Filtered by Topic: Monetary Policy Use setting Monetary Policy
There are ominous signs that the turmoil in financial markets is starting to have bigger effects on the euro-zone. While Q4’s GDP figures showed growth maintained its pace at the end of last year, the concerns over euro-zone banks have added to the …
12th February 2016
In principle, cutting policy rates into negative territory should boost growth and inflation. But central banks have not communicated these benefits clearly, and the hesitant way in which they have been introduced has undermined confidence, raising the …
January’s consumer prices figures should show a continuing movement away from deflation. While falling oil prices are being passed through to lower fuel prices at the pump, fuel price deflation will continue to ease due to larger falls a year ago. … …
The Peruvian central bank’s decision to hike interest rates by 25bp for the third consecutive month, to 4.25%, as well as the more hawkish tone of the accompanying statement, point to concerns that price pressures are building. As a result, we have raised …
The fact that euro-zone GDP growth did not slow in Q4 last year provides little comfort in the current environment of global market turmoil and does not preclude the need for further decisive policy action from the European Central Bank. … Euro-zone GDP …
The Bank of Japan unveiled a negative interest rate policy two weeks ago because it concluded that more forceful action was needed to lift inflation. Now, with equities slumping and the yen soaring to a 15-month high, policymakers are under even greater …
While some recent survey evidence has hinted that loan growth in the US may be about to slow, money and credit data in the four major advanced economies as a whole so far provide little support for the view that the world is on the verge of a broad-based …
11th February 2016
Today’s decision by Sweden’s Riksbank to cut its repo rate further below zero demonstrated that it is prepared to set aside its worries about a housing market bubble and strong domestic demand in order to respond to very low inflation and policy easing by …
The decision by the central bank of the Philippines (BSP) to keep its main policy rate on hold at 4.0% came as no surprise. With growth picking up but inflation low, we doubt the central bank will be in any rush to raise rates. We expect the policy rate …
Nothing illustrates the regional divergence in Canada’s economy like housing. While house prices continue to surge in the already most over-valued markets in Vancouver and Toronto, Calgary and other areas most affected by the collapse in commodity prices …
10th February 2016
Fed Chair Janet Yellen’s testimony to Congress today revealed that, while the FOMC might not be ready to raise interest rates for a second time in March, she still anticipates a “gradual” series of rate hikes over the next couple of years. That view is …
The Bank of Japan’s decision to cut the interest rate on some excess reserves below zero initially delivered a slide in the exchange rate and a rise in equities. But these shifts soon reversed and the yen is now at its strongest level relative to the …
Although Iceland’s central bank decided today to keep its key interest rates unchanged again, upward inflation pressures and domestic economic strength mean that rate hikes are likely later this year. … Icelandic rates on hold but more policy tightening …
Our full analysis of the prospects for the Australian and New Zealand economies is contained in our Australia & New Zealand Economic Outlook (sent to clients on 27th January), but in this note we highlight our most important non-consensus calls and …
The Zika virus has hit the headlines in recent weeks due to its rapid spread across Latin America and the suspected link with thousands of cases of serious birth defects in Brazil. But, while it is clearly an important public health issue and there is …
9th February 2016
Experience since 2009 shows that the current crop of central bankers do not hesitate to change course if they think that is the right thing to do. Indeed, central banks in numerous advanced economies have tightened policy since the global financial crisis …
The surge in Chilean inflation in January was largely due to planned tax increases and had been anticipated. As such, we don’t expect it to a trigger a policy response from the central bank and interest rates are likely to be left unchanged on Thursday. …
8th February 2016
While negative interest rate policies are being adopted by some major central banks, economic growth and inflation in Canada will be buffered by fiscal policy stimulus and the past depreciation of the Canadian dollar. Accordingly, we don’t foresee the …
5th February 2016
In her semi-annual testimony to Congress this week (to the House on Wednesday and the Senate on Thursday), Fed Chair Janet Yellen is unlikely to say that a March rate hike is completely off the table, even though it is effectively. She will stick to the …
The draft EU deal published last week has left the “Brexit” referendum looking likely to occur in June this year. What’s more, on the basis of the latest polls, it looks set to be a close vote. That said, we doubt that Mr Cameron’s deal changes either the …
Euro-zone consumer price inflation looks likely to pick up later this year, driven by the fading direct effect of lower oil prices and the feed-through of previous falls in the euro to consumer prices. But these effects should be temporary. The indirect …
Inflation is likely to have risen at the start of 2016 on account of a further small rise in food inflation. Looking ahead, the FY16/17 budget is likely to incorporate a significant rise in public sector wages, which would add to the RBI’s difficult task …
The introduction of a negative interest rate on a small portion of excess reserves has already reduced corporate bond yields, and we think that banks may also lower lending rates somewhat. However, with appetite for credit fairly subdued, rates will have …
The Reserve Bank of Australia’s February Statement on Monetary Policy confirms that the chances of a near-term reduction in interest rates remains slim. Nonetheless, there are a number of factors that could yet alter the outlook and prompt the RBA to cut …
