Filtered by Topic: Monetary Policy Use setting Monetary Policy
The recent surge in labour force participation has been concentrated among low-skilled workers, which may be artificially depressing average hourly earnings. But with this trend unlikely to last and the unemployment rate close to its natural level, we …
31st March 2016
The Norges Bank has clearly become more concerned about threats to financial stability, but we do not think that this will prevent it from cutting the policy rate to zero by the end of the year. … Will financial stability concerns prevent Norges Bank …
30th March 2016
Despite the dovish spin put on Janet Yellen’s latest remarks, global markets will probably still have to contend with more Fed tightening this year. However, the prices of many commodities, including gold, should at least benefit from rising inflation …
The biggest policy change over the past month came from Nigeria, where the Central Bank unexpectedly hiked its key interest rate from 11.00% to 12.00%. This move partially reversed the Bank’s rate cut last year, and may signal a return to more orthodox …
Our China Activity Proxy (CAP) suggests that growth held up at the start of 2016, but did not rebound as we had hoped. Nonetheless, we still think that a looser policy stance means the data is more likely to get better than worse over the coming months. …
Today’s handover from military to civilian rule in Myanmar marks another welcome step forward in the country’s political development. But the new government must overcome a number of major challenges if the economy is to meet its full potential. A key …
Broad money and credit have continued to grow at a steady pace since the start of the year while government and corporate bond yields have dropped back. The prospect of further easing from the ECB and Bank of Japan should ensure that global monetary …
We are not overly concerned by the slowdown in the annual growth rate of our broad M3 money measure to a five-year low of 3.5% in February, particularly not when bank loans are still expanding at more than 8% per year. … Monetary Indicators Monitor …
While the Reserve Bank of Australia will almost certainly leave interest rates at 2.0% at the policy meeting on Tuesday 5th April, it may try to give activity and inflation a boost by attempting to talk down the Australian dollar. In any case, we believe …
The Egyptian central bank’s decision to devalue the pound this month ended months of growing speculation that a move in the currency was on the cards. In the near term, this will bring some pain. The central bank has already jacked up interest rates in an …
The Norges Bank has clearly become more concerned about threats to financial stability, but we do not think that this will prevent it from cutting the policy rate to zero by the end of the year. … Will financial stability concerns prevent Norges Bank rate …
The 11.5% decline in corporate profits last year, which included a 7.8% decline in the fourth quarter alone, doesn’t necessarily mean that a recession is imminent. Admittedly, profits usually begin to decline in the latter stages of the economic cycle, …
29th March 2016
Fed Chair Janet Yellen’s speech later today will, of course, be keenly watched for hints on the outlook for US interest rates. However, there have already been signs that the markets are reassessing their initially (very) dovish interpretation of the …
Despite mounting concerns over rapid credit growth, rising inflation and a weakening currency, the central bank in Sri Lanka (CBSL) opted to keep its key policy interest rates unchanged at its meeting today. We don’t think it will be long before the …
We expect the Central Bank of Brazil to shift its bias towards looser policy over the coming months, but both the timing and the size of any cuts in interest rates will be determined by what happens to the real. If the currency maintains its recent …
February’s euro-zone monetary data suggest that December’s interest rate cut by the ECB had only a small effect. While the Bank has since increased its stimulus, we doubt that this will boost money and lending growth significantly. … Euro-zone Monetary …
It's not a done deal yet, but the balance appears to be tipped towards the Reserve Bank of India (RBI) deliver ing another interest rate cut in next week's policy meeting . This is due to a number of recent developments, including the finance ministry 's …
It is becoming increasingly apparent that many Fed officials are underestimating the degree to which inflation will rise in the second half of the year. Fed officials expect core PCE inflation will fall back to 1.6% by the fourth quarter, but it remained …
28th March 2016
The Financial Policy Committee (FPC) had a lot on its plate at last week’s meeting, with concerns about the impact of a Brexit only adding to the long list of existing risks to financial stability. Even if the FPC chooses to stand pat again at this …
24th March 2016
Labour markets in all the major advanced economies have been tightening for several years, and in many cases they are now close to full employment. At face value this suggests that the world may be on the verge of a broad-based pickup in wage inflation. …
The downward revision to the Fed’s interest rate projections at the March FOMC meeting, despite little change in the economic projections, has prompted plenty of speculation that its “reaction function” has shifted. We’re sceptical that the Fed is now …
The Turkish central bank’s surprise decision to reduce its overnight lending rate by 25bp to 10.5% today was dressed up as a move to simplify the monetary setup, but it appears to be a result of sustained pressure from the government to lower interest …
Taiwan’s central bank (CBC) cut its discount rate by 12.5 basis points to 1.50% today against a backdrop of very weak growth and low inflationary pressures. Further cuts to the discount rate are likely if the economy fails to recover, but the CBC is …
The conventional wisdom is that the collapse in bond yields since the launch of QQE is undermining bank profits. In reality, though they reached a fresh high last year. Unfortunately this is bad news for the Bank of Japan, as the resilience of bank …
A combination of improving investor sentiment and a pick-up in global commodity prices has underpinned a recovery in frontier financial markets in recent weeks. Since reaching a two-year low in early January, the MSCI Frontier Markets Index has risen by …
