Filtered by Topic: Monetary Policy Use setting Monetary Policy
The UK economy appears to be regaining a little momentum, but the nature of the recovery is looking quite unbalanced. The breakdown of Q3’s 0.5% quarterly rise in real GDP showed solid growth in domestic demand, but a 1.5 percentage point drag from net …
3rd December 2015
And so another year of rock bottom interest rates is set to pass us by. It is getting on for seven years since interest rates reached 0.5% and it is over eight years since we saw an interest rate rise. So will 2016 be the year in which rates finally rise? …
The European Central Bank’s failure to meet the expectations for further policy loosening fuelled by its own dovish signals has dented both its reputation for communication and, more importantly, the outlook for the euro-zone economy. … ECB fails to live …
The jump in Turkish inflation to a much higher than expected 8.1% y/y in November reinforces our view that the central bank will be forced to hike interest rates over the coming months. … Turkey CPI …
The Reserve Bank of New Zealand will probably cut interest rates by 0.25%, from 2.75% to 2.50%, at the policy meeting on Thursday 10th December. What’s more, and despite the release of some positive economic news since the Board last met, we believe that …
The Bank of Canada’s decision to leave its policy rate at 0.50% today was as expected given that the economy returned to positive growth in the third quarter. Although it believes economic growth will accelerate next year and is neutral on the interest …
2nd December 2015
While monetary policy looks set to start moving in opposite directions in the US and euro-zone very soon, no change looks likely in the UK in the near future. Sterling is therefore likely to be caught in the crossfire, keeping the trade-weighted index …
An expansion of the QE programme tomorrow would probably require some changes to ECB rules. But we do not think that this will be enough to deter the Bank from implementing more stimulus. … Current QE rules won’t stop the …
Having contracted in 2015, we expect the economy of Emerging Europe to return to growth in 2016. This will be driven in large part by an improvement in conditions in the region’s largest economy, Russia, which should exit recession over the coming …
1st December 2015
We got close to finally seeing some action from the Bank of England today. But in the event, the latest Financial Stability Report only prepped the ground for action from the Financial Policy Committee (FPC) further ahead. What’s more, it’s clear that the …
The Reserve Bank of India (RBI) kept its repo rate on hold at 6.75% today and, rather than just being on pause, we maintain our view that the loosening cycle is now at an end. … RBI holds rates, loosening cycle now at an …
The Swiss GDP release revealed that growth stalled in Q3 and November’s manufacturing PMI points to worse to come. This raises the likelihood that the Swiss National Bank (SNB) will increase its policy support in the coming months. … Swiss GDP (Q3 …
The broad money supply is growing steadily and the growth of credit to nonfinancial companies has been recovering in recent months. With bond yields still very low and several central banks likely to loosen policy over the coming year, monetary conditions …
30th November 2015
The smaller-than-expected 25bp hike in Colombia’s benchmark interest rate, to 5.50%, suggests that policymakers are starting to worry about the impact of tighter monetary policy on the economy. But, with inflation likely to continue rising over the coming …
The evidence suggests that the economy stumbled at the end of the third quarter, casting doubt about its capacity to survive the worsening oil price collapse. With non-exports misfiring and business confidence and investment tepid, we wouldn’t bet on any …
27th November 2015
For all the talk of a sharp slowdown in Asia, regional growth remains remarkably stable. That said, there are still no signs of recovery, with exports again acting as a drag on growth in the third quarter, and consumers still unwilling to spend their …
We could finally see some policy action from the Bank of England next week – but not in the form of a tightening in monetary policy. The Financial Policy Committee (FPC) may flex its muscle by using some of its macroprudential tools to keep a check on the …
Even though the recent comment by the Reserve Bank of Australia Governor that everyone should “chill out” was clearly said in jest, it looks a little misplaced when we have since found out that capital expenditure is falling off a cliff. The absence of …
The question is not whether the ECB’s Governing Council will loosen monetary policy at its meeting on December 3rd, but rather whether it will do so decisively enough to meet the very strong expectations stoked up by its own dovish signals. Anything less …
26th November 2015
The latest comments from Chairman Thomas Jordan suggest that the Swiss National Bank will act decisively to limit franc strength, including through further direct intervention in FX markets. But we doubt that it will be able to prevent some appreciation …
After many delays we think the US Fed will – finally – raise rates in December. However, the global easing cycle is likely to continue next year,for several reasons. Underlying inflation in Japan and much of Europe is set to stay well below central bank …
The raft of preliminary GDP data published over the past month showed that the slump in regional growth bottomed out in the third quarter of this year. We estimate that, in aggregate, GDP in Emerging Europe contracted by 0.5% y/y, a better outturn than …
The fact that Japan’s main trade union federation says that it will not demand stronger pay hikes in the upcoming wage negotiations than it did last time around provides another reason to think that the Bank of Japan will struggle to lift inflation. We …
US high-yield corporate bonds have performed poorly in November amid concerns over the renewed fall in commodity prices and the prospect of tighter US monetary policy. Looking ahead, we do not think that this performance will continue, even if the Fed …
25th November 2015
