Filtered by Topic: Monetary Policy Use setting Monetary Policy
Hungary’s National Bank has radically reorganised its monetary policy framework over the past couple of years, in the process moving away from interest rate cuts and turning to increasingly unorthodox tools to loosen policy. However, these measures have …
7th March 2016
Official statements at the National People’s Congress have signalled, as expected, that the immediate economic priority is to support growth including with a looser fiscal stance and more monetary support. This should help drive a cyclical recovery, even …
The smallest fall in the value of China’s foreign exchange reserves in four months suggests that capital outflows have eased, allowing the People’s Bank (PBOC) to slow the pace of its intervention. … FX reserves …
The hysterical response to the news that the Federal budget deficit might increase to as much as $30bn next year left us shaking our heads in dismay. Canadian economists are still stuck in the Paul Martin inspired 1990s mind-set that any deficit is a …
4th March 2016
With employment rising at a rapid pace and labour market slack still shrinking, we think the Fed will resume raising interest rates in June. A marked pick-up in wage growth is still notably absent, but that won’t matter to the Fed when there are clear …
The ECB has signalled a further loosening of monetary policy at its forthcoming meeting on 10 th March. And while December’s under-deliverance highlights the risk of another disappointment, the deteriorating economic outlook should persuade the Governing …
3rd March 2016
The much weaker-than-expected Turkish inflation figure for February, of 8.8% y/y, adds to reasons to think that the central bank will continue to resist hiking interest rates. But the key point is that price pressures remain extremely strong – indeed, …
Although we suspect that the Reserve Bank of New Zealand will want to keep its powder dry for a little longer, there’s a real chance it will surprise the markets and cut interest rates by 0.25% at the policy meeting on Thursday 10th March. If it does …
China’s annual National People’s Congress starts on Saturday. Among the headline announcements are likely to be GDP growth targets for this year and beyond that are unrealistically high and will do nothing for policymaking credibility. More positively, …
2nd March 2016
The Bank of Canada is unlikely to cut interest rates at the upcoming policy meeting on 9th March. But we still anticipate that the ongoing economic slump, triggered by the collapse in commodity prices, will force it to lower its key policy rate to only …
The limited supply of eligible government bonds need not prevent the ECB from delivering the significant increase in asset purchases that is needed to impress investors. We see it buying the debt of a bigger range of quasi-public companies and maybe …
Q4’s rise in Swiss GDP came as a relief given the uncertain global environment ands trength of the franc. But with persistent deflation posing a serious threat to the economy, we still see the SNB increasing its policy support this month. … Swiss GDP (Q4 …
The Reserve Bank of Australia today once again decided to leave interest rates at 2.0%, but we don’t think it will be long before a weakening in the economic outlook and a further fall in underlying inflation forces it to cut rates to 1.5%. When other …
1st March 2016
Stock markets in China slumped at the end of February, erasing nearly all of the gains they had made since the late-January low. Meanwhile, market interest rates have remained near record lows. The PBOC’s decision today to cut the required reserve ratio …
29th February 2016
The People’s Bank paused monetary loosening in recent weeks apparently on concerns that it would worsen capital outflows. The government stepped up fiscal support instead. Today’s cut to the required reserve ratio (RRR) is therefore both confirmation that …
Political campaigning in the Philippines ahead of presidential elections due on 9 th May is now well underway. Grace Poe, an independent candidate and adopted daughter of Fernando Poe, a defeated presidential candidate from 2004, is currently ahead in the …
26th February 2016
The latest deal between two Spanish political parties does not guarantee the formation of a government and new elections may take place before long. While the economy has weathered the uncertainty well so far, there are early signs of a hit to confidence …
25th February 2016
There is undoubtedly less scope for policy easing than there was a few years ago, but the charge that central banks are now powerless is, in our view, exaggerated. For a start, policymakers still have room to cut deposit rates further and expand their QE …
Our econometric model points to a more muted 180,000 gain in non-farm payrolls in February. We estimate that the unemployment rate was unchanged at 4.9%, with the growth rate of average hourly earnings edging back up to 2.6%. … Pace of employment gains …
Policymakers in Mexico and Colombia this month responded to the sharp falls in their currencies by hiking interest rates and stepping up intervention in foreign exchange markets. These moves appear to have succeeded in supporting their currencies over the …
There has been some recent talk of froth returning to Japan’s housing market but prices, other than for condominiums, are not rising at a rapid rate. With debt levels also stable, there are no signs of a bubble. Indeed, policymakers would probably welcome …
The turmoil in financial markets, the stagnation in employment growth and the recent rises in bank lending rates to businesses are unlikely to have spooked the Reserve Bank of Australia by enough to prompt it to cut interest rates at the policy meeting on …
24th February 2016
The Norwegian economy looks much weaker than the Norges Bank had anticipated at its last meeting in December. With the outlook for GDP and inflation having deteriorated, we think that the Bank will cut its policy rate by at least 50 basis points this …
The Turkish central bank’s decision to keep interest rates unchanged despite the worsening inflation outlook underlines the extent to which political pressures seem to be bearing on the MPC. The Council may be able to get away with this in the current …
23rd February 2016
