Filtered by Topic: Monetary Policy Use setting Monetary Policy
In its latest Inflation Report, the MPC sounded a stark warning about the potential adverse effects on the economy of a Brexit, but nonetheless continued to indicate that, if the UK votes to stay in the EU, markets’ interest rate expectations are too low. …
12th May 2016
Indian consumer price inflation rose above the Reserve Bank’s target for March 2017 last month, supporting our view that the scope for further loosening is very limited. … Consumer Prices (Apr.) & Industrial Production …
With the economy growing at a decent pace 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 4.0% came as no surprise. Looking ahead, a move to an interest rate …
The Norges Bank left its key policy rate unchanged today, but with the economy weak and inflation set to fall this year, we think that further loosening is on the way. … Norges Bank policy unchanged, but rate cut on the …
Iceland’s central bank kept its interest rates unchanged for the fourth 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 further tightening will be …
11th May 2016
The Bank of Thailand’s (BoT) decision to keep its policy rate unchanged at 1.50% today came as no surprise. With the economy exiting deflation and growth still on track to come in around 3% in 2016, we expect rates to be kept on hold for the remainder of …
The weaker-than-expected Mexican inflation figure for April, of 2.5% y/y, down from 2.6% y/y in March, means that the MPC is unlikely to raise interest rates at the next few policy meetings. But with inflation still likely to edge up over the second half …
9th May 2016
The modest decline of 2,100 in employment in suggests that the economy is still struggling to cope with lower oil prices. The unemployment rate was unchanged at 7.1%. We still believe that the worst isn’t over and expect the Bank of Canada eventually to …
6th May 2016
The economy seems to be on a worrying downward trajectory. But if activity were about to fall off a cliff, we might expect forward-looking measures of confidence and expectations to be tumbling and this does not seem to be the case. Although there was …
Last week’s EC Spring forecasts presented a pretty uninspiring picture of the euro-zone economy’s prospects. Despite the unprecedented degree of monetary policy support, growth is expected to slow this year and inflation to remain well below the ECB’s …
The Reserve Bank of Australia’s new forecast that underlying inflation will remain below the 2-3% target range until mid-2018 supports our view that interest rates will soon be cut by a further 0.25% to our long-held forecast of 1.5%. Governor-in-waiting …
We think that consumer price inflation held steady April as the recent slowdown in food inflation appears to have run its course. With inflation only just below the RBI's 5.0% target for March 2017 and likely to edge up over the coming months, there …
5th May 2016
A policy change looks very unlikely this month. Not only will the MPC not want to rock the boat ahead of the EU referendum, but the economy still does not look strong enough to warrant a tightening of policy. But if the UK votes to stay in the EU, we …
The Romanian MPC once again sounded relatively hawkish at this afternoon’s press conference, and we remain comfortable with our view that monetary policy will be tightened later this year to take some of the steam out of the recent consumer boom. In …
The persistent depth of deflation in Poland, particularly when compared with the rest of Central Europe, appears to be due largely to measurement issues, rather than significantly weaker domestic price pressures. The “true” rate of inflation, while weak, …
We think that consumer price inflation held steady April as the recent slowdown in food inflation appears to have run its course. With inflation only just below the RBI's 5.0% target for March 2017 and likely to edge up over the coming months, there is …
With the Fed leaving the door open to another interest rate hike at June’s FOMC meeting, focus is starting to shift once again to financial vulnerabilities in EMs. A handful of countries are likely to come under pressure as interest rates in the US move …
4th May 2016
We doubt that the MPC will model separate ‘remain’ and ‘leave’ scenarios in its Inflation Report next week. But Brexit uncertainty will still affect its forecasts via its assumptions about the exchange rate and interest rates. As this uncertainty will …
Although the annual growth rate of our own M3 measure was a still muted 3.8% in March, the strength of M2 growth, at 6.2%, and bank loan growth, at 7.8%, underscores that there is nothing in the monetary indicators to suggest the economy is in any danger …
A larger-than-expected hike in interest rates last week, coupled with the fact that inflation should soon peak, means that we suspect that Colombia’s tightening cycle is now nearing an end. We are pencilling just one more 25bp hike this year, which would …
3rd May 2016
Today’s decision by the Reserve Bank of Australia to cut interest rates from 2.0% to 1.75% will help solve the economy’s twin problems of too slow growth and too low underlying inflation. It also vindicates our decision to forecast that rates would fall …
Although the economy likely grew strongly in the first quarter, beneath the surface we aren’t convinced that the economy is still struggling to adjust to lower energy prices, despite the weaker exchange rate. Growth in the tradable sectors isn’t …
29th April 2016
The statement by the Russian central bank following its decision to leave the one-week repo rate on hold today was dovish, but less so than what the markets seem to have expected. The Council’s evident ongoing concerns about inflation risks mean we remain …
There have been a number of suggestions recently that some central banks in Emerging Asia, namely in Taiwan and Korea, might be about to adopt some of the unconventional policy measures that are being tried by the world’s major central banks. Evidence …
