Filtered by Topic: Monetary Policy Use setting Monetary Policy
Recent currency falls and higher oil prices are unlikely to put significant upward pressure on consumer prices across Asia. We continue to expect inflation in the region to remain low over the coming year. Consumer price inflation has fallen back sharply …
22nd April 2024
The past few weeks have brought a flurry of data and speeches from central bankers. What have we learned about the health of the global economy and the outlook for monetary policy? It’s important not to place too much weight on a single data point, …
Bank will probably revise up its inflation forecasts at upcoming meeting Ueda sounds keen on another rate hike However, window for tightening is closing as underlying inflation set to fall below 2% Governor Ueda sounds keen in tightening policy further …
Will the naira’s rebound last? The sharp recovery in the naira in recent weeks has been somewhat of a surprise and it has come at the expense of a steep decline in FX reserves. Without substantial improvements in the current account position or capital …
19th April 2024
Currency falls another headache for central banks The reassessment of interest rate expectations in the US combined with tensions in the Middle East has put substantial downward pressure on EM currencies this week, with some in Latin America hit …
Note: We’ll be discussing the outlook for monetary policy in the euro-zone in a Drop-In on Thursday, 25th April. Register here for the 20-minute online briefing. The financial news this week has been dominated by the potential impact of the Middle …
Worries about the currency Bank Indonesia is the only central bank in emerging Asia that has a mandate to ensure currency stability. It surprised markets (and us) when it raised interest rates to support the rupiah at its October meeting. With the …
In the previous Weekly we said “the risks are tilted towards inflation proving sticker and rate cuts happening a bit later”. This week’s global and domestic events have left our forecast that interest rates will first be cut from 5.25% in June and will …
RBNZ to watch and wait for longer On Wednesday we learnt that inflation in New Zealand moderated from 4.7% in Q4 to 4.0% in Q1. At first glance, that outturn was only a touch stronger than the 3.8% the RBNZ had predicted. However, the details of the CPI …
Investors are no longer pricing in a 50bp interest rate cut at the Brazilian central bank meeting next month, despite the forward guidance at the March meeting signalling such a move. While we think it’s too early to throw in the towel on a 50bp cut, a …
18th April 2024
The recent upturn in activity and employment growth and the resilience of core inflation suggest that the Fed won't start cutting interest rates until later this year. But although it is taking a little longer than expected, we still believe that core …
On the face of it, core disinflation seems to have stalled or even reversed in the US but not in Europe, suggesting that Fed cuts will come much later than those by the ECB and BoE. However, there are definitional issues at play that exaggerate the recent …
Aggregate EM GDP growth will enter a slower phase over the coming quarters. But the headline figure masks large variation in prospects at a country level, with many EMs experiencing a reversal of last year’s fortunes. While we expect the EM monetary …
The first Fed rate cut of this cycle is now looking like a second-half event and EM investors – and policymakers – are having to adjust to the delay. EM currencies have weakened as fears about policy constraints have spread, but how vulnerable are these …
Today’s UK CPI release has not made a sustained impact on investors’ expectations over the path of Bank Rate, and the market pricing implies that investors are still discounting fewer cuts from the Bank of England (BoE) than we are. This is why we expect …
17th April 2024
The recent bout of EM currency weakness may prompt (further) FX intervention, particularly in Asia, to stem currency volatility. Turkey’s central bank is likely to hike rates at its meeting next week and a hike is also now on the table at the Bank …
This page has been updated with additional analysis since first publication. Upside surprise, but big drop to below 2% still coming in April The smaller-than-expected fall in CPI inflation from 3.4% in February to 3.2% in March (BoE and consensus 3.1%, CE …
This page has been updated with additional analysis since first publication. Upside inflation surprise raises “higher for longer” risks Although the Q1 CPI print was a touch stronger than we had predicted, we still expect inflation to return to the RBNZ’s …
As things stand, higher oil prices will boost inflation in advanced economies by only a few tenths of a percentage point in the months ahead and we still expect this boost to fade as the year goes on. There are upside risks relating to tensions in the …
16th April 2024
The ECB looks set to cut rates in June, reducing the deposit rate from 4% to 3.75%, and we think it will follow that up with rate reductions at every remaining meeting this year . The pace of cuts might slow next year as policymakers feel their way …
The resilience of Swiss GDP over the past two years has been largely due to the merchanting sector, which buys and sells goods without them ever entering Switzerland. Excluding that sector, the economy was smaller at the end of 2023 than it was two years …
Local factors will determine the next moves by most of Asia’s central banks, not the actions of the US Fed. We expect policymakers in Thailand, Vietnam, the Philippines and Korea to lower interest rates later this year, regardless of whether the Fed cuts. …
Our analysis shows that for CPI inflation to get stuck above 2.0% it would require oil prices and UK wholesale gas prices to rise to $110 per barrel and 150 pence per therm respectively. And for CPI inflation to return to 5.0%, it would require increases …
15th April 2024
The drone attacks by Iran on Israel overnight mark a new and potentially significantly more dangerous phase in troubles in the region. The key risks for the global economy are whether this now escalates into a broader regional conflict, and what the …
14th April 2024
