggestions …
29th March 2017
Economic growth has picked up recently, but we aren’t convinced the economy has turned the corner, particularly not when that growth is still so unbalanced. Non-commodity exports are lagging and business investment will decline further this year. …
With the economy showing signs of recovery and inflation back within its target band, the Bank of Thailand’s (BoT) decision to leave interest rates on hold at 1.50% today came as no surprise. Looking ahead, we expect rates to remain unchanged for the rest …
Evidence of a sharp turnaround in growth and policymakers’ success in preventing a destabilising slide in the renminbi have underpinned a dramatic shift in sentiment towards China. But there are good reasons to expect growth to slow again soon and for the …
28th March 2017
The scandal over Brazil’s meat sector, which at one point appeared to threaten the country’s economic recovery, seems to have faded just as quickly as it escalated. The crisis exploded following the revelation earlier this month that the authorities had …
The press release accompanying the Hungarian MPC’s meeting earlier today remained dovish, but we think the Council is probably underestimating how quickly inflation will rise in the second half of this year. That could prompt the MPC to unwind its …
The Monetary Policy Committee might be relieved to see the pound regaining a bit of ground in recent weeks. But it shouldn’t want the exchange rate to rise too far. … The MPC’s sterling …
The ECB’s forward guidance about asset purchases and an extended period of low interest rates need not prevent it from starting to normalise policy should the inflation outlook so warrant. But it raises the bar to policy changes somewhat and reduces the …