Saudi Arabia’s ambitious plans to overhaul its economy have grabbed the headlines in recent days, but the past month has seen a number of other Gulf countries announce further measures to deal with the fallout from low oil prices. Qatar has followed in …
Today’s GDP figures confirm that Taiwan’s economy is struggling badly, with GDP contracting by 0.8% y/y in the first quarter of the year. Given that policymakers are running out of room to stimulate the economy and that exports are likely to remain …
The Central Bank of Egypt (CBE) kept its overnight deposit rate at 10.75% today as it awaits further evidence of the impact on inflation from last month’s devaluation of the pound. With inflation set to rise and the pound likely to weaken in the coming …
28th April 2016
Negative policy rates have come under attack in recent months, but most of the criticisms look overdone. We still think Japan will cut its policy rate further in June or July, while also stepping up its asset purchases. But those European central banks …
Brazil’s COPOM left its benchmark Selic interest rate unchanged at 14.25% yesterday and, while the case for monetary easing is growing, the accompanying statement reinforced our view that interest rate cuts are still a little way off. As things stand, we …
The Bank of Japan’s decision to forgo additional easing today came as a major disappointment to markets and resulted in a sharp appreciation of the yen. Amid sluggish growth and moderating price pressures, we still think that more monetary stimulus will …
The recent strength of both the Australian and New Zealand dollars means that interest rates will have to fall further than widely expected to solve the twin problems of too slow economic growth and too low underlying inflation. Our forecasts that GDP …
We don’t believe that the slightly more positive tone of the policy statement released after the Reserve Bank of New Zealand left interest rates on hold at 2.25% today will prevent the Bank from cutting rates to 2.0% at the meeting in June. What’s more, …
As universally expected, the FOMC kept the fed funds target range unchanged at between 0.25% and 0.50% today, but left the door open to a second 25 basis point rate hike in June. With core inflation picking up and global risks diminishing, we still …
27th April 2016
Vietnam and Thailand are facing their worst drought in decades, with water levels in the Mekong River at their lowest since 1926. The drought is already having an impact on growth. A decline in agricultural output was the main cause of the slowdown in …
We suspect that news of the sharp fall in underlying inflation in the first quarter will be enough to prompt the Reserve Bank of Australia to cut interest rates from 2.00% to 1.75% at its policy meeting on Tuesday 3rd May. But even if the Bank keeps rates …
The sharp fall in underlying inflation to 1.5% in the first quarter is a game-changer for the Reserve Bank of Australia and supports our long-held view that interest rates will fall from 2.0% now to 1.5%. Rates may even be reduced to 1.75% at next …
The statement accompanying today’s MPC meeting in Hungary was a little more cautious than we had expected, but even so, with inflation likely to stay subdued and growth weakening, we think there’s scope for at least a couple more interest rate cuts in the …
26th April 2016
The central bank in Sri Lanka (CBSL) today held its deposit and lending rates at 6.5% and 8.0%, respectively. But with credit growing rapidly and core inflation high, we expect rate hikes to come back onto the agenda soon. … Sri Lanka holds rates, but …
We believe that public spending financed permanently by central bank transfers would be a viable option to boost demand and lift price pressures. However, until the existing policy measures are exhausted, which will take a few more years, we consider the …
The recent activity data indicate that first-quarter GDP growth slowed to just 0.8% annualised. However, we expect this to prove only a temporary setback rather than the start of a more serious downturn. Employment and incomes have continued to grow at a …
25th April 2016
Indian media has been awash with reports that RBI Governor Raghuram Rajan might not have his contract renewed when his term expires in September. In the unlikely case that this occurs, financial markets in India could come under pressure. The extent of …
Headwinds to the Bank of Japan’s efforts to lift inflation have intensified in recent weeks. We expect the Bank to ease more at the upcoming meeting, most probably by increasing asset purchases and cutting interest rates. … Bank to announce more easing …
This report is only available as a PDF. Click to download. … Will bank worries prevent further ECB rate cuts? …
22nd April 2016
The idea that households and businesses postpone their spending ahead of a Federal election is more fallacy than fact. Admittedly, there is some evidence that the uncertainty generated by an election leads businesses to reduce their investment …
With the three major advanced economy central banks holding policy meetings this week and next, we are sticking to our view that the next year or two will see a lot more divergence between monetary policy in the US and elsewhere than the markets have …
21st April 2016
It is possible that an out vote in the EU referendum could push up mortgage interest rates. But if it did, we suspect any rise would be modest and that the drivers of that rise would not be those outlined by the Chancellor. … Would Brexit raise mortgage …
President Draghi struck a dovish tone following the ECB’s April policy meeting and stressed that the Governing Council was prepared to offer more policy support if needed. But while we expect the asset purchase programme to be extended in time, the Bank …
The worst looks to be over for many EM commodity producers. Their currencies have again been among the best performers this month, helped by a continued recovery in commodity prices. The slump in their exports also eased considerably in February. What’s …
