Filtered by Topic: Monetary Policy Use setting Monetary Policy
With Bank Indonesia (BI) having announced on Friday that it is planning to replace its main policy rate because the current rate has little influence over commercial banks’ lending rates, a fourth rate cut in as many months at today’s meeting never looked …
21st April 2016
Sweden’s Riksbank expanded its QE programme and kept its options open for easing later in the year. While the economy is growing strongly and inflation has picked up recently, a rising currency and fairly weak inflation outlook might prompt further …
The Russian government’s use of its oil funds to finance the budget deficit will cause the monetary base to expand and is likely to push the banking sector from having a deficit of liquidity to a surplus in the near future. This has raised concerns about …
We expect the Reserve Bank of New Zealand to cut interest rates by 0.25% to 2.00% at the meeting in early June rather than at the meeting on Thursday 28th April, although we wouldn’t completely rule out a cut next week. Either way, in a change to our …
The Turkish MPC’s 50bp cut in the overnight lending rate today, to 10.0%, was pinned on the recent improvement in inflation (although political pressure no doubt played a role) and with the headline rate likely to edge down further in the coming months, …
20th April 2016
Despite the marked improvement in financial conditions and fading fears over China’s economic outlook, the Fed is very unlikely to raise interest rates at the upcoming FOMC meeting, which concludes on Wednesday 27th April. Nevertheless, we expect the Fed …
A combination of tighter monetary and fiscal policy will offset the benefits of a weaker peso and keep the brakes on Mexico’s economy over the coming years. Nonetheless, we don’t think it’s time to throw in the towel just yet. The structural reform …
The recent rise of the Australian and New Zealand dollars will prevent GDP growth from strengthening this year and will keep core inflation at uncomfortably low levels. This is particularly true in Australia, where the dollar has reached a 10-month high …
Global growth was sluggish in the first quarter, but it is likely to pick up a bit during the rest of the year. A policy-induced rebound in China and recovery in the prices of key commodities should result in slightly faster growth in emerging economies. …
19th April 2016
Inflation is going to overshoot the Fed’s 2% target, let’s be clear. While we expect Fed officials to be fairly relaxed about that, however, we don’t think it means interest rates won’t rise at all, only that they will remain well below the neutral rate …
The Bank of Korea (BoK) today left its policy rate unchanged at a record low of 1.50% , b ut with the economy still in a fragile state, monetary policy loosening looks to be on the cards in the coming months. The replacement of four of the BoK's seven …
Recent concerns over a potential market sell-off when the Reserve Bank‘s FX swap facilities, unveiled during the 2013 “taper tantrum”, mature have been overstated. For a start, the RBI has already confirmed that maturing swaps have been covered by …
18th April 2016
Wholesale price inflation was virtually unchanged in March but, looking ahead, we think that it will return to positive territory over the next couple of months. … Wholesale Prices …
Bank Indonesia today unveiled some adjustments to its policy regime which it hopes will prompt commercial banks to lower their lending rates. If the moves are a success, they should lead to an acceleration in credit growth and provide an important boost …
15th April 2016
The decision by Peru’s central bank to hold interest rates at 4.25% for a second consecutive month suggests that policymakers believe inflationary risks are now waning. But we doubt inflation will fall back as quickly as the central bank expects and the …
President Draghi will respond to German politicians’ recent criticism of the ECB’s ultra-loose policy at the meeting on 21st April by reiterating the Bank’s independence and stressing that more support is still possible. But it seems clear that it is …
If the government presses ahead with the sales tax hike next year, the chances of hitting 2% inflation on a sustainable basis anytime soon are very slim. Even if the tax hike is postponed, our best guess is that it will take at least three years before …
The euro-zone’s gradual recovery appears to be slowing as we had warned as boosts from the euro’s depreciation and falling oil prices fade. However, the ECB has hinted at limits to its future policy support and the euro-zone region will continue to suffer …
14th April 2016
We are not convinced that negative policy rates will prompt households to save more, in aggregate, even though some may step up their savings for retirement. There are many other drivers of savings rates, and lower interest rates will tend to boost …
The MPC’s unanimous decision to leave Bank Rate on hold at 0.5% today was unsurprising given recent signs of a slowdown in economic activity and heightened uncertainty surrounding the EU referendum. These factors will contribute to the MPC leaving rates …
The Monetary Authority of Singapore (MAS) today moved to flatten the slope of its nominal effective exchange rate policy band, a decision that amounts to a loosening of its policy stance. But with inflation likely to rise over the coming months, we doubt …
The Bank of Canada’s decision to hold interest rates at 0.50% and to remain neutral on the rate outlook was largely in response to the improvement in economic growth early this year, fiscal stimulus measures and the rebound in oil prices. We still think …
13th April 2016
The Central Bank of Chile’s decision to leave interest rates on hold at 3.50% reflects policymakers concerns about the weakness of the economy and reinforces our view that further rate hikes are unlikely to come until the second half of the year. … …
We do not share the view that monetary policy has become impotent. However, scope to step up monetary stimulus much beyond current levels is small. The Bank of Japan’s efforts to boost growth and lift price pressures are therefore likely to require …
