Filtered by Topic: Monetary Policy Use setting Monetary Policy
Although the tightening of financial conditions has persuaded the Fed to hold off from tightening monetary policy on several occasions over the past couple of years, we doubt that the recent surge in the dollar and Treasury yields will prove to be an …
21st November 2016
Although the Canadian dollar has weakened further lately, financial conditions overall appear to be tightening now because of rising market interest rates and new stricter mortgage rules. Given the significant imbalances in the household sector that pose …
18th November 2016
The continued softness in core consumer prices in October suggests that the downside risk to the Bank of Canada’s core inflation rate projection is growing, which is consistent with our view that an interest rate cut is coming in the first half of next …
The Malaysian central bank confirmed today that it has been intervening in foreign exchange markets to support the ringgit, which is now close to its lowest level since the Asian financial crisis. Despite weak economic growth and subdued inflationary …
Chile’s central bank kept interest rates on hold at 3.50% and, while GDP data released this morning showed that economic growth remained sluggish in Q3 at 1.6% y/y, we still think it would take a further weakening of the economy – which seems unlikely – …
One of the key drivers of the economic turnaround this year, the property market,is starting to cool. Growth in the prices of new residential properties slumped inOctober in the largest (tier 1 and tier 2) cities, where local officials have put infresh …
With the yen weakening dramatically since the US election and incoming data showing GDP growth strong last quarter, there is now little pressure on the Bank of Japan to ease further. Less positively from the Bank’s perspective, underlying inflation looks …
Inflation is set to continue rising across Emerging Asia as the effects of past falls in oil prices drop out of the annual comparison. However, we doubt the increase will be large enough to worry most of the region’s central banks. … Inflation to rise, …
The 50bp increase in Mexican interest rates (to 5.25%) at today’s meeting was aimed at supporting the peso in the aftermath of the US election and it’s clear that further hikes are on the cards. We expect another half-point increase at December’s meeting, …
Financial markets look to have jumped the gun by concluding that the chance of a further interest rate cut in Australia has all but vanished. We think that the weak outlook for wage growth may yet prompt the central bank to cut rates further. … Wage …
Chair Janet Yellen’s remarkably bland prepared congressional testimony today did nothing to change our view that the Fed will hike interest rates at the upcoming mid-December FOMC meeting. Despite Donald Trump’s unexpected victory in last week’s …
17th November 2016
Bank Indonesia (BI) today left interest rates on hold at 4.75% and made clear that its focus is currently on maintaining a stable exchange rate rather than supporting the economy. With rate hikes in the US now looking more likely, we think BI’s easing …
With its first fixed-rate operation today in support of the new target for 10-year Japanese Government Bond yields, the Bank of Japan has moved closer to full-fledged helicopter money. There are already some indications that the government is responding …
The Swiss National Bank’s (SNB’s) pledge to intervene in foreign exchange markets appears to havealleviated upward pressure on the franc in the wake of the US election. But experience has shown itspolicy limitations and we suspect that the franc will …
16th November 2016
The Central Bank of Iceland’s decision to keep interest rates unchanged rests on overly cautious assumptions for the króna and on fears about fiscal policy and capital controls that will probably not be realised. As such, interest rates may yet be cut …
Amid falling profitability and sluggish loan demand at home, banks continue to expand overseas lending. … Monetary Indicators Monitor …
The further fall in India’s consumer price inflation last month, along with the likely shock to demand from the government’s withdrawal of most bank notes, is likely to increase the clamour for further rate cuts. But if the RBI pulls the trigger and …
15th November 2016
Indian wholesale price inflation edged down in October, but we expect it to resume accelerating over the coming months. The big picture is that there is still little room for further policy loosening. … Wholesale Prices …
The recent leap in the prices of the main commodity exports of Australia and New Zealand will boost domestic demand in both economies, but it is unlikely to lead to much faster wage growth and much higher underlying inflation. That’s because businesses …
In the wake of Donald Trump’s victory in the US presidential election, we are nudging up our forecasts for government bond yields in Europe. But we still don’t expect that they will rise as fast as in the US. … Will European bonds fare better than US …
14th November 2016
Donald Trump’s victory has exacerbated the upward movement in Treasury yields, pushing 10-year UK gilt yields higher too. Meanwhile, market participants have revised up their expectations for official interest rates in the UK further over the past month …
The 0.5% q/q rise in GDP last quarter implies that the output gap was the smallest since 2014’s sales tax hike. Combined with the recent weakening of the yen, today’s figures therefore reduce the pressure on the Bank of Japan to introduce more easing. … …
The sell-off in EM markets following Donald Trump’s victory appears to have been driven by a general rise in investor risk aversion, rather than specific concerns over a shift towards greater trade protection in the US or expectations of tighter Fed …
11th November 2016
Donald Trump’s surprise election victory has created a great deal of uncertainty for the region. In this Weekly, we answer five key questions. … Five questions (and answers) about Trump and …
Despite the drop in the sol in recent days and the rising inflation rate, Peru’s central bank left interest rates on hold at 4.25% once again. Nonetheless, we expect hikes to resume next year and the scale of tightening is likely to take most forecasters …
