Filtered by Topic: Monetary Policy Use setting Monetary Policy
The response from policy makers is one of the main reasons that the UK economy has so far weathered the Brexit vote well. And there are reasons to think that monetary and fiscal policy can continue to support the economy as Brexit negotiations …
13th February 2017
The Central Reserve Bank of Peru’s decision to leave its policy rate on hold at 4.25% was widely expected and, while the outlook for the economy has deteriorated, we still expect rising inflation to trigger rate hikes later this year. Our forecast is for …
10th February 2017
The further rise in Czech inflation last month, to 2.2% y/y, reinforces our view that the koruna cap will be removed in the coming months. We see the MPC meeting on 4th May as the most likely date for the policy shift. … Czech CPI …
In February’s Statement on Monetary Policy the Reserve Bank of Australia drew particular attention to the recent pick up in mortgage lending to investors. Given its concerns, if investor lending remains elevated this may prove to be a barrier to further …
The new forecasts published in February’s Statement of Monetary Policy show that the RBA is largely expecting Australia’s slow growth and low underlying inflation problems to be solved over the next couple of years. In that sense, the RBA is almost …
The Bank of Japan’s preferred measure of underlying inflation fell to a fresh low in December. While the weaker exchange rate and the recovery in commodity prices should result in a rebound in coming months, the chances of hitting the Bank’s 2% inflation …
Compared to 2012, when ECB President Draghi’s pledge to do “whatever it takes to preserve the euro” helped to bring the currency union back from the brink, the central bank’s ability to address euro-zone break-up risks has diminished. … Can the ECB still …
9th February 2017
The surge in Mexican inflation in January, to 4.7% y/y from 3.4% y/y in December, is largely the result of hikes in regulated fuel prices. Nonetheless, core inflation also continued to rise as a result of the past falls in the peso. Against this backdrop, …
Recent economic data support our view that the Riksbank will raise interest rates this year. But given the recent appreciation of the krona, the Riksbank is likely to maintain a very dovish tone in its communications next week. … Riksbank to maintain …
With the economy growing strongly but inflation under control, today’s decision by the central bank in the Philippines (BSP) to keep its main policy rate on hold at 3.0% came as no surprise. Looking ahead, we don’t think the BSP will be in a rush to …
While leaving interest rates on hold at 1.75% today, the Reserve Bank of New Zealand suggested that the next move in interest rates is more likely to be up than down. But since we largely agree with the Bank that rates are unlikely to rise until 2019, …
8th February 2017
The dovish tone of the Polish MPC’s post-meeting press conference this afternoon reinforces our view that the policy interest rate will be kept at its current historic low of 1.50% throughout 2017-18. This stands in contrast to the markets, which are …
The Reserve Bank of India’s (RBI’s) decision to keep interest rates on hold today was in line with our non-consensus forecast and it signals the end of the loosening cycle. Looking ahead, with inflation set to accelerate, we continue to think that rate …
The Central Bank of Iceland (CBI) kept monetary policy unchanged today, but struck a hawkish note in its accompanying statement. However, we believe that the downward effects of a further strong appreciation of the króna on import prices will more than …
The Bank of Thailand (BoT) unsurprisingly left its policy rate on hold at 1.50% for its 14th straight meeting today. With the government prepared to do the heavy lifting to support the economy, the BoT is likely to remain on the sidelines in 2017. … Bank …
The fairly hawkish post-meeting press conference and upwards revisions to the central bank’s inflation forecasts suggest that the Romanian MPC is increasingly concerned about the prospect of loose fiscal policy feeding into stronger core price pressures. …
7th February 2017
We believe that the Reserve Bank of Australia is being too complacent in expecting GDP growth to be close to 3% over the next couple of years and underlying inflation to rise to 2.0%. So while the RBA today left interest rates at 1.5%, we suspect it may …
The Central Bank of Sri Lanka (CBSL) kept rates on hold at its meeting today, but against a backdrop of rapid credit growth, rising inflation and a weakening currency, we think it is only a matter of time before the CBSL is forced to resume its tightening …
The further fall in Russian inflation last month, to 5.0% y/y, supports our view that, despite the central bank’s recent hawkish rhetoric, interest rates will be lowered substantially this year. … Russia CPI …
6th February 2017
Following a strong end to 2016, the economy appears to have carried a decent amount of momentum over into 2017. Despite a slight fall in the Markit/CIPS all-sector PMI in January, it is still at a level consistent with quarterly GDP growth of around 0.5%. …
The recent appreciation of the Swiss franc suggests that the Swiss National Bank (SNB) may now be willing to tolerate a (slightly) stronger currency. But we see the franc rising even further to reach parity with the euro later this year. Given the seismic …
Indonesia recorded another quarter of disappointing growth in the final quarter of last year. With commodity prices likely to remain depressed and policymakers running out of scope to stimulate the economy further, we expect growth to remain stuck at …
The statement released after last week’s FOMC meeting suggests that the Fed will remain in wait and see mode until it gets more clarity on the size, composition and timing of the fiscal stimulus being planned by the Trump administration. Until that time, …
3rd February 2017
The hawkish statement by the Central Bank of Russia that accompanied today’s decision to leave the policy rate on hold has prompted us to revise up our end-year interest rate forecast (to 8.25%, previously 7.50%). Nonetheless, we still think inflation …
The spotlight in the region’s currency markets over the past couple of years has been on the threat of large devaluations but, as we explain in this Focus, the risks in Morocco appear to lie in the other direction. With the authorities pushing ahead with …
