Filtered by Topic: Monetary Policy Use setting Monetary Policy
Stock markets in China have had a volatile end to the month. Meanwhile, the PBOC appears to have stepped up its foreign currency interventions in order to prevent the renminbi from weakening further. Market interest rates remain near record lows. … PBOC …
29th July 2016
Slightly stronger-than-expected inflation figures, coupled with the renewed fall in the ruble, prompted the Russian central bank to pause its easing cycle today, but we think inflation should resume its downwards trend in the current quarter, clearing the …
We doubt that spreads on US corporate bonds are set to widen, even though we expect the yields of Treasuries to rise as the Fed tightens policy faster than investors currently anticipate. Past form suggeststhat credit spreads are fairly insensitive to the …
One widely-held view is that the Bank of Japan has refrained from stepping up its purchases of Japanese Government Bonds in recent months because the pool of available securities is drying up quickly. By contrast, we believe that QQE can continue at least …
Pakistan’s three-year arrangement with the IMF comes to an end next month. An improvement in the external position means it is unlikely that there will be any immediate problems, but the IMF does appear to have had a positive influence on policymaking, …
The Bank of Japan’s decision to refrain from meaningful easing once again today has disappointedinvestors and resulted in a renewed strengthening of the yen. While we still expect the Bank to domore, it seems that Governor Kuroda has now adopted the …
Australia’s inflation data for the second quarter provided something for everyone, but the bigger picture is that there is very little price pressure anywhere in the economy. This is why we believe the RBA will cut interest rates to 1.5% on Tuesday and …
News that Egypt is on the brink of receiving an IMF deal (and the subsequent easing of pressure on the pound) provided the central bank with a window of opportunity to pause its tightening cycle today, but we still think further interest rate hikes are …
28th July 2016
With market participants having been disappointed by the Monetary Policy Committee’s inaction in July, expectations of a bolder and broader package of measures at next week’s meeting have grown. With recent activity data showing a slowdown underway and …
Inflation in a number of EM commodity producers has remained stubbornly high over the past few months. Accordingly, consensus expectations for monetary policy in these countries have moved towards our more hawkish forecasts. … Inflation in EM commodity …
We expect the ECB and Bank of Japan to step up their asset purchases a bit in the coming months and the Bank of England (BoE) to resume its QE programme after a four-year break. Indeed, “global QE” will probably be as large in the coming twelve months as …
The central bank in Sri Lanka (CBSL) today raised its deposit and lending rates by 50bp each in whatwas Indrajit Coomaraswamy’s first monetary policy meeting as governor. With credit growing at anunsustainable pace, inflation rising and the currency …
After dipping in the wake of the UK’s vote to leave the EU (Brexit), the prices of most industrial metals have rallied strongly since. They have shrugged off disappointing economic news out of China, the increased likelihood of interest rate rises in the …
While the second-quarter inflation figures were somewhat mixed, we still expect that the most likely outcome at the Reserve Bank of Australia’s policy meeting on Tuesday 2nd August is an interest rate cut from 1.75% to 1.50%. The Statement on Monetary …
The Fed was never going to provide a definitive steer on future rate decisions at this week's FOMC meeting, particularly not when Chair Janet Yellen is due to speak at the Jackson Hole symposium in late August. Nevertheless, the language added to today's …
27th July 2016
The downturn in Latin America appears to have bottomed out in the second quarter of this year. Our GDP Tracker suggests that the region’s economy contracted by 1.2% y/y in Q2, compared to 1.5% y/y in Q1. This was due in large part to Brazil, where …
June’s data suggest that euro-zone money and credit growth are still too weak to provide much support to the economy. While the full effects of ECB stimulus introduced in June are yet to be felt, we think that credit growth will remain weak. … Euro-zone …
The CPI inflation data for the second quarter makes next Tuesday’s RBA policy meeting a closer call than had looked likely, but we still think the RBA will pull the trigger and cut interest rates to 1.5%. In fact, continued low inflation may mean that …
The Central Bank of Nigeria’s latest rate hike is a belated attempt to regain control over the country’s weakening currency. We expect that the bank will tighten by at least another 200bps later this year. … Nigeria: CBN hikes rates despite threat to …
26th July 2016
The Hungarian MPC seemed to pour cold water on the prospect of additional monetary policy easing in the statement accompanying today’s rate-setting meeting. However, we think the Council is still too optimistic about the economy’s growth prospects as well …
Korea’s growth picked up in the second quarter of 2016, but we expect the economy to lose momentum over the coming quarters against a backdrop of mounting cyclical and structural headwinds. … Korea GDP (Q2 …
An imminent shift from fiscal tightening to loosening has reduced the pressure on the Bank of Japan to provide more stimulus. However, the sharp appreciation of the exchange rate since the start of the year is threatening to derail the Bank’s efforts to …
It is early days, but the limited data released since the EU referendum, as well as the reaction in financial markets, support our view that the economic implications of Brexit outside the UK will be negligible. … Global fallout from Brexit: one month …
25th July 2016
In contrast to the prevailing view that tight credit conditions have been a constraint on Mexican growth, the debt ratio has actually increased at a reasonably sharp pace over the past five years. This does not yet pose an imminent threat to financial …
The Central Bank of Kenya decided to hold its key rate at 10.50% today, but we expect that the bank will cut rates later this year as inflation remains within target and Kenya’s external vulnerabilities ease. … Kenya: Rates on hold, cuts still in the …
