Filtered by Topic: Monetary Policy Use setting Monetary Policy
Having previously shown that it was willing to prioritise growth even at the risk of missing targets for inflation, the RBI’s decision today to keep interest rates on hold despite the downside risks created by demonetisation comes as a surprise. … RBI …
7th December 2016
Since Donald Trump won the race to the White House, investors have had to adjust to the prospect of looser fiscal and tighter monetary policy. Not surprisingly, the prospect has caused the dollar to strengthen, but Treasuries to come under fire. Looking …
6th December 2016
After accelerating a little in Q3, business surveys suggest that the world economy has continued growing at a fairly rapid pace in the final months of 2016. Labour market data for the US have been encouraging, the eurozone and Japan are doing better than …
The further fall in Russian inflation last month, to 5.8% y/y, won’t be enough to prompt the central bank to resume its easing cycle at the rate-setting meeting next week. Nonetheless, we think the decline in inflation will continue into 2017, ultimately …
While November’s fall in Swiss inflation was mainly due to energy effects, the weakness of core inflation will do little to ease fears that the economy may be experiencing a sustained bout of damaging deflation and keeps the onus on the Swiss National …
After leaving interest rates on hold at 1.5% today, the Reserve Bank of Australia remained fairly optimistic on the outlook for activity even though the economy may have contracted in the third quarter. We’re not too concerned about the outlook either, …
Far from being the catastrophe that many had expected 2016 was – as we anticipated – a year of stabilisation and recovery for many emerging markets. In this Focus we outline the ten key issues that we think will shape the outlook for EM investors in 2017. …
5th December 2016
Donald Trump’s unexpected election victory means that we are likely to see a major fiscal stimulus enacted in the first half of next year. As a result, we now expect GDP growth to accelerate to 2.7% in 2017, before slowing to a still healthy 2.2% in 2018. …
Both households and businesses appear to have been undeterred by Brexit uncertainty in Q3. What’s more, the latest business surveys suggest that the economy will turn in another solid performance in Q4. Gains in both the Markit/CIPS services and …
The latest data show that global monetary conditions remain exceptionally accommodative. Monetary aggregates and bank lending to the private sector are rising at a steady pace, and although government bond yields have risen since the US presidential …
The rebound in third-quarter GDP mainly reflects volatility in energy production rather than any fundamental improvement in the economy. Excluding energy, GDP has been growing at less than 1% annualised over the past two quarters and we aren’t optimistic …
2nd December 2016
A rejection of Matteo Renzi’s proposed constitutional reforms in Sunday’s referendum could plausibly set Italy on a path towards an eventual exit from the euro-zone, an outcome not remotely priced in to financial markets. … Crunch time for …
The recent weakening of the yen will lift headline inflation by around 0.5 percentage points in coming months and further gains are likely if, as we have been forecasting for a while, the yen weakens towards 120 against the dollar by the end of next year. …
The liquidity-draining measures that were eventually introduced by the Reserve Bank of India (RBI) to deal with the rush of cash entering the banking system after the demonetisation announcement have led to suggestions that the central bank may now …
The election of Donald Trump in the US drove large moves in Nordic and Swiss financial markets last month, with currencies generally depreciating against the US dollar while long-term bond yields increased. … External market drivers Trump domestic …
1st December 2016
Amid heightened political and economic uncertainty, President Mario Draghi seems set to announce another six-month extension to the ECB’s Asset Purchase Programme this month. We expect purchases to continue at the current pace of €80bn per month. The Bank …
Don’t draw too much comfort from the markets’ muted response to political risks in the euro-zone. It may not tell us much about the scale of the threats facing the currency union and it may not last. … Are markets under-estimating political …
30th November 2016
While the Bank of England’s Financial Stability Report (FSR) suggested that the UK financial system has fared well during recent uncertainty, it highlighted lingering risks. Nonetheless, we think that some of these risks could have a positive element to …
Inflation in most commodity-producing EMs will continue to edge down over the coming months as the effects of previous currency falls unwind. This will allow policymakers in almost all of these countries to loosen monetary conditions. … Inflation in EM …
The surprise acceleration of inflation in Kenya and Uganda raises a risk to our view that both countries central banks will loosen policy. But we expect that rates will still fall. … Kenyan & Ugandan Consumer Prices …
The Reserve Bank of Australia is unlikely to play either Santa or Scrooge at its meeting on Tuesday 6th December, as it will almost certainly leave interest rates on hold at 1.5%. And we believe that the markets have got ahead of themselves by starting to …
The renminbi’s depreciation against the US dollar quickened in November, with the Chinese currency reaching fresh multi-year lows against its US counterpart. We expect it to breach 7.0 against the US dollar before long, and to reach 7.3 by the end of next …
The rebound in third-quarter GDP likely means that the Bank of Canada will leave its economic projections and policy interest rate unchanged next Wednesday. But policymakers will still have doubts about the underlying strength of the economy, especially …
Chinese equities extended their rally in November, hitting the highest since January. The renminbi fell to an eight-year low against the US dollar, but strengthened against the trade-weighted basket. Meanwhile, a rise in interbank rates signals that the …
With President Trump set to implement a large fiscal stimulus next year, US inflation and interest rates will both rise more rapidly than seemed likely a month ago. This has already had knock-on effects on global exchange rates and bond markets, and has …
