Filtered by Topic: Monetary Policy Use setting Monetary Policy
The Polish MPC used this afternoon’s post-meeting press conference to suggest that it was broadly unconcerned about the impact of the UK’s vote to leave the EU on the domestic economy, but we think Brexit may cause growth to be a little weaker than the …
6th July 2016
Sweden’s Riksbank has pushed back its expectations for a rate rise. Although the negative impact of previous falls in energy prices on inflation is fading and domestic inflationary pressures are picking up, the Riksbank might still need to intervene in …
The negative economic spillovers on Central and South Eastern Europe from the UK’s vote for Brexit are likely to be smaller than many fear, but they will still drag on activity in the region. Accordingly, we have made some modest downwards revisions to …
By leaving interest rates at 1.75% and not providing a very strong hint that they will be cut in August, the Reserve Bank of Australia today implied that the recent financial market volatility and political uncertainty has not altered the economic …
5th July 2016
Rumours have circulated again that Egypt is seeking a deal with the IMF and, as we argue in this Watch, an agreement is now looking more likely than at any point in the past five years. A financing package would help to plug the holes in Egypt’s balance …
Coming after Governor Carney’s initial statement following the referendum to “take all necessary steps to meet its responsibilities for monetary and financial stability”, Project Reassure continued with the FPC announcing immediate action to support bank …
While the UK Brexit vote triggered some initial volatility in financial markets, many of the adverse moves have already been unwound and overall financial conditions in the US remain considerably looser than they were just a few months ago. And with the …
1st July 2016
The past month has brought aggressive monetary easing in a handful of frontier markets, and we think others will follow suit over the rest of this year. Cuts in policy interest rates this month in Ukraine and Argentina, of 150bp and 450bp respectively, …
30th June 2016
With the economy struggling badly and inflationary pressures very low, Taiwan’s central bank (CBC) today cuts its discount rate by a further 12.5 basis points to 1.375%. Given the poor outlook for economic growth, further easing is likely before the end …
This year looks set to be the toughest for the economies of the Middle East and North Africa in almost three decades. The Gulf countries will continue to tighten fiscal policy in response to low oil prices. While this should ensure that dollar pegs remain …
29th June 2016
The markets are probably right to price in additional policy easing from the Bank of England and the ECB in the wake of the UK’s vote to leave the EU (‘Brexit’). However, the consensus is almost certainly wrong in expecting the Fed to respond by keeping …
In the immediate aftermath of the UK referendum, central bankers have concentrated on providing verbal reassurance, but they may soon back their words with action. We think the Bank of England will cut its key policy rate to only 0.25% in July or August …
If worries about a deepening crisis in the EU drive another surge of safe haven flows into Japan, even direct foreign exchange intervention would probably not prevent the yen from strengthening. Intervention could make a difference though if market …
The Korean government today announced plans for a fiscal stimulus package worth about 20trn won (equivalent to 1.3% of GDP) in response to growing headwinds facing the economy. The decision follows the Bank of Korea’s move to cut interest rates to a new …
28th June 2016
The latest monetary data are consistent with a gradual slowdown in advanced economies, but do not point to a collapse in growth. Looking ahead, global central banks are likely to respond to the UK referendum result by leaving policy looser for even …
27th June 2016
Despite the slowdown in the first quarter, the incoming monthly data point to a big rebound in second-quarter GDP growth and we still expect growth for 2016 as a whole to be 2.0%. The UK’s vote to leave the EU will have no meaningful impact on the US …
Despite unexpected gains for the right in Spain, an anti-austerity left-wing coalition may now be more likely than opinion polls had suggested. Either way, the new government will be a very fragile one. … Spain’s new government set to be a fragile …
May’s euro-zone monetary data suggest that economic growth remains fairly slow. While the ECB has since introduced new stimulus measures, including its latest TLTROs, we doubt that they will boost money and lending growth significantly. … Euro-zone …
Following the announcement earlier this month from Reserve Bank of India (RBI) Governor Raghuram Rajan that he will be stepping down at the end of his first term in September, speculation has been rife over who will succeed him. In this Watch , we profile …
The growth rate of average hourly earnings has accelerated to 2.5%, from a norm of nearer 2.0% in recent years, and other measures like the Atlanta Fed’s tracker suggest that median wage growth is closer to 3.5% now. It is not all good news, however, with …
24th June 2016
The UK vote to leave the European Union (EU) has inevitably triggered an immediate negative reaction in global financial markets, but we do not anticipate a significant sustained tightening in US financial conditions. As a result, we don’t expect the UK …
With its currency flat today amid broader EM volatility and its governor on the way out, the central bank in Sri Lanka (CBSL) has decided to keep policy rates unchanged. But credit growth is soaring and price pressures are building. We expect rate hikes …
Following the vote for a Brexit, a considerable amount of uncertainty hangs over the UK, which is likely to weigh on activity in the short term. However, we think that the near-term hit to the economy will be somewhat weaker than some of the more …
The UK’s surprise vote to leave the European Union has put more pressure on the European Central Bank to provide additional policy support. We now expect an acceleration in the pace of the ECB’s asset purchases and perhaps another small cut in interest …
