Filtered by Topic: Monetary Policy Use setting Monetary Policy
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 …
17th March 2016
A rebounding currency, subdued economic growth and inflation, and the Fed’s dovishness yesterday all fed into Bank Indonesia’s decision to cut its main policy rate for the third time in as many months. But we believe the balance of risks will shift in …
The lack of upward pressure on the franc following the last ECB meeting has allowed the Swiss National Bank (SNB) to leave policy on hold for now. But deflation dangers are particularly severe in Switzerland and we suspect that the Bank has more work to …
We think that today’s interest rate cut by the Norges Bank will be followed by another 25bp reduction in June. But concerns about household debt will prevent further loosening beyond that. … Norges Bank cuts rates, but concerns about debt …
Three months after the People’s Bank hinted that it would in future manage the renminbi relative to a currency basket rather than the dollar the jury is still out on what this means in practice. Contrary to many fears, the renminbi has not weakened …
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 …
The Fed opted to leave its key policy rate unchanged at 0.25% to 0.50% today, while also lowering its projections for the pace of future rate hikes. Nevertheless, as inflation continues to rise and global risks diminish further, we expect the Fed will …
16th March 2016
Despite its latest policy loosening, the ECB’s behaviour over recent years has been consistent with an inflation objective of closer to 1% than 2%. This has depressed economic growth and increased the risk of the euro-zone sliding into a deflationary …
Despite lower gasoline prices weighing on headline CPI inflation, the much bigger story is the surge in core inflation to a four-year high of 2.3% in February, which illustrates that the Fed can’t stay on the sidelines for much longer. … Consumer Prices …
Iceland’s central bank decided today to keep its key interest rates unchanged for the third meeting in a row, citing low global inflation and a strengthening currency. But with inflationary pressures building and the economy growing strongly, more rate …
The National People’s Congress has ended today leaving us still feeling confident in our relatively upbeat view of the immediate outlook for the economy. But the leadership’s continued tentative approach to structural reform raises doubts about growth …
Sri Lanka’s request for an IMF loan should ease fears about a potential balance of payments crisis, but the mistakes that put the country in this position will need to be addressed. Most importantly, policy will need to be tightened, which will weigh on …
While the distribution of helicopter money in the euro-zone is not a likely near-term measure, the lesson of recent years is that seemingly unimaginable policies can become reality. And it may suit the ECB to keep the idea hovering. … Is the ECB about …
15th March 2016
2016 is shaping up to be a better year for investors in Latin America than 2015. With global commodity prices now at a bottom and set to edge up this year, we expect most equity markets in the region to perform well and most currencies to stabilise. …
The March FOMC meeting is likely to conclude tomorrow with US interest rates left on hold but clear signals that hikes will resume soon. However, the timing will remain dependent both on future US economic data and on global sentiment. For the latter at …
Today’s GDP figures suggest Sri Lanka’s economy slowed sharply in the fourth quarter of 2015. However, we would be wary of reading too much into the data, given the serious doubts that remain over the reliability of the rebased GDP figures. The big …
The Bank of Japan did not announce additional monetary easing at today’s meeting, but dropped some strong hints that it believes more stimulus will eventually be needed. We now expect policymakers to step up the pace of asset purchases and lower the …
The renewed fall in Sweden’s inflation rate in February was largely down to movements in energy prices. But with underlying price pressures still largely absent, the Riksbank may well need to take further policy action. … Swedish Consumer Prices (Feb. …
Indian consumer price inflation dropped in February as food price pressures abated. However, the RBI still faces a difficult task in meeting its inflation targets for the next two years. … Consumer Prices …
14th March 2016
The decision this morning by the Central Bank of Egypt to devalue the pound and move to a more flexible exchange rate regime is a positive step and should help to improve the country’s balance of payments position. There will inevitably be some short-term …
Wholesale price inflation held steady in February, but we think that it will return to positive territory over the next couple of months. … Wholesale Prices …
A wide range of commodities benefited from improving sentiment towards the sector in the past week, even those – notably iron ore – where the underlying fundamentals remain distinctly bearish. Expectations of additional policy stimulus in China offset …
11th March 2016
It is questionable whether the surge in commercial property prices can be sustained. The rise in multi-family apartment prices, which explains a large part of the overall increase in commercial property values, is partly explained by the low vacancy rate, …
The weaker than expected 2,300 decline in employment in February and further uptick in the unemployment rate to a three-year high of 7.3% from 7.2%, provides more evidence that the economy is struggling to cope with the oil price shock. As the fallout …
