Filtered by Topic: Monetary Policy Use setting Monetary Policy
The Swiss National Bank (SNB) left interest rates on hold as expected today, but it will continue to intervene in FX markets if needed, as is likely in the run-up to the UK referendum. An actual Brexit would most probably prompt the SNB to cut interest …
16th June 2016
The Bank of Japan still sees downside risks to its inflation forecasts, and we believe that policymakers will respond by stepping up the pace of easing next month. … Bank of Japan to provide more easing next …
May’s data suggest that the labour market is not too strong to prevent the Reserve Bank of Australia from cutting interest rates to 1.5% at its August meeting and not too weak to prompt it to become any more worried about the health of the economy. … …
Despite leaving its economic projections largely unchanged today (GDP growth expectations were revised down slightly, inflation forecasts were revised up slightly) the FOMC nevertheless cut its interest rate projections quite sharply, suggesting it has …
15th June 2016
Michel Temer’s first month as interim president of Brazil has been a mix of the good (eye-catching economic reforms) and the bad (three members of government, including the transparency minister, have already been forced to resign due to allegations of …
GDP figures published today showed growth in Sri Lanka picked up in the first quarter of 2016. However, we are wary of reading too much into the data, given the serious doubts that remain over the reliability of the rebased GDP figures. The big picture is …
Private consumption growth in Hong Kong is at the weakest since 2009, even though the labour market is tight and real wages are growing strongly. The downturn in the city’s housing market and a slump in stock prices are largely to blame. … Wealth effect …
After accelerating since mid-2015, credit growth now appears to be stabilising. It may start to slow before long given that policymakers have in recent months refrained from further monetary easing. … Bank Lending & Broad Credit …
Speculation has mounted in recent weeks that Saudi Arabia will devalue the riyal. For our part, we have long argued that policymakers would be loath to abandon the dollar peg. And, as we explain in this Watch , there are strong economic reasons to expect …
14th June 2016
Sweden’s inflation rate fell by more than expected in May. With underlying price pressures still largely absent, the Riksbank may well need to take further policy action. … Swedish Consumer Prices …
The sharp rise in wholesale price inflation in May reinforces our view that there is little scope for further monetary loosening. … Wholesale Prices …
Sweden’s inflation rate fell by more than expected in May. With underlying price pressures still largely absent, the Riksbank may well need to take further policy action. … Swedish Consumer Prices (May …
Pedro Pablo Kuczynski’s (PPK) victory in Peru’s presidential election is likely to mean the continuation of the current government’s market-friendly economic policy. While there is a risk that his party’s weak position in congress will undermine his …
13th June 2016
The decline in long-term inflation expectations to a record low in the University of Michigan’s June consumer confidence survey won’t prevent the Fed from raising interest rates, not least because most other measures show that inflation expectations …
The rise in India’s consumer price inflation last month pushes it further above the RBI’s target for March 2017. This supports our view that there is no further scope for policy loosening. … Consumer Prices …
The government’s decision to postpone the sales tax hike to 2019 has improved the economic outlook. However, we still believe that the Bank will respond to the recent moderation in underlying inflation by stepping up the pace of monetary easing, probably …
There are one or two genuine reasons to worry about the strength of the labour market. But the deeper we dig, the more we’re convinced the spring slowdown in payroll employment growth is a temporary hangover after the record warm fall and winter. The last …
10th June 2016
The decision by Russia’s central bank to cut its benchmark one-week repo rate by 50bp to 10.50% today was a close one but, having decided to start easing policy once again we think that interest rates will now fall further than the consensus is currently …
If the housing markets in both Australia and New Zealand remain strong, then our forecasts that interest rates will fall to 1.0% in Australia and to 1.75% in New Zealand would look out of reach. However, we suspect that tighter lending standards will take …
Inflation looks set to rise in most of Emerging Asia over the coming year, but probably not by enough to worry policy makers, who will look to keep interest rates low to support growth. … Inflation set to rise, but central banks in no hurry to hike …
The modest rise in Mexican inflation in May, to 2.6% y/y from 2.5% y/y in April, in itself is unlikely to have much of a bearing on the central bank’s rate setting meeting later this month given that it was in line with expectations. But we think the drop …
9th June 2016
With even overseas central banks citing the EU referendum as a reason not to raise rates this month, the chances of anything from the Bank of England are nil. If the UK votes to stay in the EU, we don’t think that it will be too long before the MPC …
Egyptian inflation jumped to 12.3% y/y in May as the impact of March’s devaluation of the pound continued to feed through into price pressures, while a decision by the government to hike medicine prices last month also played a role. Today’s figures, …
The Bank of Korea (BoK) unexpectedly lowered its policy rate to a new record low of 1.25% today, marking its first cut since last June. The decision came a day after plans were unveiled for the restructuring of the country’s ailing shipbuilding industry. …
Despite leaving interest rates at 2.25% today, the Reserve Bank of New Zealand still hinted that they may fall to 2.0% before long. What’s more, we still think there’s a chance that rates may have to decline to 1.75%, although not until very late this …
