Filtered by Topic: Monetary Policy Use setting Monetary Policy
Although France’s headline inflation rate edged up in December, the big picture is that price pressures in the euro-zone’s second-largest economy remain very weak. … French Consumer Prices …
13th January 2016
The recent flood of capital leaving China has been driven primarily by increased scepticism that the People’s Bank will hold to its pledge to keep the renminbi stable. The fact that the PBOC has ended up in this position despite its massive foreign …
12th January 2016
Mauricio Macri has made a strong start to his term as president of Argentina, tackling some of the country’s biggest macroeconomic distortions in his first month in office. There’s work still to do – fiscal policy is yet to be tightened, and we’re no …
Based on our new oil price forecasts we expect inflation in advanced economies to rise more gradually this year than previously anticipated. This will add to pressure for further policy loosening in the euro-zone and Japan, but it should have less impact …
The fall in Russian inflation in December to 12.9% y/y provided the first clear sign that the impact of the 2014 ruble crisis has started to unwind. And we think that inflation is likely to decline further over the coming months. Nonetheless, the latest …
Many parts of the emerging world are facing a tough year in 2016. But the outlook is not as uniformly bleak as many assume and some important emerging economies could spring positive surprises. … Crisis or recovery: what next for emerging …
11th January 2016
2016 won’t be an easy year for the UK economy, given the renewed fiscal squeeze and probable EU referendum in particular. Nonetheless, we expect it to weather these clouds relatively well and anticipate GDP growth of about 2.2%, close to last year’s rate. …
While the majority of investors expect another interest rate cut from the Bank of Canada by the middle of this year, most of them don’t realise just how weak the economy is right now and the urgency for additional policy stimulus. With signs warning that …
8th January 2016
The latest incoming monthly data suggest that fourth-quarter GDP growth slowed to between 1.0% and 1.5% annualised. Added to the widening in corporate credit spreads, the renewed weakness in stock markets and the news that the ISM manufacturing index fell …
The 292,000 surge in non-farm payroll employment, together with the 50,000 upward revision to the gains earlier months should put paid to any fears that, even if fourth-quarter GDP growth ends up being lacklustre, the US recovery is in serious difficulty. …
Fears that Brazil’s government will respond to a deepening recession by resorting to populist economic policies have surfaced over the past week. As things stand, we don’t think there is much evidence of any such shift at this stage. But if it …
The further rise in Brazilian inflation in December, to a 12-year high of 10.7% y/y, now means that anything less than a 50bp rate hike at this month’s COPOM meeting is likely to see financial markets come under further pressure. Meanwhile, inflation in …
The Bank of Japan will probably lower its inflation forecasts and push back the timing for reaching its 2% target yet again later this month. With cheaper energy keeping a lid on inflation, the recent slide in expectations of future price gains may …
The further decline in Mexican inflation in December, to 2.1% y/y, underscores the lack of price pressures in the economy. Against this backdrop, we expect only modest monetary tightening in 2016, even if the Fed hikes rates more aggressively. … Mexico …
7th January 2016
Romanian National Bank Governor Mugur Isarescu gave little away at this afternoon’s post-meeting press conference, but the tone of the accompanying statement suggested that the MPC is concerned about both deteriorating sentiment towards emerging markets …
The fall in oil prices, a souring in global market sentiment, weaker wage data and some unfavourable revisions to GDP growth suggest that the chances of rates not rising until the second half of the year have risen. Indeed, we now only expect one hike …
Inflation is likely to have risen in December on account of accelerating food inflation and the government’s incremental hiking of fuel duties even as global oil prices continue to slump. Further ahead, a potentially large rise in public sector wages …
The willingness of the People’s Bank to sell over $100bn of foreign exchange reserves last month is a measure of its belief that a stable currency is in China’s interests and that current downward pressure is driven by speculative rather than fundamental …
Sweden’s Riksbank is likely to have to follow through on its pledge to intervene in the foreign exchange market. But the strength of the domestic economy and the likelihood of more ECB QE means that it will probably only be able to stem the krona’s …
Renewed intervention by the authorities in China may not be enough to prevent further falls in local equity markets, but even in the event of a sell-off the macroeconomic consequences should be small and any related losses in global markets quickly …
6th January 2016
In our first India Watch of 2016, we outline the prospects for India’s economy over the coming year. The lagged effect of earlier policy loosening and weakness in global commodity prices should provide a small boost to economic growth this year. However, …
December’s euro-zone consumer price inflation rate of +0.2% left an average inflation rate for 2015 as a whole of zero – the lowest rate since the single currency was formed. Headline inflation will almost certainly rise during 2016 as negative energy …
5th January 2016
In response to the deepening economic and political crisis in Brazil we are marking down some of our key forecasts. We now expect interest rates to be raised further, the currency to weaken a little more and the economy to contract again this year. … New …
December’s weaker-than-expected euro-zone consumer prices figures supported our view that bolder ECB policy action will ultimately be needed to bring inflation back to target on a sustained basis. … Euro-zone Flash CPI …
