Filtered by Topic: Monetary Policy Use setting Monetary Policy
The Reserve Bank of New Zealand’s hint that the weakening outlook for inflation means that interest rates may have to be reduced this year from the current rate of 2.5% supports our long-held view that rates will fall to 2.0%. The New Zealand dollar has …
28th January 2016
The Fed certainly didn't rule out a March rate hike completely in the FOMC statement released today, but it was notable that it was no longer willing to describe the risks to the outlook as balanced. … Fed doesn't completely rule out March rate …
27th January 2016
The renewed turmoil in global financial markets together with the downward revisions to estimates of fourth-quarter GDP growth in the US have prompted claims that the Fed made a serious policy error in raising interest rates late last year. With the risks …
We continue to believe that GDP growth in both Australia and New Zealand won’t accelerate at all this year from last year’s disappointing rates of around 2.3%. A further weakening in the outlook for underlying inflation will also play a major role in …
The consensus is expecting further, albeit limited, monetary easing in India over the coming months, but we continue to think that the rate-cutting cycle has come to an end. The Reserve Bank of India’s (RBI’s) aversion to financial market volatility means …
The rise in headline inflation in the fourth quarter of last year, to 1.7% from 1.5%, hides the more important easing in underlying inflation. On one measure, underlying inflation is now below the RBA’s 2-3% target range. We believe that further falls in …
Inflation across Emerging Asia remains very low, with consumer prices rising by less than 2% y/y in seven of the 14 countries we track. Two of those, Thailand and Singapore, are in deflation, while there are only two countries, India and Bangladesh, where …
The growth rate of our M3 broad money measure slowed to a three-and-a-half year low of 4.1% in December, but the slightly narrower M2 measure increased by a solid 6.0% last year, while bank loans expanded by a very robust 8.4%. Since the slowdown in M3 …
26th January 2016
The turmoil in global markets since the beginning of the year is not, in our view, a sign that the world economy is heading for a recession, but the fall in oil prices will have a knock-on effect on inflation. While not a “game-changer”, it has reinforced …
Central Bank of Nigeria Governor Godwin Emefiele used the post-MPC meeting press conference to reiterate his commitment to retaining controversial FX restrictions. But with strains in the balance of payments building, we believe that the governor will, …
The latest fall in oil prices and in the ruble since the start of the year has dealt a blow to hopes that Russia’s economy would stabilise in the near future. Fiscal policy is likely to be tightened to counter the hit to the public finances. And the …
With economic activity recovering and underlying inflation holding up, the recent strengthening of the yen and the plunge in the Nikkei are unlikely to force the Bank’s hand at next week’s meeting. However, underlying inflation looks set to moderate and …
The external deflationary pressure from the stronger dollar and lower commodity prices is persisting for longer than we expected. The lower profile for energy prices now means that headline inflation will remain around 1% for much of the year and won’t …
25th January 2016
The recent turmoil in financial markets will have brought a sudden end to Governor Stevens ’“chilled” Christmas period. But this won’t be enough to prompt the Reserve Bank of Australia (RBA) to cut interest rates at the policy meeting onTuesday 2nd …
Despite a rapidly deteriorating outlook, the Bank of Canada defended its recent inaction on interest rates on the basis of it not knowing the details of the upcoming Federal budget, due to be delivered sometime in April. But if that budget fails to admit …
22nd January 2016
Our calculations indicate that fourth-quarter GDP growth slowed to only 1.0% annualised, largely thanks to a more modest 2.0% gain in consumption. The latter is hard to square with the continued decline in energy prices, but the weather may have played a …
The higher starting point means that inflation in Australia is unlikely to fall close to zero, as it has done in New Zealand. That said, underlying or “core” inflation in Australia may soon follow in the footsteps of core inflation in New Zealand by …
We have reduced the amount by which we forecast the dollar to strengthen against the euro and the yen this year, but increased the amount by which we project that it will appreciate against sterling. The big picture is that our new forecasts continue to …
21st January 2016
The ECB signalled firmly today that further policy loosening is imminent. While we are wary of putting too much faith in its communications after last month’s disappointment, there are good reasons to expect it to cut interest rates and accelerate its …
The decision by Malaysia’s central bank (BNM) today to cuts its statutory reserve requirement (SRR) ratio is not a signal that interest rates cuts are on the way. Worries about currency weakness and high levels of foreign currency debt mean BNM’s main …
Large injections of liquidity into the banking system by the People’s Bank (PBOC) have grabbed headlines today. The moves have more to do with offsetting the usual spike in liquidity demand ahead of Chinese New Year than a response to capital outflows or …
While recent events have increased the chances that interest rates will be cut from 2.5% now to 2.0%, as we have been expecting for some time, we think that the Reserve Bank of New Zealand will hold fire at the policy meeting on Thursday 28th January. …
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 entirely. The Bank sounded far more downbeat about the economic outlook because of the worsening commodity price shock. But …
20th January 2016
Despite the prevailing gloom about the world economy, we think global growth will pick up from around 2½% last year to 3% in both 2016 and 2017, using our own estimates for China. Growth should be little changed in the US this year and will probably slow …
