Filtered by Topic: Monetary Policy Use setting Monetary Policy
Iceland’s central bank kept its interest rates unchanged for the fifth consecutive meeting. But with price pressures set to pick up in the second half of the year, further tightening will be needed. … Iceland holds rates but tightening cycle not yet …
1st June 2016
The delay that has just been confirmed in the sales tax hike will result in economic activity being stronger than would have been the case next year. The decision diminishes pressure on the Bank of Japan to provide more monetary stimulus to offset fiscal …
The surge in GDP in the first quarter means the RBA won’t be in a rush to cut interest rates again. But growth will slow during the rest of this year and we still think that continued low inflation will prompt the RBA to cut rates to 1.5%, probably in …
The robust growth in bank loans and the monetary aggregates is another reason to believe that second-quarter GDP growth will rebound markedly. The growth rate of our M3 measure accelerated to 4.0% in April, from 3.8%. … Monetary Indicators Monitor …
31st May 2016
Asian currencies fell back in May following signals from the Federal Reserve that interest rates in the US are likely to be raised this summer. … Asian currencies slide on Fed …
The pick-up in GDP growth in the first quarter might convince some that the worst effects of the oil price shock are over, but the details showed that business investment fell further, consistent with weaker intentions for this year. With the economy …
April’s euro-zone monetary data suggest that economic growth remains fairly slow. While the full effects of the ECB’s expanded stimulus measures will not yet have been felt, we doubt that they will boost money and lending growth significantly. … …
This week’s OPEC meeting in Vienna is likely to pass without any major surprises. Policymakers should be a little happier heading into the meeting than they were at the previous one in December – after all, oil prices broke through US$50pb last week for …
Markets are coming around to the idea that the Fed will raise rates for a second time either next month or in July, but still appear to be unusually sanguine about the prospects of additional rate hikes beyond then. We agree that the Fed will probably …
27th May 2016
By keeping monetary policy too loose for too long, Pakistan, Vietnam and Sri Lanka now face either a surge in inflation or a rise in bad debts. What’s more, central banks remain complacent about the risks. The longer it takes them to bite the bullet and …
Although GDP growth in Australia in the first quarter probably at least matched the 0.6% q/q rate in the fourth quarter of last year, the continued disappointment is the failure of non-mining investment to fill the hole left by the plunge in mining …
26th May 2016
The European Central Bank (ECB) is likely to maintain a dovish tone at its forthcoming policy meeting on 2nd June, forecasting below target inflation and holding open the door to further policy loosening later in the year. However, it is also likely to …
The US Fed looks set to increase interest rates soon, possibly as early as its June meeting, and we think it will end up hiking more than is generally expected over the next couple of years. However, Emerging Asia looks well-placed to cope with this next …
Despite a serious downgrade to its views on second quarter economic activity, the Bank of Canada opted to hold interest rates at 0.50% today and to remain neutral on the rate outlook, clinging to its hope that growth will rebound in the second half of the …
25th May 2016
Events in Brazil have dominated the past month. The new government under interim president, Michel Temer, has announced a string of market-friendly policies aimed at stabilising the economy, but it remains to be seen whether it will be able to push these …
A vote by the UK to leave the European Union would come as a major surprise and could trigger significant market turmoil. This would probably lead to the Bank of England keeping monetary policy looser for longer than it would otherwise have done. But we …
The minutes of the April FOMC meeting and subsequent comments by various Fed officials have prompted speculation that the Fed could raise interest rates as soon as next month. Treasury yields have rebounded sharply. We always said the June meeting was a …
Claims that the launch of negative interest rates has caused a flight to cash are exaggerated. However, there are clear signs that negative rates have lowered borrowing costs for Japan’s private sector. … Monetary Indicators Monitor …
Two years on from his inauguration, Prime Minister Narendra Modi has arguably just enjoyed his most successful month in office. For a start, PM Modi's BJP secured two important legislative victories in the latest session of parliament. The first was the …
While investors are still probably underestimating the future pace of monetary tightening in the US, we suspect that relatively low valuations will help to ensure that emerging market (EM) equities perform well in the next eighteen months. … Valuations …
24th May 2016
The Central Bank of Nigeria finally admitted at its MPC meeting today that its inflexible “strong naira” policy has failed. The move towards a more flexible exchange rate system is a positive step. We expect that the naira will weaken to around 240/$, …
The fact that Mexican inflation in the first half of this month came in at a weaker-than-expected 2.5% y/y eases some of the pressure on the MPC to tighten monetary policy next month. But if the peso continues to weaken, an interest rate hike next month …
Having cut its policy rate by 15bp to 0.90% earlier today, the National Bank of Hungary’s MPC used the accompanying press release to comment that interest rates would now be left unchanged. In contrast, we think today’s interest rate cut in Turkey is …
While we have consistently been among the most bearish forecasters of EMs over the past 4-5 years, the consensus has moved a long way in our direction over the past 12 months. Over the next year we suspect that it is now more likely that growth surprises …
23rd May 2016