Loose monetary policy increases the appeal of “risky” assets. This is a positive thing when their valuations are low, as they were in the aftermath of the financial crisis. It is, however, a potentially dangerous thing when their valuations are high. The …
23rd March 2016
Data released over the past month have provided further evidence that regional growth strengthened at the start to the year. Admittedly, the region’s largest economy, Russia, remains in recession. But the slump in output there is clearly easing. Indeed, …
Nigerian officials unexpectedly abandoned two key economic policies yesterday by tightening monetary policy and re-instating a partial ban on rice imports. The immediate economic effects will be mixed, but investors may see the decisions as another sign …
The larger-than-expected fall in Brazilian inflation in the first half of this month, to 10.0% y/y from 10.4% y/y over February as a whole, is encouraging. We expect inflation to continue to fall back over the course of this year, but it will be a slow …
The last month has seen EM financial markets recover from their poor start to 2016. Our Synthetic EM Exchange Rate Index has rallied to its strongest level since November. Almost all EM currencies have strengthened against the US dollar over the past …
The storm created by low oil prices will finally make its presence felt in the Gulf this year and we expect this to be the start of an extended period of slow growth. A wave of devaluations is highly unlikely and, although the Gulf countries have agreed …
The Bank of Thailand (BoT) unsurprisingly kept its policy rate unchanged at 1.50% today. With the government stepping up efforts to support growth, we expect rates to be left on hold throughout 2016. … Fiscal policy to take lead over monetary policy …
Today’s surprisingly high South African inflation figure will probably lead the SARB to accelerate its programme of rate hikes. This will be very painful for an economy that is struggling to avoid recession. … South Africa Consumer Prices …
With the economy steadily gaining momentum but inflation very low, today’s decision by the central bank of the Philippines (BSP) to keep its key policy rate on hold at 4.0% came as no surprise. Looking ahead, we think the central bank will be in little …
Greece and its creditors have reached some compromises that might allow the first bailout review to be concluded next month and negotiations over debt relief to begin. But the growing financial and political costs of the refugee crisis are another …
22nd March 2016
The fall in Mexican headline inflation in the first half of March, to 2.7% y/y from 2.9% y/y over February as a whole, confirms that overall price pressures remain in check for now. However, the rise in core inflation suggests that underlying price …
The Central Bank of Nigeria hiking its key policy rate from 11.00% to 12.00% is, in many ways, a positive sign. But this flip-flop on rates will raise yet more questions about the unpredictable and confusing direction of Nigerian monetary policy. … …
The weak inflation outlook and prospects for slower growth mean Hungary’s easing cycle, which resumed today, has further to run – we anticipate a few more small rate reductions in the coming months. Meanwhile, the Bank became the first EM central bank to …
Given that Brazil’s growing debt burden is denominated overwhelmingly in local currency there is little need for the foreign currency financing that an IMF bailout would provide. Instead, the main benefit of calling in the IMF would be to add much-needed …
February’s disappointing public finances figures were yet another blow for the Chancellor by suggesting the OBR’s new forecasts published in last week’s Budget already look too optimstic . Meanwhile, the unchanged inflation rate of 0.3% in February …
President Mauricio Macri’s first 100 days in office have seen an impressive range of measures to put Argentina’s fragile balance of payments position on a more sustainable footing. By any reasonable yardstick the early days of his presidency must …
21st March 2016
Helicopter money may be the next big thing as policymakers reach the limits of standard unconventional policies. In theory, it can fund an unlimited increase in both public spending and the money supply. In practice, though, it need not be as radical as …
Today’s statements from the Ghanaian and Kenyan Central Banks were more dovish than we had anticipated. This supports our view that the Ghanaian authorities will cut rates later this year, and we have now pencilled in a 50bp cut in Kenya. … Kenya & …
Property prices in Singapore have fallen for ten consecutive quarters and we expect the slide to continue. The gradual deflation of what had looked like a potential housing bubble has left the economy in much better shape to cope with rising interest …
18th March 2016
The statement by Russia’s central bank following its decision to leave its one-week repo rate unchanged earlier today was decidedly cautious and reinforces our view that any policy easing is only likely to come towards the end of the year. And even then, …
The Central Bank of Chile’s decision to keep interest rates on hold at 3.50% for the third consecutive month reinforces our view that the weakness of the economy will ensure the pace of further tightening remains gradual. We expect just one 25bp hike over …
The Central Bank of Egypt’s larger-than-expected 150bp in its overnight deposit rate, to 10.75%, was a pre-emptive move to limit the inflationary impact from the recent devaluation of the pound. We think the pound is likely to weaken further over the …
17th March 2016
The growing unease over the potential impact of negative interest rates suggests that Sweden’s Riksbank will think twice about cutting the repo rate further below zero. It can draw on other policy measures so it is not yet out of options. But its …
Today’s interest rate hike in South Africa will be followed with further tightening later this year in response to the deteriorating inflation outlook. … South Africa: Inflation, rand weakness force painful …
The MPC’s decision to leave interest rates on hold at 0.5% today – marking the 7th anniversary of rates being at this record low – was unsurprising given the softness of recent activity indicators and heightened uncertainty about the economic outlook. The …