The two main events this week – the Budget and MPC decision – will highlight the divergence between monetary and fiscal policy stances. With Bank Rate likely to be held at 0.5%, marking seven full years at a record low, monetary policy is doing a great …
The adverse market reaction to the ECB’s bolder-than-expected package of policy measures unveiled on Thursday reflected concerns, partly prompted by comments from President Mario Draghi , that the central bank is running out of policy ammunition. Those …
The Central Reserve Bank of Peru’s decision to leave interest rates unchanged at 4.25% is unlikely to mark the end of the tightening cycle and we expect further rate hikes over the coming months. … Peru holds rates, but the tightening cycle has further …
We expect the economies of Central Europe (Poland, Hungary, Slovakia and the Czech Republic) to perform well over 2016-17. Consumer spending looks set to stay strong, while export sectors will register reasonable rates of growth. Deflation pressures will …
At first glance, a write-off of the Bank of Japan’s huge JGB holdings offers a simple solution to the country’s debt problem. But it is not clear that such a drastic step would actually help significantly. We still think that higher inflation rather than …
The recent interest rate cut in New Zealand and the dovish comments by the RBNZ now mean it is easy to imagine a scenario where interest rates in New Zealand fall below those in Australia. That would result in the New Zealand dollar weakening further …
Low oil prices mean that budget deficits will persist for some time in the GCC and we think these countries will shift away from a reliance on savings towards issuing debt to plug the gap this year. We estimate that more than US$85bn of debt will be …
10th March 2016
Recent developments are unlikely to have caused Monetary Policy Committee (MPC) members to fundamentally change their view since they voted unanimously to leave rates on hold in February. Indeed, there is nothing in the data that should push the more …
Colombia’s economy grew by a respectable 3.3% y/y in the final quarter of 2015, but we expect the economy to slow this year as the impact of lower oil prices continues to bite and economic policy tightens further. … Colombia GDP …
We are often characterised as being “bullish” on the US economy, but our economic growth forecasts are hardly upbeat. Instead, where we really differ from the consensus is in believing that even moderate economic growth will be enough to generate a marked …
While the ECB today delivered a package of measures which exceeded market expectations, there is no guarantee that it will revive the euro-zone’s flagging economic recovery and eliminate the threat of deflation in the currency union. … ECB belatedly …
The Bank of Korea (BoK) today left its policy rate unchanged at a record low of 1.50%. The pressure for a rate cut is building against a backdrop of softening economic data, but we are sticking with our forecast for rates to be left on hold for now. … …
Corporate bond yields have collapsed since the Bank of Japan adopted negative interest rates. However, with bonds only accounting for a quarter of corporate debt, bank lending rates would also have to fall to ensure a noticeable decline in corporate …
Today’s 0.25% cut in interest rates in New Zealand, to 2.25% from 2.50%, will have been a surprise to most analysts and the financial markets. But as early as July last year we forecast that rates would be cut to 2.0% this year and in the RBNZ Watch we …
Brazil’s financial markets rallied after news broke last week that former President Lula had been detained (and later released) in relation to the ongoing corruption probe at Petrobras. But this reaction is difficult to square with the reality that the …
9th March 2016
The Bank of Canada’s decision to hold its key policy rate at 0.50% today doesn’t mean that further rate cuts are off the table, as it depends on the details of the forthcoming Federal stimulus budget due later this month. If that budget doesn’t rejuvenate …
Despite the clear improvement in the incoming economic data over the past month, which has triggered a reversal of the earlier tightening in financial conditions, the chance of the Fed raising interest rates at next week’s FOMC meeting, which concludes on …
The fall in Brazilian inflation in February, to 10.4% y/y from 10.7% y/y in January, was driven entirely by the unwinding of the impact of regulated price hikes implemented in the same period last year. However, with inflation likely to be slow to fall …
Malaysia’s central bank (BNM) today kept its policy rate on hold at 3.25% at a monetary policy meeting that will be Governor Zeti’s last after 16 years at the helm. We continue to think rates will be kept unchanged this year, but uncertainty around the …
Japan’s economy is struggling to regain momentum and the recent strengthening of the yen is providing a further headwind to efforts to raise inflation. The Bank of Japan will therefore have to step up the pace of easing soon – we suspect as early as next …
The latest rise in Portuguese bond yields reflects fears that its debt will soon be classified as junk by all four major ratings agencies, leading the country to be excluded from the ECB’s asset purchases. These fears seem justified, suggesting that …
8th March 2016
Negative interest rates have come under attack recently, but in our view most of the criticisms are over-stated. In particular, the costs of negative rates for commercial banks appear to be very small, and, despite the recent comments by the Bank for …
The second estimate of Q4 GDP confirmed that Japan’s economy contracted last quarter. With the early indications for Q1 not looking promising, we retain our view that the Bank of Japan will announce more easing next week. … GDP (Q4 …