Today’s “Super Thursday” announcements were generally dovish but, true to form, Governor Carney gave mixed messages, striking a more hawkish tone at the press conference. While market expectations have changed very little, our view is that a hike in Bank …
4th February 2016
The Czech MPC was even more dovish than we had expected at this afternoon’s post-meeting press conference as it not only extended its commitment to keeping the exchange rate ceiling in place to 2017 (as we had suggested might happen), but it also …
While the latest data have raised fresh questions about the strength of the US economy, we think activity will recover because income growth remains strong while the drags from dollar appreciation and the downturn in the mining sector should fade. Growth …
The sharp drop in oil prices and the Canadian dollar have led to a rapid deterioration in Canada’s economic outlook, overwhelming the ability of policymakers to stabilise the economy with conventional stimulus. We expect GDP growth to be less than 1% in …
3rd February 2016
The 10-year Japanese government bond yield has fallen to a record low of less than 0.1% following the Bank of Japan’s decision to cut its deposit rate to -0.1%. We now forecast that the 10-year JGB yield will fall to -0.25%, as the BoJ reduces its deposit …
Financial markets got off to a tumultuous start to the year, but the economy has begun 2016 on a slightly stronger footing. The Markit/CIPS surveys point to quarterly GDP growth of around 0.6%, a slight pick-up on recent rates. And consumer confidence …
Hard data for the fourth quarter of last year, including GDP estimates for some countries and industrial production and retail sales figures for the region as a whole, suggest that euro-zone GDP posted a quarterly gain of just 0.3%. This would be the same …
Stronger-than-expected Turkish inflation in January, of 9.6% y/y, was partly driven by administered price hikes and what is likely to be a temporary unwinding of the impact of the decline in global oil prices. But even so, underlying price pressures are …
The Bank of Thailand’s (BoT) decision to keep its policy rate unchanged at 1.50% today came as no surprise. With the economy gradually recovering and the government stepping up efforts to support growth, we expect rates to be kept on hold throughout …
With longer-term interest rates falling alongside short-term rates, the introduction of negative rates will not hamper the Bank of Japan’s ability to purchase large amounts of government bonds. Nor will they have a crippling effect on commercial banks’ …
The Bank of Japan last week became the fifth central bank to impose negative rates and we now expect it to lower its deposit rate to -0.7% by the end of this year. If policy eventually needed to be loosened further, we think central banks could cut rates …
2nd February 2016
The tumble in inflation from the most recent peak of just over 5% in late-2011 to an average of 0% in 2015 has provided a welcome boost to the economy. But with near-zero rates of inflation now in the rear-view mirror, this favourable tailwind will not …
The Reserve Bank of India (RBI) kept its repo rate on hold at 6.75% today and, while the consensus is expecting further modest loosening later this year, we think that rates will remain unchanged throughout 2016. … RBI holds rates, no change likely in …
While the Reserve Bank of Australia acknowledged the threat posed by a weaker global economy when it left interest rates on hold at 2.0% today, we don’t think it went far enough. With the outlook for underlying inflation at home also softening, we …
Amid concerns about the sustainability of its large-scale asset purchases, the Bank of Japan now looks likely to rely increasingly on lowering the interest rate on central bank reserves to deliver policy easing. We believe that this rate may lowered to …
1st February 2016
The Fed certainly didn't rule out a March rate hike completely last week, but it was deliberately non-committal about the risks to the outlook. It's debatable whether the current uncertainty will clear up by the time of that March FOMC meeting. We …
29th January 2016
The sinking Canadian dollar has prevented the annual core CPI inflation rate from falling below the mid-point of the Bank of Canada 1% to 3% inflation target range, despite the worsening economic downturn and growing slack in the economy. But tentative …
The Russian central bank kept its benchmark one-week repo rate on hold at 11.00% earlier today, but the markedly more hawkish tone of the accompanying statement makes it clear that rate cuts – which the MPC had hinted at recently – are off the cards. …
December’s euro-zone monetary data suggested that money and lending growth in the currency union has peaked, adding to the case for the ECB to loosen monetary policy significantly in March. … Euro-zone Monetary Indicators Monitor …
The introduction of negative interest rates at today’s BoJ meeting will likely be followed by further cuts in coming months. The upshot is that the yen should continue to weaken against the dollar. … Further cuts in interest rates likely to be …
It’s odd that the financial markets placed so much emphasis on the rise in Australia’s tradables inflation rate in the fourth quarter of last year when this was more than offset by a fall in non-tradables inflation. What’s more, there are good reasons to …
The Central Bank of Egypt kept its benchmark overnight deposit rate unchanged at 9.25% today as an influx of financial support has eased immediate concerns over the country’s external position and reduced the need to follow up on December’s rate hike. But …
28th January 2016
The messages from this month’s Inflation Report will probably be pretty mixed. A lower profile for growth and inflation over the next few quarters should cement expectations that an interest rate rise soon is off the agenda. In contrast, a stronger …
The South African Reserve Bank has raised its key interest rate from 6.25% to 6.75% as inflation concerns outweighed worries about weak growth. We expect the bank will be forced to hike by another 50bp over the course of 2016. … South Africa: Rates …
