Filtered by Topic: Monetary Policy Use setting Monetary Policy
After the Fed’s co-ordinated attempts to prepare markets for another interest rate hike at this week’s FOMC meeting, which concludes on Wednesday, another 25 basis point hike is fully priced into markets. Buoyed by the post-election improvement in the …
10th March 2017
ECB President Mario Draghi last week reiterated the plan to buy assets throughout this year and keep interest rates at or below current levels for an extended period. But he also explained that additional interest rate cuts or non-standard policies are …
In his annual outing before the press at the National People’s Congress today, People’s Bank Governor Zhou Xiaochuan made a strong case that policy support for the renminbi can be sustained in the face of market pressure. In fact, he argued that sales of …
Peru’s central bank kept interest rates on hold once again at 4.25% and, while the economic outlook has deteriorated in recent months, stubbornly above-target inflation means the next move in the policy interest rate is still likely to be up. … Peruvian …
Although we still believe that the next move in interest rates in Australia will be down, it is useful to consider what would need to happen to prompt the RBA to raise rates. Two scenarios stand out. The first is where the strong global economy and the …
The Swiss National Bank will reiterate after its meeting on 16th March that it remains fully prepared to act to prevent any significant appreciation of the Swiss franc in the coming months. Although inflation has picked up since the start of the year, the …
9th March 2017
The ECB today reiterated its commitment to buying assets throughout this year and keeping interest rates at current or lower levels for an extended period. While the Bank believes that downside risks to growth have diminished, it will apparently not …
It may not be long before one or two Monetary Policy Committee members vote for a rise in Bank Rate. But with signs that the economic data have taken a bit of a softer turn since February’s Inflation Report, this month’s decision to keep rates on hold and …
Ahead of the Central Bank of Iceland’s meeting next week, today’s data revealed that Icelandic GDP expanded by a strong 2.6% in Q4. Despite the strength of the economy, the recent appreciation of the króna points to looser monetary policy. On balance, …
The dovish stance taken by the Polish MPC in its post-meeting press conference reinforces our view that, despite the recent rise in inflation, monetary policy will remain loose over the next couple of years. We think the Council is likely to keep the …
8th March 2017
Last week Fed officials acted on a clearly preconceived plan to prepare markets for another interest rate hike at the upcoming FOMC meeting, which finishes on Wednesday 15th March. Buoyed by the post-election improvement in the survey evidence and perhaps …
Switzerland’s consumer prices data for February revealed that prices are finally rising again. But with the franc likely to strengthen this year, underlying price pressures are set to remain subdued. … Swiss Consumer Prices …
There is a good chance that a strike at Chile’s largest copper mine will tip the economy into a technical recession in Q1. While growth should return in Q2, the weakness of the non-mining sector means that we expect GDP to expand by just 1.0% in 2017. …
7th March 2017
The recent rise in the Turkish central bank’s holdings of government debt doesn’t appear to be the backdoor effort to ease monetary policy that some fear. Even so, the concerns this has raised highlight the extent to which the Bank’s credibility has been …
Japan’s economy has performed well recently and inflation is set to rise sharply soon. But the spike in inflation won’t last and, with inflation expectations no higher now than when the Bank of Japan launched Quantitative and Qualitative Easing, any talk …
The statement released after the Reserve Bank of Australia today left interest rates at 1.5% remained fairly balanced, but recent speeches have made it clear that the RBA doesn’t intend to cut interest rates again. We think the combination of weaker …
Fed officials appear to have embarked on a co-ordinated attempt to prepare markets for another interest rate hike at the upcoming FOMC meeting in mid-March. The improvement in the survey evidence would certainly seem to justify additional monetary …
3rd March 2017
The recent strength of activity surveys, as well as increases in headline inflation and inflation expectations, are all good news for the ECB. But for now, we doubt that this will be enough to sway the Bank from its plan to continue purchasing assets …
The sharp rise in headline inflation across Emerging Asia is unlikely to be the trigger for the region’s central banks to start tightening monetary policy. The increase is almost entirely due to an acceleration in energy price inflation, which has been …
The recent run of positive data may lead the ECB to judge that downside risks to the economic outlook have receded when it meets next week. But core inflation has remained low despite the rise in the headline rate. And with political risks still a cause …
2nd March 2017
With the economy gaining momentum, it was no surprise that Malaysia’s central bank (BNM) kept its policy rate unchanged at 3.0% today. Looking ahead, we expect BNM to keep interest rates steady for the rest of 2017. … Interest rates in Malaysia to stay on …
The government’s demonetisation measures have caused growth in India to slow but the economy is set to recover as consumption and investment rebound. Longer-term prospects have also been boosted as Prime Minister Modi’s reform agenda has gained momentum. …
Although core inflation is dangerously low and wage growth anaemic, the Bank of Canada’s decision to hold its policy interest rate at 0.50% can be justified on the recent improvement in the activity data. But with non-energy exports still misfiring, …
1st March 2017
The minutes of the Riksbank’s February meeting were fairly dovish. With board members concerned about the krona’s appreciation and political risks in the euro-zone, we think that the Bank will wait until July before dropping talk of the repo rate being …
Recent comments by Governor Lowe have made it pretty clear that the Reserve Bank of Australia doesn’t intend to cut interest rates further, including at its next policy meeting on Tuesday 7 th March. That’s not too surprising given the RBA remains fairly …