The People’s Bank has raised the interest rate that it charges when providing funds in China’s repo market. This is the clearest evidence so far that monetary policy is being tightened and that supporting growth is no longer the primary immediate goal of …
Our economic forecasts point to a supportive backdrop for the housing market in 2017. Nevertheless, there are three potential risks facing the market. These are an interest rate shock, a shift in the behaviour of investors and a London-led correction. On …
Financial markets and a large majority of analysts are braced for a rate cut at the Reserve Bank of India (RBI) policy meeting next week. But, despite the continued damage and uncertainty caused by demonetisation, we don’t think it’s a done deal. The RBI …
The Reserve Bank of New Zealand will undoubtedly keep rates on hold at 1.75% at its meeting on Thursday 9 th February, but in the accompanying Monetary Policy Statement we suspect it will revise up its inflation projections. That said, while the financial …
2nd February 2017
The upwards revisions to the Czech National Bank’s inflation forecasts and the relatively hawkish post-meeting press conference reinforce our view that the Council’s koruna cap policy will end fairly soon. We think that the MPC meeting on 4th May is the …
The first Bank of England “Super Thursday” of 2017 saw the MPC Minutes and Inflation Report strike a cautiously-optimistic tone. That said, while the economy appears to be coping with Brexit uncertainty well so far, we think the start of the monetary …
Our Taylor rules suggest that central banks in Latin America attach most importance to the latest inflation rate and the current output gap when setting policy. Some central banks (notably Mexico) take into account other factors such as the exchange rate …
The króna has depreciated fairly sharply since the Central Bank of Iceland (CBI) last met. But given our expectation that it will rise again, we do not think the Bank will respond to recent currency movements by changing policy next week. … Icelandic …
At the conclusion of its two-day FOMC meeting, the Fed issued a near-identical statement to the one released in December, which strongly suggests it has no intention of raising interest rates again at the upcoming March meeting. Given the current …
1st February 2017
The Reserve Bank of Australia will almost certainly leave interest rates on hold at 1.5% at its policy meeting on Tuesday 7 th February, but its new forecasts to be published in the Statement on Monetary Policy on Friday 10 th may provide a hint that …
While there are still considerable uncertainties over the economic outlook, we maintain our view that the damage from the UK’s vote to leave the EU will be smaller than most forecasters have anticipated. Admittedly, higher inflation and Brexit uncertainty …
31st January 2017
Australia will make almost no progress this year with GDP growth once again coming in closer to 2.0% than 3.0%. With growth in New Zealand set to accelerate from around 3.0% to 3.5%, the divergence in the economic fortunes of the two neighbours will …
30th January 2017
President Donald Trump sees the renegotiation of NAFTA as an opportunity to close the trade deficit with Mexico and return manufacturing jobs to the US. It’s possible that he could gain modest concessions while leaving the rest of the treaty broadly …
27th January 2017
The widespread pick-up in activity and rebound in inflation in advanced economies during recent months has reduced the pressure for central banks to ease policy further. But only in the US do we expect interest rates to rise sharply. With economic growth …
The solid 0.6% expansion in UK GDP in the fourth quarter of last year provided further evidence that the vote to leave the European Union has so far had little discernible adverse effect on the UK economy, in stark contrast to the Treasury’s …
December’s euro-zone money and credit data are consistent with steady economic growth. But they still point to inflation undershooting the ECB’s target. … Euro-zone Monetary Indicators Monitor …
The Monetary Policy Committee (MPC) faces a less challenging trade-off between supporting the economy and controlling inflation. It will probably upgrade the growth projections in its Inflation Report. But the recent rebound in sterling should result in a …
26th January 2017
The Bank of Japan appears to have reduced the number of short-term JGB auctions it conducts this month, paving the way for a reduction in the volume of purchases this year. However, an increase in the target for 10-year JGB yields is not on the cards. … …
The Bank of Japan will probably extend the deadlines for some of its lending programmes by one year at the upcoming meeting. But having upgraded its assessment of the economy at the December meeting, there is little chance of new stimulus being announced. …
Following its rate hike at last December’s meeting, the Fed will remain in wait-and-see mode until it has more clarity on the magnitude, composition and timing of the anticipated fiscal stimulus. We expect no change at next week’s FOMC meeting, which …
25th January 2017
The Hungarian MPC kept its policy interest rate unchanged earlier today and the accompanying statement remained dovish in spite of a jump in inflation at the end of 2016. Looking ahead, with growth set to fall short of the central bank’s lofty …
24th January 2017
The surge in Mexican inflation in the first half of January, to 4.8% y/y from 3.4% y/y in December, was due largely to hikes in regulated fuel prices. But core inflation also rose further as the effects of a weaker currency pushed up import prices. We …
Today’s interest rate hike by the Turkish central bank was just large enough to buy support for the lira, but we think further hikes in the key policy rates will, ultimately, be needed in the coming months. Moreover, there were worrying signs that the MPC …
The sharp fall in the Turkish lira has forced the central bank to tinker with its monetary policy setup in an effort to shore up the currency, and we think hikes in key policy interest rates loom. Earlier this month, the Bank lowered reserve requirement …
With the recent improvement in the inflation outlook, the Bank of Japan is unlikely to ease further in 2017 but any speculation about policy tightening will prove premature. In fact, the Bank’s pledge to keep long-term government bond yields low has …
23rd January 2017