Our calculations indicate that second-quarter GDP growth accelerated to 2.5% annualised, thanks primarily to a massive 4.5% surge in real consumption. The latter would mark the biggest quarterly gain in a decade. Although we expect consumption growth to …
Speculation has mounted in recent weeks that the Egyptian pound could be on the cusp of (another) devaluation. The initial rumours were sparked by the central bank governor, Tarek Amer, who suggested that his predecessors’ decision to keep the pound …
The recent experience of the Reserve Bank of New Zealand provides two lessons for the Reserve Bank of Australia. First, don’t dither when it comes to making decisions otherwise you’ll be punished by a stronger currency. Second, getting interest rates low …
22nd July 2016
The economy has clearly taken a hit from the vote to leave the EU last month. Granted, sales values have held up well according to John Lewis, and the latest Bank of England Agents’ Scores were surprisingly upbeat. But consumer confidence has tumbled and …
Our calculations indicate that second-quarter GDP growth accelerated to a more respectable 2.5% annualised, following a disappointing 1.1% gain in the first quarter. But be aware that the BEA will also be releasing its annual revisions this week, which …
Almost a month on from the historic vote to leave the EU, some of the first indicators of the state of the economy appear to point to a marked slowdown in growth. But the prospect of policy support to come has helped financial markets to retain their …
We expect the rise in Mexican inflation in the first half of this month, to 2.7% y/y from 2.5% y/y over June as a whole, to be the start of an upward trend that will ultimately force the central bank to tighten monetary policy further. The MPC is unlikely …
The failed military coup in Turkey and subsequent government backlash have dominated investors’ concerns over the past week and triggered a sell-off in local financial markets. Policymakers have already taken steps to try to diminish financial stress and …
For the world as a whole, the economic impact of the UK’s vote to leave the European Union should be negligible. Nonetheless, growth looks set to remain lacklustre in advanced economies. And with inflation below target, central banks in the euro-zone and …
The government’s announcement this week that it will inject more capital into local banks is a positive step, but the amount is still too limited to revive the ailing sector. … Capital injections too small to revive banking …
The weakness of South Africa’s economy prompted the MPC to hold off hiking interest rates today, but we still think there is room for additional monetary tightening later in the year. For now, we think it’s most likely that the MPC will raise its policy …
21st July 2016
After leaving policy on hold today, the ECB also stopped short of promising imminent policy easing. But President Draghi reiterated that the Bank is ready to act and we believe that it will up the pace of asset purchases and possibly cut interest rates at …
The uptick in Brazilian inflation in the first half of this month was modest but it will reinforce the hawkish tone set by last night’s COPOM statement. Our base case is that interest rate cuts will commence in October but it’s possible that policymakers …
Bank Indonesia (BI) left interest rates on hold today, but further loosening is likely sooner rather than later. We think the shift to a new policy rate, which formally comes into effect next month, will be the trigger for more easing. … Bank Indonesia …
Oil prices have been low for some time now, but the past month has brought further evidence that this new reality is starting to hit home in energy-exporting frontier markets. Recently-released data showed that growth in Saudi Arabia’s economy slowed to …
Indian bond yields have recently fallen to their lowest levels since 2013, in large part due to anticipation that the successor to Governor Raghuram Rajan at the RBI will be more dovish. But with the RBI facing a tough challenge in meeting its inflation …
The early evidence suggests that businesses and households in Australia have not been ruffled by the UK’s vote to leave the EU and Australia’s close Federal election result. Admittedly, consumer confidence did fall in July. But that decline was small and …
The Reserve Bank of New Zealand used its unusual inter-meeting “economic update” to all-but guarantee that it will cut rates from 2.25% to 2.00% at the meeting on 11 August and that it wants the dollar to weaken substantially. To achieve the latter, we …
Some investors in Japan have responded to the introduction of negative interest ratesby acquiring more overseas securities. Meanwhile, bank lending rates have fallen butthe availability of cheaper loans has not led households and firms to borrow more. … …
20th July 2016
The Fed is very unlikely to spring any surprises at the upcoming FOMC meeting, which concludes next Wednesday 27th July, but a September rate hike is a distinct possibility. The statement next week should acknowledge the apparent pick-up in second-quarter …
Most EM central banks look set to maintain a loosening bias over the next couple of years. Nonetheless, there are a handful of emerging economies where inflationary pressures mean that interest rate hikes are on the cards. … What next for EM monetary …
Upside risks to Colombian inflation over the next few months mean that we now expect the central bank to raise interest rates by 25bp this month, to 7.75%, with a further hike in August likely. Nonetheless, the bigger picture is that inflation is close to …
Last month’s rise in South African inflation, to 6.3% y/y, took the headline rate further above the Reserve Bank’s target range, and both we and the Bank expect it to edge higher over the rest of this year. Nonetheless, the weakness of the economy, …
The Turkish MPC’s decision to cut its overnight lending rate by a further 25bp today suggests the Council views the market volatility stemming from Friday night’s attempted coup (and growing concerns about political risk) as short-lived. And given today’s …
19th July 2016
A string of positive trade figures released over the past few months has raised hopes that South Africa’s balance of payments position might finally improve. In this Watch, however, we explain why the country’s large investment income deficit means that …