Inflation in Brazil has fallen more quickly than even we had anticipated and, as such, we have pencilled in additional cuts to interest rates this year. We now expect the Selic to fall to 9.00% by end-2017 (previously 10.00%), which is a little below what …
28th February 2017
Chinese equities started the Year of the Chicken on a bright note, rising in February by the most in three months. Meanwhile, the PBOC has continued to tighten monetary conditions by pushing market interest rates higher. … Equities hit three-month …
It seems increasingly likely that the much anticipated Trump fiscal stimulus will not take place until later this year. But economic growth and headline inflation have both picked up in the US and this has strengthened the case for the Fed to raise rates …
27th February 2017
January’s euro-zone money and credit data point to steady economic growth. But they still suggest that core inflation will remain very weak. … Euro-zone Monetary Indicators Monitor …
The decision by Colombia’s central bank to cut its policy interest rate by 25bp (to 7.25%) caught most off guard but was in line with our expectations. The statement accompanying the decision was dovish and supports our view that the policy rate will be …
A jump in export demand provided a boost to economic growth in the region’s most trade dependent economies last quarter, with Hong Kong, Taiwan and Singapore all expanding at their fastest pace in nearly two years. Although relatively buoyant global …
24th February 2017
Despite edging down in February, the NIER’s Economic Tendency Indicator still points to a surge in Swedish GDP growth. And with inflation expectations rising far above the Riksbank’s target, the Bank’s next move will be to tighten policy. … Swedish …
The statement accompanying the Brazilian central bank’s decision to cut the Selic interest rate by 75bp to 12.25% maintained an explicit easing bias but gave little away in terms of the future pace of rate reductions. For our part, we suspect that the …
23rd February 2017
The Bank of Korea (BoK) kept its policy rate unchanged at 1.25% today, but with the economy struggling for momentum and underlying price pressures benign, we think it will resume its easing cycle later this year. … Korea holds rates, but easing cycle not …
A number of developments over the past month have cast a shadow over Indonesia’s prospects. The first was the publication of GDP figures for the final quarter of last year which showed a slowdown in the pace of growth. A fall in government spending, which …
We expect the Bank of Canada to hold its policy interest rate at 0.50% next week. Although core inflation and wage growth have slowed, activity and business confidence data have been more positive lately. Additional monetary stimulus later this year, …
22nd February 2017
The rise in CPI inflation to a five-year high of 2.5% in January was principally due to a surge in gasoline prices, which appears to have been partly reversed in February. Nevertheless, with headline inflation now much closer to the Fed’s target, it will …
Data to mid-February showed another big drop in Brazilian inflation which, coming alongside the recent strength of the real, paves the way for a large reduction in the Selic interest rate at tonight’s meeting. A 100bp cut is now possible, but we still …
Credit growth has slowed in the US in recent months, but has edged higher in other advanced economies. As a result, we expect overall credit growth in advanced economies to continue at around 5% or so in year-on-year terms. Meanwhile, bank lending in …
The Reserve Bank of India’s decision to keep rates on hold and signal the end of its loosening cycle in this month’s policy meeting took many by surprise. But subsequent data showing that core inflation has risen to its highest rate since October 2014 …
While some policymakers have floated the idea that the Fed should begin to shrink its balance sheet soon, we suspect that it will proceed very slowly. And as other central banks will be adding to their assets until well into 2018, it will be many years …
21st February 2017
The decision by Egypt’s central bank to leave its policy interest rate on hold despite the rise in inflation to a 30-year high last month means that additional monetary tightening is no longer on the cards. We have taken the 150bp of rate hikes that we …
16th February 2017
Bank Indonesia kept its policy rate on hold at 4.75% today, and we think that worries about inflation will prevent the central bank from loosening policy any further over the rest of the year too. … Bank Indonesia holds again, rates unlikely to change …
There is definitely a role for the Reserve Bank of Australia to manage expectations by signalling where it thinks the economy is heading. But by sounding more optimistic than its own forecasts, there’s a danger that the RBA has moved from signal to spin. …
While the Riksbank maintained a very dovish tone today, the strength of the Swedish economy and rising inflationary pressures mean that the Bank will soon have to change its stance. We expect the repo rate to be increased by the end of this year. The …
15th February 2017
The decision by Chile’s central bank to keep interest rates on hold at 3.25% came as a bit of a surprise, but it only marks a pause in the easing cycle and we expect the policy rate to fall to 2.50% by year-end. … Chile pauses easing cycle, but more rate …
The sharper-than-expected decline in South African inflation – particularly core inflation – last month supports our view that the country’s monetary tightening cycle is now over. … South Africa Consumer Prices …
Fed Chair Janet Yellen at least kept the possibility of a March rate hike alive in today’s Congressional testimony, but she offered no strong hints that such a move was actually coming and we still think the FOMC will wait until June. According to Yellen, …
14th February 2017
Japan’s GDP expanded by 1.0% in 2016, which is a touch faster than the economy’s sustainable rate. We forecast a similar increase in 2017 so spare capacity should continue to decline. Helped by the tailwind from a weaker yen, we expect inflation to …
The sharp rise in Indian wholesale price inflation last month supports our view that the Reserve Bank of India will have to reverse course and begin hiking interest rates much sooner than is generally anticipated. … Wholesale Prices …