The UK’s vote to leave the EU has pushed the yen to levels last seen when Quantitative and Qualitative Easing was first launched, while the Nikkei has slumped by 8%. These moves increase the chances of direct intervention by Japanese policymakers to …
The ECB’s decision to reinstate a waiver allowing Greek banks to borrow from it at low interest rates will help to ease pressure on the banking sector. But it is very unlikely to generate a lending revival and it could still be some time before Greece …
23rd June 2016
Mexico’s fairly soft mid-month inflation reading for June, of 2.6% y/y, taken together with the recent rebound in the peso, has eased some of the pressure on the MPC to tighten monetary policy next week. Nonetheless, with core price pressures building and …
With the economy growing strongly but inflationary pressures 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 think the central bank will be in …
The Norges Bank left its key policy rate unchanged today, but with the economy weak and inflation set to fall, we think that further loosening is on the way. … Norges Bank to cut interest rates in …
The yen would presumably jump on safe-haven demand in response to a UK vote to leave the EU, but we would still expect the Japanese currency to end the year much weaker against the dollar. Indeed, even after a vote for Brexit, the yen could soon be …
22nd June 2016
EM growth has shown some signs of life in recent months. GDP data for Q1 showed a rise in aggregate growth for the first time since 2013 and our GDP Tracker suggests that the improvement continued in the early part of Q2. (See Chart.) The turnaround has …
The weaker-than-expected South African inflation reading for May, of 6.1% y/y, will provide welcome relief for the Reserve Bank. Barring a surprising rise in June’s inflation figure, we think the MPC will pause the tightening cycle at next month’s …
A vote by the UK to leave the European Union in tomorrow's referendum would be unlikely to have much impact on India's economy. Indian exports to the UK are equivalent to less than 0.5% of GDP, so even a sharp slowdown in demand from the UK, which we …
Doing away with a specific timeframe for reaching 2% inflation would sow doubts about policymakers’ commitment to the 2%-target and would be a major step backwards. Instead, more stimulus is needed to make more credible policymakers’ efforts to achieving …
The Danish krone would probably face significant upward pressure in the event of a Brexit. But as the Danmarks Nationalbank has scope to loosen policy further, a Brexit is unlikely to break its euro peg. … Would Brexit break Denmark’s currency …
While the Swiss National Bank (SNB) has vowed to limit any impact on the franc if the UK votes to leave the EU tomorrow, we doubt that it has enough ammunition to prevent an appreciation. We think that the currency would rise towards parity with the euro …
Hungary’s MPC made it clear today that further interest rate cuts are unlikely. And while the Council hinted at more “unconventional” policy loosening, we doubt that this would have a significant impact on overall monetary conditions. Elsewhere, following …
21st June 2016
Today’s ruling by the German constitutional court leaves the ECB free to implement its long-awaited OMT programme, if deemed necessary. And a possible trigger for OMTs – Brexit – might be just a few days away. We think the most likely ECB response to a …
Capital flows out of China have stabilised in recent months and policymakers have responded by once again easing restrictions on cross-border flows. But outflows are likely to pick up again if the dollar strengthens in the months ahead. … Capital Flows …
Bank lending rates have fallen sharply since policymakers introduced negative interest rates in January. One consequence is that bank profits have started to moderate from high levels. … Monetary Indicators Monitor …
The decision this month by Russia’s central bank to lower interest rates after a hiatus of close to a year has been followed by fairly hawkish comments from policymakers making clear that this does not necessarily mark the start of a new easing cycle. …
20th June 2016
Saudi inflation edged down for a second consecutive month in May, although it remained elevated due to the energy and water tariff hikes earlier in the year. Further ahead, with economic growth slowing sharply, we think underlying price pressures should …
The announcement from RBI Governor Raghuram Rajan that he will stand down at the end of his current contract in September is likely to put local financial markets under pressure in the near term. However, the long-term market impact will depend on who is …
The key US event this week will be Fed Chair Janet Yellen’s semi-annual testimony to Congress. She will be testifying to the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday. We expect her to add little to what …
17th June 2016
Following the FOMC meeting earlier this week, we have lowered our forecasts for the fed funds rate at the end of 2017 and 2018. But two key themes remain unchanged: global monetary policy will continue to be very loose, and US monetary policy is likely …
Today’s 100bp rate hike in Egyptian interest rates was larger than even our own above-consensus forecast and, with inflation likely to rise further in the coming months and the central bank willing to tighten policy aggressively, we’ve pencilled in …
16th June 2016
Headline CPI inflation remained well below the Fed’s target in May, but base effects will push it well above 2% by early next year. Both headline and core consumer prices increased by a solid 0.2% m/m in May. Annual headline inflation fell back slightly …
The MPC today repeated its warnings about the potential adverse effects on the economy of a Brexit , but reiterated that the policy implications of a Brexit would not be clear-cut. Meanwhile, if the UK votes to stay, we still think that a rate rise …
Both the Nigerian and South African economies contracted in Q1, and the latest activity figures suggest that things remained very grim going into Q2. In Nigeria, disruptions to oil output in Q2 have dealt a heavy blow to an industry that was already …