Kenya’s banking sector is stronger and more resilient than recent headlines might imply. The failure of a few small banks poses little risk to the sector as a whole. Indeed, as we explain in this Watch , the failure of a few smaller banks will probably …
12th April 2016
Despite glimmers of a revival in production, the mood among businesses across most sectors and regions has darkened due to shrinking real incomes and weak domestic demand, with the low level of confidence more consistent with a shrinking economy. This …
8th April 2016
ECB officials appear to be trying to strike a balance between holding the door open to further policy action and yet stressing the limitations of monetary policy in order to pressure governments into taking steps themselves to encourage growth. But there …
The government has tried to talk down the yen down over last week as the currency has climbed to fresh highs against the dollar. While we still consider intervention in the currency markets unlikely, the moves put further pressure on the Bank of Japan to …
Thanks to a markedly weaker gain in consumption than we were previously expecting, it now appears that first-quarter GDP growth was no more than 1% annualised. Following on from the 1.4% gain in the final quarter of last year, that suggests the US economy …
7th April 2016
The fall in Mexican inflation last month, to 2.6% y/y from 2.9% y/y in February, confirms that overall price pressures in the economy remain in check. But the recent steady rise in core inflation suggests that underlying price pressures are building. We …
The recent weakness of wage growth over the past few months is partly explained by a deterioration in the quality of jobs being created, which is also reflected in a surge in low-skilled labour force participation. … Strength of low-paid hiring may be …
Weaker-than-anticipated inflation, lingering uncertainty in global financial markets and concerns about the impact that the EU referendum is having on the real economy means that this month’s interest decision is likely to be another unanimous one to keep …
Receding fears over a sharp renminbi devaluation, along with favourable exchange rate movements, has helped end the recent string of declines in the value of China’s FX reserves. … FX Reserves …
The Polish MPC made it clear once again at this afternoon’s post-meeting press conference that it’s not likely to loosen monetary policy in the near future. Although inflation will remain subdued, so long as the economy holds up well – as we expect – we …
6th April 2016
Despite a small rise in mortgage interest rates the strong labour market, high consumer confidence and historically favourable mortgage affordability all combined to ensure that mortgage applications for home purchase rose in March. … Mortgage …
Business surveys edged up in March but still point to global economic growth of only around 2%. In the US, jobs growth remained strong and, with core inflation pressures building, we think the Fed will raise rates three times this year, beginning in June. …
We expect the Bank of Canada to keep interest rates at 0.50% next week and maintain a neutral outlook for future policy changes. Despite the strong start to the year, policymakers indicated recently that they believe the economy isn’t out of the woods …
Having now cut its repo rate by 150bp since January 2015, the RBI yesterday re-emphasised the need for commercial banks to boost lending by passing on rate reductions to borrowers. In truth, high levels of bad debt mean that the banking system needs …
The region’s original tiger economies, Hong Kong, Singapore, Taiwan and Korea, are likely to struggle over the next couple of years against a backdrop of cooling credit growth, bursting property bubbles and mounting structural problems. The outlook is …
The sense of panic about emerging economies that gripped financial markets at the start of this year has eased. This is justified. There are few signs that the emerging world is on the brink of a crisis. Nonetheless, we should not expect a major …
5th April 2016
Uncertainty regarding who will take over at the helm of the Turkish central bank when the current governor’s term expires this month has raised concerns that a government loyalist could be put in place, resulting in aggressive (and reckless) policy …
The Reserve Bank of India (RBI) reduced its repo rate by 25bp to 6.50% today but, given the difficulties it faces in meeting its inflation targets for March 2017 and 2018, we think that rates will now stay on hold for a prolonged period. … RBI cuts repo …
We were right to suggest that, while leaving interest rates on hold at 2.0% today, the Reserve Bank of Australia would use the policy statement to try to talk the dollar down. Whether or not this will work is another matter. In the financial markets, …
The Bank of Uganda is unlikely to follow today’s surprise rate cut with much more monetary easing this year. A variety of factors will force the Bank to keep policy tight. … Uganda: Bank seizes fleeting opportunity for rate …
4th April 2016
The sharp decline in Turkish inflation in March, to a seven-month low of 7.5% y/y, was driven by a drop in food inflation, and masked the fact that core inflation remains extremely strong. Even so, today’s data make it more likely that the central bank …
The Bank of Canada's first-quarter survey on business intentions suggests that the worst might be over for Canada’s struggling economy, but we don’t anticipate any significant improvement this year. Indeed, we suspect that the economy will lose momentum, …
1st April 2016
Despite the recent resurgence in economic growth, we still expect the Bank of Canada to cut interest rates again, albeit not until much later this year. While widening interest rate differentials between Canada and the US would normally push the Canadian …
We can’t rule it out completely, but recent suggestions that Australia is the second most likely country in the world to suffer a debt crisis and recession in the next one to three years seem overblown. The level of household debt isn’t as high as it …
The Romanian MPC’s press conference this afternoon reinforced our view that concerns about loose fiscal policy will prompt a move towards tighter monetary conditions. This might happen as soon as the next meeting in May. In contrast, the Czech MPC …
31st March 2016