The Central Bank of Kenya’s 100bp rate cut (from 11.50% to 10.50%) signals that the Bank believes that inflation is well-anchored. The wide current account deficit will limit the scope for further cuts. … Kenya: Surprise rate cut sign of reduced …
A US-style collapse in house prices in Australia is unlikely when lending conditions during the good times have not been as loose as in America and Australian banks are better placed to cope with the bad times. Even so, we are more worried than most and …
The central bank in Sri Lanka (CBSL) today held its deposit and lending rates at 6.5% and 8.0%,respectively, for the third straight month. However, we think it is only a matter of time before it isforced to tighten monetary policy again against a backdrop …
20th May 2016
Emerging market policymakers have been in tightening mode over the past year, but this reversed last month. Our EM interest rate diffusion index shows that more EM central banks cut rates than hiked in April – the first time in ten months that this has …
GDP growth in Emerging Asia slowed slightly in the first quarter of the year. However, it is stilldoing much better than other emerging regions, with South East Asia standing out as a rarebright spot in the global economy. … South East Asia continues to …
Our forecasts that interest rates in Australia will remain low for longer than the markets expect while rates in the US will rise further than widely believed are consistent with government bonds in Australia outperforming US Treasuries. While Australian …
Today’s decision to hold rates at 7.00% is only a pause in the SARB’s tightening cycle; we still expect at least two rate hikes later this year. The MPC statement supported our very downbeat view of South Africa’s economy. … South Africa: A pause in the …
19th May 2016
Our central forecast is that US interest rates will be raised twice this year, probably in September and December, but we suspect that the chances of a hike on 15th June are rather higher than the 30% currently priced into the market. What’s more, …
Low commodity prices, slower growth and a string of elections have prompted a move towards reform in a handful of frontier market economies in recent months. But while these governments have made impressive starts, much of the hard work is still to be …
Malaysia and Indonesia both left their main policy rates on hold at scheduled meetings today. But while Malaysia’s central bank (BNM) gave little sign that it was about to shift monetary policy settings anytime soon, Bank Indoensia (BI) appeared to …
We expect the Bank of Canada to hold interest rates at 0.50% next week and maintain a neutral outlook for future policy changes. Despite stronger economic growth at the start of the year and the rebound in oil prices, forward looking indicators on …
18th May 2016
Lower-than-expected inflation and retail sales will probably lead the SARB to leave rates on hold at its meeting tomorrow. Output data suggest that South Africa narrowly avoided a fall in GDP in Q1. … South Africa: Weak economy will prompt SARB …
The pace of job creation improved in March, but was nevertheless low by recent standards. That said, in big picture terms, with vacancies still high and job creation driven by full-time positions, occupier demand looks solid. … UK Commercial Property …
The Central Bank of Chile’s decision to leave its key policy interest rate unchanged at 3.50% reinforces our view that lingering signs of economic weakness, notably the rising unemployment rate, will mean that further tightening is delayed until the final …
Fears of deflation have eased since the beginning of the year as oil prices have rebounded and global growth has stabilised. However, the appreciation of the euro and yen and continued weakness of domestic price pressures suggest that the chances of the …
17th May 2016
The slowdown in Czech GDP in Q1, to 3.1% y/y from 4.0% y/y, confirms that last year’s bumper growth rates were temporary. But the economy is still strong and today’s figures, coming alongside continued improvements in the labour market and rising …
Brazil’s new Finance Minister has unveiled a string of eye-catching market-friendly measures this morning, as part of the first plank of his new economic programme. … Brazil’s Meirelles unveils first steps in economic …
The Philippines central bank’s (BSP’s) shift towards an interest rate corridor system does not amount to a change in its monetary policy stance. With inflation set to stay low, we think monetary policy will remain supportive for some time yet. … …
16th May 2016
Indian wholesale price inflation rose sharply in April and returned to positive territory for the first time in 18 months. This reinforces our view that there is little scope for further monetary loosening. … Wholesale Prices …
The MPC’s attempt to base its forecasts on the UK remaining in the EU suggests that it believes trade-weighted sterling will rise by around 5% on a vote to stay. But it also implies that it doesn’t think that interest rate expectations will be affected. …
13th May 2016
While we didn’t think that the more modest 160,000 increase in payroll employment in April necessarily ruled out the possibility of a June rate hike by the Fed, the increasing probability that employment will be even weaker in May probably does. Under …
Hong Kong’s economy contracted in Q1, with output dragged down by falls in exports and household spending. We don’t expect a major rebound in the quarters ahead as interest rates rise further and the city’s property downturn continues. … Hong Kong GDP …
We don’t share concerns that the Bank of Japan will soon run into trouble acquiring the ¥80 trillion worth of Japanese Government Bonds it has pledged to buy every year. Admittedly, insurance companies have yet to reduce their bloated JGB holdings. But …
The Central Reserve Bank of Peru kept interest rates on hold at 4.25% for a third consecutive month, but we suspect that further rate hikes are still on the way in the second half of the year. Indeed, if a June rate hike in the US sparks another leg down …
The Bank of Korea (BoK) today left its policy rate unchanged at a record low of 1.50%, but with growth still sluggish and government pressure for monetary policy easing rising, we think it is only a matter of time before the BoK cuts rates. … Korea likely …