While the Central Bank of Kenya held rates on hold today, we expect that the Bank will be forced to tighten policy by around 50bp later this year as inflation remains above target. … Kenya: Rates on hold despite higher …
The latest slump in commodity prices, the renewed market turmoil and the apparent slowdown in fourth-quarter GDP growth are all good reasons why the Fed might ultimately decide against raising interest rates for a second time at the mid-March FOMC …
The fall in CPI inflation to just 0.1% in the fourth quarter of last year, from 0.4% in the third quarter, could prove to be a game-changer for the RBNZ as it leaves the economy uncomfortably close to outright deflation. This may not quite be enough to …
The Turkish central bank’s decision to keep its key interest rates on hold today, despite pressure on the lira and the deteriorating inflation outlook, adds to the impression that monetary policy moves are being swayed by government influence and will …
19th January 2016
Sentiment towards emerging markets has worsened since the start of the year amid mounting worries about the outlook in a number of key economies. Nevertheless, the latest data provide no evidence of a major slump in economic activity over the past few …
Low oil prices are battering Nigeria’s export-dependent economy. But it’s the government’s market-distorting response that risks pushing the country into a Venezuela-style crisis. … Nigeria: Policy response pushes economy towards …
18th January 2016
Swiss exports have performed better than we had feared in the year since the SNB abandoned its currency ceiling. But the franc’s strength has probably yet to take its full toll on exports and the extra deflationary pressure that it has caused could have …
Our key theme for this year, that the two big deflationary shocks of 2015 - the slump in energy prices and the surge in the dollar - will fade, leaving rising domestic price pressures to generate a rebound in inflation has had a particularly inauspicious …
15th January 2016
Broad money and private sector credit have continued expanding steadily in recent months. In advanced economies as a whole, credit has been growing rapidly while in emerging economies it has slowed but only gradually over the past five years. Overall, …
The decision by Peru’s central bank to hike interest rates for a second consecutive month underlines its concerns about above-target inflation and we have brought forward our forecast for 50bp of further hikes to this year, from 2017. Meanwhile, despite …
Today’s data suggest that lending to the real economy remained strong at the end of last year, which should help support economic activity in the coming months. The loose monetary stance currently adopted by the People’s Bank means a further pick-up in …
The Swiss National Bank’s (SNB) shock decision to abandon its ceiling for the franc reflected its judgement that the policy was just not sustainable. Unless it can reverse the franc’s appreciation with other policies, the downward impact on growth and …
After disappointing markets in December, we expect the ECB to indicate at its forthcoming meeting that the door is still open to bolder policy support. The Bank is unlikely to alter policy for now given the firm tone of recent survey data and the damage …
14th January 2016
The renewed concerns about growth in China, which led to a rout in Chinese equities at the start of 2016, hit financial markets worldwide, including the UK. That said, the UK has been relatively sheltered from this storm, with bond yields only falling …
Polish National Bank Governor Marek Belka used this afternoon’s post-meeting press conference to warn incoming MPC members that there was little to warrant looser monetary policy, but with inflation likely to be weaker than expected, we think the …
The MPC’s decision to leave interest rates on hold at 0.5% today, for the 82nd month in a row, was unsurprising given the recent fall-back in the oil price and renewed market concerns about the health of the global economy. Indeed, these risks underline …
Bank Indonesia’s decision to cut interest rates today should provide a long-overdue boost to the struggling economy. But the central bank will take a cautious approach from here. … Indonesia will only cut rates …
South African mining output did not contract as sharply as was predicted in November, but the weakness of the economy will still put pressure on the SARB to slow its hiking cycle. Even so, with the rand under pressure, we expect that the Bank will hike …
The very low rate of inflation in Sweden in December underlines the absence of price pressures and will encourage the Riksbank to follow through on last week’s announcement that it was prepared to intervene in the currency market. … Swedish Consumer …
Bangladesh Bank has today cut its policy rates for the first time since 2013 to give the economy a further lift. Although the central bank has become more confident of meeting its inflation target, there appears to be little scope for further loosening. …
Against a backdrop of global financial market volatility and rising household debt, the Bank of Korea (BoK) left its policy rate unchanged at a record low of 1.50% today. We do not expect any changes in the coming months. … Korea to hold rates in …
Turmoil in China’s financial markets has fuelled concerns that its real economy is also on the brink of a crisis, but we expect continued policy support to drive a recovery over the coming months. Stronger growth in China should in turn provide a boost to …
13th January 2016
We expect the Bank of Canada to cut its key policy rate by 25 basis points to 0.25% next week, which is much sooner than most investors anticipate. The incoming data suggest that the economy contracted in the final quarter of last year, and was therefore …
The Bank of Japan has eased its collateral rules to free up additional JGBs. However, a shift in the composition of government debt away from Treasury bills and loans towards JGBs is providing a bigger boost to the pool of available JGBs. … Monetary …
The renewed fall in oil prices in recent months is a further blow to Malaysia’s economy. Moreover, there is very little scope for policymakers to support growth with fiscal or monetary loosening. We now expect a deeper slowdown in 2016. … Oil price fall …