Interbank interest rates in Saudi Arabia have edged down over the past month as investor sentiment towards the Kingdom has improved and policy moves have helped to ease liquidity constraints at banks. Nonetheless, with the US Federal Reserve set to hike …
29th November 2016
Chilean activity data for October were slightly worse than expected and suggest that the economy got off to a disappointing start in Q4. They’re probably not enough to convince the central bank to ease policy immediately, but if the data fail to improve …
The Central Bank of Sri Lanka (CBSL) kept rates on hold at its meeting today, but with credit growing at an unsustainable pace, inflationary pressures building, and the US Federal Reserve set to resume its own tightening cycle soon, interest rates are …
The Central Bank of Kenya has paused its loosening cycle for now, but further cuts are likely in 2017. We expect that the bank’s key policy rate will end 2017 at 9.00%. … Kenya: Policy loosening will proceed …
28th November 2016
Frontier financial markets came under pressure in the wake of Donald Trump’s US election victory, with currencies weakening against the dollar and bond yields rising. The losses have been relatively modest and in some cases have already started to …
Interest rates are an important driver of housing demand, but they are not the only factor. And restricted access to mortgage credit, rather than its cost, is currently actin as the biggest drag on housing market activity. Thus, even though demand …
The 50% fall in the Egyptian pound against the US dollar since the central bank floated the currency at the start of November will cause economic growth to slow sharply in the coming quarters. Interest rates have already been hiked by 300bp and we think …
October’s euro-zone money and credit data remain consistent with steady economic growth. But a renewed pick-up in money and lending growth will be needed before the ECB can feel comfortable about hitting its inflation target. … Euro-zone Monetary …
According to both market measures and survey measures, inflation expectations have been rising. Yet both short and longer-term inflation expectations remain undesirably low. And while the recent depreciation of the euro will help to boost inflation, other …
25th November 2016
Regional GDP growth held steady at just under 4% last quarter, with buoyant domestic demand again helping to offset weak exports. With subdued global growth set to continue holding back exports, the onus will be on policymakers to support domestic demand …
A further rise in global government bond yields may put the Bank of Japan’s yield target under pressure but we nonetheless believe the Bank will be able to reduce its asset purchases next year while keeping the yield target unchanged. … BoJ set to taper …
Mexican inflation continued to climb in the first half of November, rising to 3.3% y/y from 3.1% y/y over the whole of October. And, following the sharp depreciation of the peso over recent weeks, we now expect it rise above the top-end of the central …
24th November 2016
Today’s press conference saw the SARB leave rates on hold but take a notably hawkish tone.Policymakers seem to be rowing back their claim that the tighten cycle is coming to an end. … South Africa: Rates on hold, but rhetoric turns …
The government’s shock demonetisation announcement earlier this month was its boldest measure yet to tackle corruption and formalise large parts of the shadow economy, but it is unlikely to be the last. … Anti-corruption drive has further to …
We’ve written lots over the past two weeks about Donald Trump’s victory and the implications for EMs. While much remains uncertain, in this Update we draw out five early takeaways. … Trump and the fallout for EMs in five key …
23rd November 2016
Having slowed in Q3, we expect growth in Emerging Europe to recover over the course of the next year as Russia continues to pull out of recession and investment in the Central European economies rebounds. However, the overall pace of growth will remain …
Political developments have taken centre stage over the past month. Aside from Donald Trump’s election victory, most attention in Asia has focused on Korea, where President Park Geun-hye is clinging to her job with her fingernails following allegations …
Inflation in South Africa picked up from 6.1% y/y in September to 6.4% y/y in October, but we still expect that the SARB will keep its key policy rate on hold this week. … South Africa Consumer Prices …
Today’s decision by Malaysia’s central bank (BNM) to keep interest rates on hold at 3.0% suggests that it is more worried about supporting the weak currency than boosting the sluggish economy. Looking ahead, fears of further currency weakness are likely …
The economy has recovered from the temporary disruption caused by the wildfires earlier this year and the slump in mining-related investment, triggered by the collapse in oil prices last year, is finally fading. Unfortunately, the housing downturn, which …
22nd November 2016
Today’s MPC statement makes it very clear that the CBN is unwilling to hike interest rates in the face of inflation that is more than double the official target. The next move will probably be down. … Nigeria: CBN holds rates in face of …
Swedish inflation is set to rise sharply over the next year. As such, the Riksbank’s intention to loosen monetary policy further seems like a mistake and any additional interest rate cuts will have to be reversed before long. Ultimately, we expect the …
According to our detailed estimates, capital flows out of China last month were the largest since January’s panic over the renminbi. While markets appear more at ease about the trajectory of renminbi this time, growing capital outflows still pose a threat …
Financial markets across the emerging world have stabilised following an initial sell-off in the wake of Donald Trump’s victory in the US presidential election earlier this month. This partly reflects a more conciliatory tone from the president-elect, …
Donald Trump’s surprise victory in the US election has led to a rash of sizeable downgrades to growth forecasts for Mexico, including several predictions of a recession. But we think the impact over the next couple of years will be less severe than most …
21st November 2016