JGB yields would have to fall by another 40bp to wipe out the Bank of Japan’s profits, and they would have to remain that negative for many years to erode its capital base. However, that would be a price worth paying to overcome deflation and return the …
The latest data from Central and South Eastern Europe (C&SEE) serve as a timely reminder that, despite widespread pessimism, some parts of the emerging world are faring well. Flash Q4 GDP estimates suggest that aggregate growth in C&SEE came in at around …
22nd February 2016
The dollar’s near 20% rise since mid-2014 has slowed the growth rates of both manufacturing output and employment, but there is no sign of any collapse that could drag down the wider economy. The manufacturing surveys remain particularly downbeat, but …
19th February 2016
The pick-up in core CPI inflation to a three-and-a-half-year high of 2.2% in January, from 2.1%, illustrates that rising domestic price pressures won’t allow the Fed to leave interest rates at near-zero levels for that much longer. … Consumer Prices …
Consumer prices increased by 0.2% m/m seasonally adjusted in January, as a sharp 0.6% m/m jump in food prices offset the gasoline-related 0.8% m/m decline in transportation prices. Added to some unfavourable base effects, that was enough to push the …
The central bank in Sri Lanka (CBSL) has delivered a surprise by hiking both its policy interest rates by 50bp. Against a backdrop of rapid credit growth, building price pressures and currency weakness, further monetary tightening looks likely. … Sri …
There are good reasons to think that the recession in Brazil – which is now the worst since at least the 1930s – should start to ease this year. But the good news ends here. While growth should return towards the end of 2016, the recovery will be …
18th February 2016
The move by Venezuelan policymakers to devalue the official exchange rates and raise fuel prices will help to ease the pressure on the public finances, but the measures fall chronically short of what is needed to close the country’s huge budget deficit. …
While most developments since November’s Autumn Statement bode poorly for the public finances, lower interest rates should provide an offset. However, the Chancellor would be unwise to spend this windfall as this impact could easily be reversed in …
Bank Indonesia today cut its main policy rate by 25 basis points to 7.00%. We believe that one more cut is likely in this cycle. Today’s statement hints that, as long as the recent market calm persists, it is likely sooner rather than later, before US …
Although Sweden’s headline inflation rate rose by more than expected in January, the upward trend is far from assured. As such, we still see a strong possibility of additional policy easing by the Riksbank later this year. … Swedish Consumer Prices (Jan. …
Expectations of lower inflation have probably played only a minor role in the fall in Treasury inflation compensation – the gap between the nominal yields of conventional Treasuries and the real yields of Treasury Inflation Protected Securities (TIPS) – …
17th February 2016
The inept response by China’s policymakers to the pressures of the last few months has rightly diminished confidence in their ability to handle the structural transition China faces in the years ahead. But there is little evidence that the economy is …
Broad money growth has slowed somewhat in the four major advanced economies in recent months. However, bank lending to the private sector, which is a better guide to economic prospects, has generally held up better. … Credit growth still strong in the …
Talk of a UK interest rate cut has resurfaced in recent weeks, following the deterioration in global market sentiment and the moves by other central banks to cut rates. There is certainly scope for the Bank of England to cut rates further, but we think …
The adverse reaction to the decision by Sweden’s Riksbank to lower its policy rate further below zero illustrates investors’ concerns about the impact of negative interest rates on banks’ profitability. But we doubt this will deter the European Central …
South African inflation accelerated to 6.2% y/y in January in what we believe is the beginning of a food price-driven inflationary spike. Elevated inflation will add to dilemma facing the SARB. … South Africa Consumer Prices …
Although a number of other central banks have now adopted negative policy rates, the chances of the Fed following suit are pretty small. Even if US economic conditions deteriorated, we suspect that the obstacles to setting the fed funds rate below zero in …
16th February 2016
The Bank of Korea (BoK) left its policy rate unchanged at a record low of 1.50% today against a backdrop of heightened financial market volatility. While we can’t rule out a rate cut in the coming months, especially after the BoK took a slightly more …
Today’s data point to a sharp acceleration in credit growth going into 2016. This is consistent with our view that growth is more likely to pick up than slow over the coming quarters. … Bank Lending & Broad Credit …
Eleven years ago, Alan Greenspan described the behaviour of bond markets as a “conundrum” in testimony to the Senate. This was because long-term yields had trended lower, even as the US FOMC had raised the federal funds rate by 150bp. If that was a …
15th February 2016
The idea that the People’s Bank is running out of FX reserves doesn’t stand up to scrutiny. But the fact that many take it seriously is a sign of how far sentiment has swung against China. … PBOC still far from exhausting …
The recent appreciation of the yen, even if sustained for longer, should not have a major impact on external demand nor consumer prices. However, it will lower corporate profits and could reduce firms’ willingness to lift wages, thus further delaying the …
Japan’s economy shrank last quarter for the second time over the past year. While activity is set to pick up in coming months ahead of next year’s sales tax hike, the bigger picture is that spare capacity is not shrinking fast enough to reach the Bank of …
Futures markets now expect the Fed to leave rates unchanged for all of this year and anticipate a single 25 basis point hike next year. In contrast, we expect the Fed to begin raising rates again in June, as it becomes clear that neither China nor the US …
12th February 2016