At first glance, there would appear to be an inconsistency between our forecast that the trade-weighted dollar will increase by a modest 2% next year, while at the same time we also expect short-term interest rates to increase by about 75 basis points …
Being long of the dollar is reportedly one of the most crowded trades in the market. However, we stillthink that the US currency has further to climb against other majors. Indeed, we now expect the euro tofall below parity no later than the middle of next …
We expect the economic downturn in Latin America to bottom out towards the turn of this year and conditions to improve in 2016. However, the recovery will be slow-going and uneven. For a start, the lagged effects of currency weakness will keep inflation …
We expect the Bank of Canada to hold its key interest rate 0.50% next week and remain neutral on the direction of its next potential move. While highlighting the further slide in oil prices as a greater downside risk to the economy, the Bank’s abiding …
The war of words between Bank Indonesia (BI) and the government is heating up after the country’s vice president, Jusuf Kalla, earlier this week renewed its call for the central bank to cut interest rates to support growth. BI sets monetary policy …
The prospect of a historically large divergence between US and euro-zone monetary policy looks set to push the euro below parity versus the US dollar for the first time since late 2002. … Historic policy split to push euro below …
The Reserve Bank of India has cut policy rates by 125bp so far this year, but there are a number of reasons to think that it will keep the repo rate on hold not just at next week’s policy meeting but throughout 2016. In particular, the RBI faces a tough …
Weaker-than-expected Mexican inflation in the first half of November underscores the lack of price pressures in the economy. This reinforces our view that the central bank is likely to raise interest rates more gradually than markets expect, even as the …
24th November 2015
The Central Bank of Nigeria cut its key policy rate in a surprise move today, the latest signal that Governor Emefiele sees slow growth, rather than the slow-burning balance of payments crisis, as Nigeria’s key economic challenge. The Bank’s …
The Turkish central bank left interest rates on hold today, but given the economy’s exposure to Fed tightening and with inflation set to rise even further, rate hikes look likely over the coming months. … Rate hikes looming in …
The flow of positive economic news since the last Reserve Bank of Australia (RBA) meeting makes it a sure bet that the RBA will leave rates on hold at 2.0% for the seventh consecutive month when the Board meets on Tuesday 1 st December. The likelihood of …
The 271,000 surge in non-farm payrolls last month puts to rest fears that the earlier slowdown could be the start of a worrying downturn. The decline in the unemployment to 5.0% in October leaves it at the lower bound of the Fed's estimated range for the …
23rd November 2015
We believe that the recent strength in the Bank of Japan’s new core inflation measure reflects the lagged pass-through to prices of the weaker yen rather than a pick-up in domestic price pressures. But import price inflation has slowed sharply lately, so …
The rise in credit spreads this year has been interpreted by some as a signal that the corporate sector is dangerously over-leveraged. At an aggregate level we can find very little evidence of this, however, with any potential problems restricted to a few …
20th November 2015
Central banks across the world’s frontier markets are preparing themselves as the US Federal Reserve finally moves toward its first rate hike in nine years. Central bankers in Angola, Ghana, Zambia, Mozambique, Trinidad & Tobago, and Argentina have all …
It goes without saying that the loss of life and the social impact of the Paris attacks dwarf any consideration of their economic consequences. But we doubt that the near-term economic impact will be major. Similar tragedies in Madrid and London had only …
Over the past month central banks in South Africa, Ghana, Zambia, and Mozambique have all hiked interest rates. These countries’ domestic situations all vary, but each is facing a combination of high inflation and a weakening currency. The Ghanaian cedi …
The parts of Asia that were hardest hit during the 2013 “Taper Tantrum” have seen their current account deficits fall back, or even disappear, over the past couple of years. This should make them less vulnerable to any negative shifts in investor …
The SARB’s decision to hike its key interest rate from 6.00% to 6.25% showed that the Bank is alarmed at the prospect of persistently high inflation in the context of disappointing growth. The prospect of impending Fed tightening will have also played a …
19th November 2015
The main significance of today’s announcement by the People’s Bank (PBOC) that it is cutting standing lending facility (SLF) interest rates is that it is experimenting with a new monetary policy framework. This shift in itself does not constitute monetary …
The slump in commodity prices over the past year has meant central banks in net commodity exporting and importing countries have continued to follow different paths. Despite the hit to growth from lower export revenues, policymakers in big commodity …
The positive reaction by investors to the minutes from October’s FOMC meeting supports our view that emerging markets (EM) will fare relatively well in 2016/17 as US interest rates are raised. We expect equities to outperform those in the developed world …
While the Bank of Japan does not seem to be overly concerned about the recent weakness in activity, we think price pressures will moderate in coming months as spare capacity has risen. Accordingly, we still think that more monetary easing will eventually …
Recent suggestions that Italy has gained the most from QE paint a pretty bleak picture of the policy’s effectiveness. As it happens, we are not convinced that Italy has been the biggest winner. Either way, more needs to be done to support growth and raise …
18th November 2015
South African inflation accelerated to 4.7% y/y in October in what we believe is the beginning of a sharp inflationary spike. While tomorrow’s rate decision will be close, we expect that the SARB will hike interest rates by 25bp. … South Africa Consumer …
