Filtered by Topic: Monetary Policy Use setting Monetary Policy
While the Riksbank extended QE today, a number of the Executive Board dissented, suggesting that today’s announcement marks the beginning of the end for policy loosening in Sweden. Indeed, despite its dovish rhetoric, we think that the Riksbank will be …
21st December 2016
The Bank of Thailand (BoT) left its policy rate on hold at 1.50% today, and with fiscal policy taking the lead in boosting growth but inflationary pressures benign, the BoT is likely to keep rates unchanged throughout 2017. … Thailand to keep rates on …
2016 will be remembered as the year that Prime Minister Modi finally began to deliver on promises of much-needed economic reform. However, with a number of state elections due to take place over the next 12 months, the Modi government will face a more …
We expect growth in the US to pick up next year as a result of Donald Trump’s planned fiscal stimulus, but in several other advanced economies it is likely to slow. Although headline inflation is set to rise almost everywhere, core inflation should remain …
20th December 2016
The press release accompanying the Hungarian MPC’s meeting earlier today suggests that the Council thinks the need for additional monetary easing has diminished. As a result, we have taken the very modest policy easing that we had previously expected out …
The underlying momentum in the economy remains sluggish and circumstances aren’t likely to improve next year, mainly because of a worsening downturn in housing investment. We expect GDP growth to be only 1.2% in 2017, down slightly from an already muted …
As a result of the recent falls in the peso, Mexico’s headline inflation rate is on course to break through the top end of the central bank’s 2-4% target range next year. While this should prove to be temporary, we think policymakers will react by hiking …
A huge rise in manufacturing confidence, to within touching distance of a record high, pushed the Swedish Economic Tendency Indicator higher still in December. This calls into question the Riksbank’s commitment to loosen policy further and supports our …
The Bank of Japan left policy settings unchanged today. As expected, it upgraded its assessment of the health of the economy, which points to policy remaining on hold for the foreseeable future. … Bank of Japan on hold for foreseeable …
The Bank of Japan’s yield target has kept JGB prices anchored over recent weeks against the backdrop of a sell-off in bond markets overseas. The volume of the Bank’s bond purchases has also remained stable. With the yield target likely to be unchanged …
19th December 2016
The lack of a sustained acceleration in wage growth suggests the Fed will be in no rush to hike rates again early next year. The stagnation in productivity, however, means that even the current level of hourly wage growth could soon feed through into …
16th December 2016
While it continues to warn about growing housing imbalances and risky mortgage lending, the Bank of Canada still believes there is only a low probability of a major housing correction happening anytime soon. That assessment looks very odd now, considering …
The MPC has not surprisingly emphasised the importance of inflation expectations in determining the degree to which it is prepared to tolerate an overshoot of the inflation target. After all, low inflation expectations appear to have helped to keep wage …
The Russian central bank’s post-meeting press conference provided the firmest signs yet that the easing cycle will resume next year. Governor Nabiullina’s comment that Q2 was the most likely time for this suggests that the initial rate cut may come a …
Peru’s central bank kept interest rates on hold at 4.25% for a tenth consecutive month last night, but with the risks to inflation firmly skewed to the upside, we expect policy tightening to resume next year. … Peru holds interest rates, but hikes likely …
Donald Trump’s surprise win in the Presidential election has introduced uncertainty across a number of policy dimensions, but the likelihood of a significant fiscal stimulus next year points to a pick-up in GDP growth and inflation. That stimulus will …
15th December 2016
At its last meeting, the Bank of Japan sounded the alarm over a decline in price pressures. However, the economy has continued to grow faster than potential and the recent sharp weakening of the yen should have soothed nerves. We expect the Bank to leave …
The unanimous decision by the Monetary Policy Committee (MPC) to leave interest rates on hold and the scale of its asset purchases unchanged, at the same time as the US Fed has resumed tightening policy, highlights the likely divergence in policy rates …
Yesterday’s US rate hike was widely anticipated, which probably explains the relatively muted responses in commodity markets. We expect the Fed to accelerate the pace of tightening in 2017, which would represent a headwind for commodity prices, notably …
Bank Indonesia’s (BI) decision to keep its policy rate on hold at 4.75% today demonstrates the central bank’s focus remains on supporting the rupiah. With interest rates in the US likely to rise further next year, we think that BI’s easing cycle has now …
The Norges Bank’s decision to leave interest rates unchanged came despite a deterioration in the outlook for growth and inflation. While policymakers remain concerned about the impact of loose monetary policy on house price inflation, we suspect that they …
The Swiss National Bank’s decision to leave interest rates on hold and pledge continued currency intervention was as expected. The Bank may have drawn some comfort from the franc’s recent decline against the US dollar. But the currency’s strength against …
The Bank of Korea (BoK) kept its policy rate unchanged at 1.25% today, but with the growth outlook deteriorating and inflation benign, we expect a rate cut in 2017. … Korea holds rates, but cut in 2017 …
As universally expected, the Fed today raised interest rates for the second time in this economic cycle, with that hike coming a full year after the first increase and more than seven years after the current expansion began. With the economy much closer …
14th December 2016
The continued rally in sterling over the past month or so means that it is now around 10% lower on a trade-weighted basis relative to where it stood on the eve of the EU referendum, rather than the 15% that had been the case when talks of a “hard” Brexit …