While Trump’s election win is still causing some uncertainty in financial markets, attention in New Zealand has swiftly moved to the kiwi dollar following comments by Governor Wheeler that the RBNZ has an “open mind” to the possibility of using foreign …
The Bank of Korea (BoK) kept its policy rate unchanged at 1.25% today and, while subdued growth and low inflation mean the BoK will keep monetary policy loose for the foreseeable future, a high level of household debt is likely to deter further rate cuts. …
The central bank in the Philippines (BSP) surprised nobody with its decision to leave its main policy rate on hold earlier today at 3.0%. Looking ahead, with inflation set to remain low and growth likely to stay strong, we expect interest rates to remain …
10th November 2016
In October, the Norges Bank’s favoured measure of inflation was unchanged at a joint 14-month low. We think that it will fall sharply next year, prompting the Bank to cut its key policy rate from 0.5% to zero. … Norwegian and Danish Consumer Prices …
The Reserve Bank of New Zealand showed that business carries on as usual with Trump as US President as today it met its previous pledge to cut interest rates from 2.00% to 1.75%. What’s more, yesterday’s financial market volatility didn’t stop it from …
We think that the sharp appreciation of the króna over recent months will prompt the Central Bank of Iceland to cut its inflation forecasts next week. As a result, although the Bank has previously stated that it would act cautiously in monetary policy …
Polish National Bank governor, Adam Glapinski, used this afternoon’s post-meeting press conference to indicate that interest rates are most likely to remain unchanged over the course of next year. But his view seems to be based on somewhat optimistic …
9th November 2016
The rebound in the peso over the last few hours appears to have dissuaded Mexico’s central bank from raising interest rates at a press conference this morning. However, with the situation in markets still uncertain, our sense is that the central bank will …
Today’s minutes showed broad support for an extension of the Riksbank’s government bond purchase programme. Combined with the uncertainty created by Donald Trump’s victory in the US, an extension of bond purchases by the Riksbank now seems all but …
The sharp fall in Brazilian inflation in October is likely to be followed up by further declines over the coming months. Accordingly, barring a sustained drop in the real – the currency is down by 2.5% against the dollar in the aftermath of the US …
We suspect that the Nordic and Swiss economies will see limited effects from Mr Trump’s victory. Butit makes monetary policy divergence between Switzerland and Sweden next year slightly more likely. … Trump win could widen policy divergence next …
The Bank of Thailand (BoT) left interest rates unchanged at 1.50% today and is likely to be in little hurry to adjust monetary policy over the coming year. Elsewhere in the region, the increase in uncertainty and volatility following Donald Trump’s …
The sell-off in EM financial markets in the wake of Donald Trump’s victory in the US election has been swift but policymakers in most countries will look through the initial volatility – only central banks in Mexico and (possibly) Turkey are likely to be …
Consumer price inflation is likely to have edged up in October, as the recent sharp slowdown in food inflation appears to have bottomed out. But with the central bank focused on supporting growth, the pick-up we are expecting won’t be large enough to …
7th November 2016
If Donald Trump prevails in tomorrow’s US presidential election, our sense is that Mexican policymakers’ initial response would be to hike interest rates by 100-200bp at an emergency central bank meeting in an effort to support the peso. This may also be …
Investor concerns about the outcome of the US presidential election have caused substantial currency and equity market movements in the past few weeks. However, the Vix “fear gauge” has not yet risen as far as it did in the immediate aftermath of the UK …
The biggest decline in the value of China’s foreign exchange reserves since the start of the year has more to do with movements in exchange rates and asset prices than sales by the People’s Bank. Capital outflows remain substantial but probably eased last …
The Central Bank of Egypt’s decision to float the pound last week, coming alongside a raft of subsidy cuts, means inflation is likely to climb to more than 20% in the coming months. The impact is likely to be temporary and inflation should start to ease …
We think that the upward revision to the MPC’s inflation forecast was about the right magnitude. But for the Committee to respond to this – or a greater – overshoot of the target, domestic costs pressures would also have to rise. We think that GDP growth …
4th November 2016
Should Donald Trump pull off a surprise victory in Tuesday’s US Presidential election, equities, bond yields, commodity prices and the Australian and New Zealand dollars would probably all fall. But those moves would probably be reversed before long as it …
While the forecasts published in the RBA’s latest Statement on Monetary Policy have hardly changed since the August edition, the tone is much more balanced and could probably even be described as upbeat. In other words, the RBA is increasingly thinking …
The unanimous decision by the MPC to leave interest rates and its asset purchases on hold in November did not come as a surprise given the continued run of upbeat news on the health of the economy. And while the MPC will be watching closely for any …
3rd November 2016
Russian inflation once again surprised on the downside, falling to 6.1% y/y in October. This is unlikely to cause the central bank to change its mind, and interest rates will almost definitely be kept on hold at the MPC meeting in December. But today’s …
The most noteworthy market developments last month were prompted by expectations of further policy loosening from Sweden’s Riksbank, with the krona depreciating sharply last month as a result. Meanwhile, bond yields increased inmost countries while equity …
The decision this morning by the Central Bank of Egypt (CBE) to finally adopt a floating exchange rate regime is a positive step and moves the government closer to securing a US$12bn financing package from the IMF. There will inevitably be fresh pain for …