The third consecutive 0.4% m/m increase in core CPI in March, coming on the heels of the 303,000 surge in non-farm payrolls, fuelled fears that a pick-up in the real economy is now translating into a resurgence in inflation too. We are not convinced. …
12th April 2024
Finance Minister Chrystia Freeland’s pledge to create the conditions needed for lower interest rates means the government is unlikely to announce much new near-term spending in Budget 2024 next week. Providing that core inflation pressures remain muted, …
Strong US CPI puts further pressure on the RMB The stronger US CPI print on Wednesday pushed back expectations for Fed rate cuts. Most currencies depreciated against the US dollar as a result. But, while the offshore renminbi weakened 0.4% on Wednesday, …
Underlying inflation still a cause for concern The common theme from the March CPI data released this week was that headline inflation surprised to the downside in the region’s major economies. But markets and central banks have paid just as much – if not …
Ben Bernanke didn’t pull any punches in his review of the Bank of England’s forecasting/communications and recommended a full revamp of the Bank’s main forecasting model, using alternative scenarios to express uncertainties rather than fan charts and …
Where the US leads, the UK often follows. So the rebound in the US CPI inflation rate from 3.2% in February to 3.5% in March and the unchanged core CPI inflation rate of 3.8% has spurred fears that the downward trend in UK inflation will soon stall. In …
This page has been updated with additional analysis since first publication Credit growth plummets in a further sign of weak demand Bank loan and broad credit growth in China both decelerated sharply in March. (See Chart 1.)While we expect the PBOC to cut …
Bernanke puts the boot in, but doesn’t recommend the BoE projects interest rates Our initial impression (our full analysis is here ) of the changes to the Bank of England’s forecasting and communications recommended by Ben Bernanke is that they would go a …
The main takeaway from Thursday’s ECB meeting is that a rate cut in June is highly likely. Big upward surprises to inflation and wage growth data, or increases in the ECB’s updated inflation projections, would probably be necessary for officials to hold …
Global Economics Chart Pack (April 2024) …
The Bank of Korea left its policy rate on hold today (at 3.5%), but kept open the possibility of rate cuts later this year. However, with inflation concerns continuing to linger, we are pushing back the timing of when we think the central bank will cut …
Markets fret inflation risks The RBNZ’s meeting this Wednesday went by without much ado, with the Bank leaving rates unchanged as everyone had expected. If anything, the Committee sounded a touch dovish, as it no longer mentioned its limited tolerance for …
Yen falling to fresh 34-year low Following a hotter-than-expected US inflation print, the yen has now weakened to 153 against the dollar for the first time since 1990. Bank of Japan Governor Ueda explicitly ruled out responding to the weakness of the …
On hold, early rate cut unlikely With inflationary pressures lingering, the currency falling sharply and expectations of a rate cut by the US Federal Reserve being pushed back, the prospect of an early rate cut by the Bank of Korea (which today left …
The Monetary Authority of Singapore (MAS) kept policy settings unchanged today, as expected, but with the economy set to remain weak and core inflation on track to resume its downward trend soon we think the MAS will loosen policy at its meeting in …
Today’s ECB policy announcement and press conference support our forecast for a June rate cut. Given that we expect more rate cuts than the money market discounts, we think that Bund yields will fall back towards 2.25% by the end of the year. Today’s …
11th April 2024
While inflation fell further across Central and Eastern Europe (CEE) in March, we think that the recent run of good CPI news is largely over. We expect inflation to rise back above central banks’ target ranges in Hungary and Poland by end-2024 (to near …
The ECB’s decision to update its guidance suggests that an interest rate cut at the next meeting in June is very likely. Christine Lagarde would understandably not commit to a path of rate cuts, but we expect the Bank to reduce the deposit rate from 4% …
Updated guidance suggests that June cut is likely The ECB’s decision to update its guidance suggests that an interest rate cut at the next meeting in June is very likely. In the press conference, Christine Lagarde won’t give a clear signal about the path …
Even if the US Federal Reserve leaves its policy rate unchanged for longer than we expect, our forecast that inflation in the UK will be lower than in the US suggests this won’t prevent the Bank of England from cutting rates from 5.25% to 5.00% in June …
Fed looking to slow QT by half from June According to the minutes of the Fed’s mid-March policy meeting “almost all participants judged that it would be appropriate to move policy to a less restrictive stance at some point this year if the economy evolved …
10th April 2024
Governor Tiff Macklem sounded relatively dovish in the Bank of Canada’s press conference today, leaving the door open to an interest rate cut at the next meeting in June. While the Bank left the policy rate at 5.0% today, the policy statement and …
Underlying services prices still providing cause for concern The slightly softer-than-expected Brazilian inflation figure for March of 3.9% y/y keeps the door open to 50bp interest rate cuts at the Copom meetings both next month and in June. But with …
BoT on hold, but cuts likely later in the year Thailand’s central bank (BoT) today resisted pressure from the government to loosen monetary policy, but with growth set to remain weak and inflationary pressures very subdued, we still think rate cuts are …
The Reserve Bank of New Zealand didn’t drop any hints as to when it might pivot to looser policy at its meeting today. However, as inflation risks recede, we still expect the Bank to start cutting rates by August. The RBNZ’s decision to leave rates on …
RBNZ remains on the sidelines The RBNZ didn’t drop any hints as to when it might pivot to looser policy at its meeting today, but we still think that it will start cutting rates by August. The RBNZ’s decision to leave rates on hold at 5.50% was correctly …