The Malaysian central bank (BNM) has introduced a range of measures to stabilise the ringgit, which has been the region’s worst performing currency over the past month. The most significant step it has taken so far is a requirement for exporters to …
The Central Bank of Iceland’s (CBI’s) decision to cut interest rates before the next phase of capital account liberalisation came as a surprise. While the strong economy calls for policy tightening in the long term, a further sharp appreciation of the …
The jump in new lending last month was largely seasonal. Broad credit growth did pick up slightly but the increase was small and is unlikely to elicit a major policy response. … Bank Lending & Broad Credit …
As inflation was a touch weaker in November than the Riksbank anticipated, monetary policy is set to be loosened further. While we expect the Riksbank to announce an extension of QE, the already-weak level of the krona suggests that it will hold back from …
13th December 2016
Even before the latest rise in oil prices, the average inflation rate in the G7 was set to rebound to over 2% early next year. In the US, Donald Trump’s planned fiscal stimulus should boost US demand at a time when the economy is already near full …
The Swiss National Bank will stress after its meeting on 15th December that it is prepared to act decisively to prevent any significant appreciation of the Swiss franc in the coming months. Indeed, the Bank has already increased its intervention in …
The Middle East & North Africa region will struggle again next year, recording its weakest economic growth since the global financial crisis in 2009. Fiscal policy will have to be tightened in most places in order to rein in twin budget and current …
12th December 2016
While the ECB opted to extend its Asset Purchase Programme (APP) at a slower monthly pace than anticipated, there is no immediate end in sight in terms of its duration. Indeed, we think that the ECB will continue purchases far beyond 2017 and it will be …
9th December 2016
Signs that Brazil’s economy was turning a corner around the middle of this year have been extinguished by a recent run of awful data and – more ominously – renewed political strife. There are still reasons to expect growth to return next year but this …
The larger-than-expected decline in Brazilian inflation in November, coming on the back of less hawkish communications from policymakers in recent weeks, make it more likely that COPOM will step up the pace of easing at its January meeting. … Brazil …
Our Tracker shows that total capital outflows from the emerging world reached a ten-month high of $75bn last month. This was driven mainly by an acceleration in outflows from China, but it seems that Donald Trump’s election victory has also triggered a …
The Norges Bank is almost certain to leave monetary policy unchanged at its meeting on 15th December. Indeed, in October, the Bank repeated its message that “the key policy rate would most likely remain at [0.50%] in the period ahead”. However, we think …
For most countries in Emerging Asia an increase in US interest rates is not a major cause for concern. However, aggressive Fed tightening could cause problems in Hong Kong, Malaysia and Indonesia. … Asia well-placed to weather Fed rate …
We think that consumer price inflation dropped in November as the government’s demonetisation measures are likely to have led to some price discounting. However, demonetisation could boost inflation over the longer term if it leads to supply disruptions …
China defied the bears this year with an economic turnaround that took many by surprise. But the current strength cannot be sustained and the risk now is that many don’t appreciate how soon growth will slow again. In particular, we think it is wrong to …
Little has changed since the Central Bank of Iceland (CBI) last met and so, like last month, policy will be unchanged next week. As political and exchange rate uncertainty fades next year, concerns that the CBI will continue to miss its inflation target …
8th December 2016
The uncertainty surrounding next week’s Fed meeting is not about the out come of that meeting – a 25 basis point rate hike is all but guaranteed – but over President-elect Donald Trump’s potential reaction to that decision. Trump has said little about the …
The Monetary Policy Committee (MPC) will take some comfort from recent data suggesting that the economy has maintained its momentum in Q4, while sterling’s recovery may have lessened the extent to which inflation will overshoot the MPC’s target. …
While the ECB announced today that it would slow the pace of its asset purchases from next April, it also committed to buying for longer than anticipated. What’s more, it expressed a clear bias towards increasing the degree of support in future if …
Mexican inflation rose to 3.3% y/y in November, from 3.1% y/y in October, and it’s unlikely to stop there. We expect the headline rate to climb above the top-end of the central bank’s 2-4% target range by the middle of next year. As such, the central bank …
The euro-zone economy still seems to be weathering the effects of political upsets and uncertainty at home and abroad well. The PMI and EC survey indicators rose in November, consistent with an acceleration in GDP growth from Q3’s modest 0.3% q/q. …
Comments by Polish National Bank Governor, Adam Glapinski, at this afternoon’s post-meeting conference support our view that interest rates will be left unchanged next year, not hiked as the markets are pricing in. Moreover, with GDP growth likely to …
7th December 2016
After seriously considering an interest rate cut back in October, the Bank of Canada gave no strong indication in today’s policy statement that it was considering a rate cut in the near term. There were a few dovish hints, however, that suggest it is …
After two years of falling output, Latin America’s economy finally looks set to return to growth next year. Brazil and Argentina should exit recessions, while the downturns in Colombia and Chile are likely to bottom out. Investment should start to recover …
The small uptick in Chilean inflation in November is likely to prove temporary and we expect the headline rate to fall further below the central bank’s target by early next year. Following more disappointing news on the economy, we now expect the central …