On the face of it, 2015 has been a decent year for the Indian economy. Admittedly, activity indicators are pointing to a slow and bumpy recovery, but conditions have undoubtedly improved following three years of tepid economic growth. Meanwhile, inflation …
23rd December 2015
The ASEAN Economic Community (AEC) formally takes effect on 31st December and aims to transform ASEAN into a single market and production base, which its supporters hope will one day enable it to rival China as the workshop of the world. ASEAN has already …
The growth rate of our M3 broad money aggregate slowed to 4.6% in November, but M2 growth was still a very healthy 6.2% and, most importantly, the growth rate of bank loans is running at 8.0%. … Monetary Indicators Monitor (Nov. …
22nd December 2015
The Egyptian central bank has found itself in the spotlight this month, as attention has (re-)focussed on the country’s fragile external position. The appointment of Tarek Amer as governor had already sparked speculation that policymakers were gearing …
The decision by the Turkish central bank to keep interest rates on hold, when hikes had been widely anticipated, will probably result in renewed concerns that the MPC’s decisions are being swayed by government pressure. The accompanying statement did …
Inflation is currently being held down by the impact of falling commodity prices and the stronger dollar but, as those deflationary forces fade next year, we expect rising domestic price pressures to push inflation back towards the Fed’s 2% target. …
21st December 2015
We fear that households are utterly unprepared for the normalisation of market interest rates that began with the US Fed’s historic lift-off last week. Canada’s economy has long been overly reliant on household consumption and housing as drivers of …
18th December 2015
If 2015 was the year when interest rates didn’t rise as rapidly as most originally expected, then 2016 is likely to be the opposite, with a bigger than expected rebound in inflation forcing the Fed to abandon its gradual pledge. … What to expect in …
The increase in annual headline inflation to 1.4% in November, from 1.0%, was largely as expected given the diminishing drag from lower energy prices. Meanwhile, core inflation remained close to the 2.0% mid-point of the Bank of Canada’s target range, …
The stronger-than-expected performance of the euro-zone economy in 2015 and the additional policy support recently provided by the ECB might appear to provide the conditions for a further improvement in the currency union’s outlook in 2016. But two of the …
After a slight wobble in the autumn, the UK economy seems to be ending 2015 on a more positive note. Growth this year is on course to have been about 2.4%. While weaker than 2014’s 2.9% growth rate, this is still pretty respectable and broadly in line …
The stronger-than-expected rise in Brazilian inflation, to 10.7% y/y, in the first half of December was driven by an increase in food inflation that should ease by mid-2016. Nonetheless, the risk of further rate hikes are growing. … Brazil IPCA-15 …
Advanced economies are likely to continue their steady recovery during the coming year or two, albeit with the euro-zone and Japan still lagging well behind the US and UK. Tighter labour market conditions should push inflation up rapidly in the US, but …
Last night’s decision by central banks in Mexico and Chile to hike interest rates suggests that the actions of the US Fed still hold sway with policymakers in Latin America. Nonetheless, we suspect that domestic concerns will mean that policy in both …
The policy tweaks the Bank of Japan announced today are mainly aimed at ensuring that the existing volume of asset purchases can be maintained rather than constituting a genuine expansion in stimulus. But we think policymakers will come under pressure to …
Our decent forecasting performance in 2015 means we are not too worried by some of our forecasts for 2016 being very different to the consensus. Our big success this year was accurately forecasting the sharp weakening in both the Australian and New …
Today’s decision by Taiwan’s central bank (the CBC) to cut its main policy rate by 12.5 basis points to 1.625% reflects concern over the current weakness of the economy. Looking ahead, we are optimistic that growth will start to pick up soon, which should …
17th December 2015
Emerging market (EM) growth remained fairly stable in October, as it has for much of the year. Looking ahead, we expect EM growth to pick up a touch in 2016, even as the Fed tightens monetary policy. … EM growth steady as Fed starts to …
It now seems likely that the US will relax its restrictions on oil exports before the end of the year. However, the impact on prices should be negligible given the US’s continuing need to import oil and the still limited opportunities for US producers to …
Bank Indonesia (BI) kept its key policy rate on hold today at 7.50%, but dropped the clearest signal yet that an interest rate cut is not far away. We are maintaining our view that the central bank will cut rates early in 2016. … Bank Indonesia to cut …
The positive reaction of many riskier assets to Fed “lift-off” supports our view that they will perform well in 2016. … Will markets continue to react well to Fed rate …
The US Fed’s decision to finally press ahead and raise interest rates yesterday begged the question ofwhether the MPC will quickly follow suit. However, in the near term, the only British mention of “liftoff” is likely to be in relation to astronaut Tim …
The muted responses in commodity markets to the first hike in US interest rates since 2006 are atribute to the clear communications of the Fed and, in our view, largely justified. Looking forward, though, we continue to expect rates to rise further in …
The recent resurgence in activity in both Australia and New Zealand is not the start of a sustained period of strong GDP growth. While the near-term outlook has improved, GDP growth in both economies won’t accelerate in 2016 from about 2.3% in 2015. The …
The Norges Bank left monetary policy unchanged today, but with growth slowing and inflation set to fall, interest rate cuts look highly likely next year, starting at the next policy meeting in March. … Norges Bank signals rate cuts next …