The sudden stop in employment growth rules out any chance of a rate hike from the Fed at next week’s FOMC meeting, particularly now that the UK vote on whether to leave the European Union (EU) appears to be going down to the wire. A quick rebound in …
8th June 2016
It is by no means guaranteed that the MPC would loosen policy after a Brexit vote. But if it did want to give the economy some extra stimulus, an interest rate cut would not be its only option. … How might the MPC loosen policy after a …
The prospect of ECB corporate bond purchases, which begin today, has pushed corporate bond spreads down and prompted a pick-up in issuance. However, there are several reasons to think that spreads might rise after bond purchases begin. And the increase …
Consumer price inflation is likely to have dropped in May, but not by enough to bring it below the RBI’s 5.0% target for March 2017. … Drop in inflation not enough to prompt rate …
The Reserve Bank of India (RBI) kept its repo rate on hold at 6.50% today and, while the consensus is expecting further modest loosening later this year, we think that rates will remain unchanged throughout the rest of 2016 and 2017. … RBI holds rates, …
7th June 2016
It was no surprise after cutting interest rates in May that the Reserve Bank of Australia left rates on hold at 1.75% today. But by not sending a signal that rates will fall further, it has become a bit less likely that rates will be reduced to 1.5% in …
It is often claimed that central bankers are less committed to their inflation targets than they were before the global financial crisis, but a closer look suggests that there has not been a dramatic change. Policymakers are prepared to tolerate inflation …
6th June 2016
Russian inflation remained unchanged at 7.3% y/y in May for the third consecutive month, but it looks like it is on course to edge up over the coming months. As a result, we think that the central bank will continue to resist calls to cut rates. We expect …
The weak US non-farm payrolls data for May and uncertainty ahead of the UK referendum on EU membership, scheduled for 23rd June, may push back the next Fed rate hike until July at the earliest, if not September. Nonetheless, we still think that the US …
3rd June 2016
The rising business inventory-to-sales ratio is not a signal of an imminent recession. The increase in the ratio of some specific components – machinery – is a potential problem. But much of the rise in recent years is instead due to a compositional …
The long delay in explaining its new FX policy is another blow to the credibility of the Central Bank of Nigeria. In this note, we examine three key questions raised by the current FX policy uncertainty. … Nigeria: What to look for when CBN clarifies …
The 38,000 increase in non-farm payrolls in May, which is still only 73,000 if we adjust for the 35,000 striking Verizon workers, means that a June rate hike from the Fed is now very unlikely. (Consensus forecast 160,000, CE forecast 120,000.) A July hike …
The expansion of the ECB’s QE programme may have contributed to the recent increase in euro-zone equity prices and economic sentiment. But purchases of government bonds have increased by more in the region’s core than in the periphery, suggesting that …
Exports from Vietnam should continue to grow strongly in the short-term, helped by booming foreign direct investment into the manufacturing sector. However, the lack of spillovers from the dynamic foreign sector to the less productive domestic economy is …
The recent increase in Target2 imbalances does not suggest that the euro-zone is set for another crisis on the scale of 2011/12. However, it does suggest that countries in the core might be experiencing more of the benefits of QE. If anything, this is the …
The leap in GDP in Australia in the first quarter doesn’t significantly alter the outlook for underlying inflation, especially if we are right in thinking that economic growth will drop back below the economy’s potential rate later this year. This …
Growth in Emerging Europe is set to strengthen over the next few quarters, helped in part by the fact that the drag from Russia will ease as it exits recession. However, while the acute stage of Russia’s crisis has passed, the recovery over 2016-17 will …
2nd June 2016
The ECB is in wait and see mode while it assesses the effects of its latest policy measures, but President Draghi left the door wide open to further policy action. We continue to believe that the central bank’s work is not yet done . … ECB holds fire …
The Reserve Bank of Australia is unlikely to follow May’s 0.25% interest rate cut to 1.75% with another reduction at the meeting on Tuesday 7th June. But we still believe that rates will be reduced to 1.5% at the August meeting and, in a change to our …
The Reserve Bank of India (RBI) has cut its repo rate by 150bp since the start of last year, but we believe that it will now keep rates on hold not just at next week’s policy meeting but for the rest of 2016. To the extent the RBI does want to see further …
Economic growth in Emerging Asia has remained remarkably steady over the past year, even as export demand has stalled. However, policy support and lower oil prices will not continue to prop up domestic demand for long. The upshot is that even if export …
The Reserve Bank of New Zealand will almost certainly cut interest rates from 2.25% to 2.00% at its next policy meeting on Thursday 9th June. Although we don’t expect the RBNZ to signal this month that further rate cuts lie ahead, we think that rates will …
We disagree with recent suggestions that negative central bank policy rates encourage households to increase their savings, thereby reducing demand and weighing on inflation. In fact, the opposite seems to be true in the euro-zone. We suspect that …
1st June 2016
A Brexit and its after-effects could prompt the European Central Bank (ECB) to undertake further unconventional policy action, including measures to support the euro-zone’s financial sector, FX intervention and even some form of helicopter money. … How …
