Filtered by Topic: Monetary Policy Use setting Monetary Policy
We held two online Drop-In sessions today to discuss the outlook for 2024 and the risks to our forecasts. (See a recording here .) This Update summarises the answers to several of the questions that we received. Are there recessions coming in advanced …
5th December 2023
Overview – India’s economy has grown at a healthy clip over recent quarters and, with the help of government spending, we think it will continue to hold up well ahead of next year’s general election. Given also that food inflation has picked up again, the …
Overview – With higher interest rates taking longer to percolate through the economy, we now think the recession will be shallower and GDP growth will stay weak throughout all of 2024. It’s a softer landing for the economy, but the runway is longer. And …
Given the high bar for further rate hikes, we’re more confident than ever that the Reserve Bank of Australia is done tightening policy. That said, there is a good chance that the cash rate will remain at its cyclical peak for longer than we currently …
RBA is done hiking rates Although the RBA won’t tighten policy any further, there is a good chance that the Bank will hold the cash rate at its current peak for longer than we anticipate. The RBA’s decision to leave rates unchanged at its meeting today …
Our view about relative economic and interest rate prospects in Sweden and the euro-zone suggests that the Swedish krona’s recent rebound may prove durable. In fact, given how far below “fair value” it appears to us, we think that the krona will rise …
4th December 2023
Overview – Following a strong 2023, GDP growth is set to slow towards potential next year and the labour market will tread water for now. However, with the virtuous cycle between consumer prices and inflation set to gain momentum, we expect the Bank …
Argentina: signs of more orthodox shock therapy There have been two key developments in Argentina this week that give a sense of what President-elect Javier Milei’s policy agenda will look like. First, the confirmation that Luis Caputo will become economy …
1st December 2023
Investors increased their expectations for interest rate cuts by the ECB after November’s soft euro-zone inflation print this week, but in parts of Central and Eastern Europe (CEE) the latest developments suggest inflation will take a lot longer to fall …
In light of the inflation and activity data released this week we are bringing forward our forecast for the start of the ECB’s rate cuts from September to June next year. And we now think the deposit rate will come down from 4.0% currently to 3.0% by the …
The prospect of earlier interest rate cuts in the US and the euro-zone has led to a sharp fall in US and euro-zone government bond yields this week. 10-year US Treasury and German Bund yields have fallen by 15 and 22 basis points (bps), to 4.32% and 2.43% …
Ramp up in fiscal support yet to be fully felt Government borrowing has been strong ever since the Politburo called for an acceleration in bond issuance at its July meeting. Momentum has been sustained by a rare mid-year increase in the deficit target …
Revising up our GDP forecasts The activity data this week confirm that India’s economy is rude health. The GDP data for Q3 (Q2 of FY23/24) showed a slowdown in both y/y and q/q, but this was very mild and the bigger picture is that the pace of growth …
Consumption falling but labour market tightening The October activity data were a mixed bag. While industrial production rose by 1% m/m, firms’ forecasts for the next couple of months were weak and point to a stagnation in output across Q4 following …
GDP contracted in the third quarter and there are downside risks to the outlook. As house prices are falling again, household debt is elevated and high interest rates are still feeding through, the key risk is that the mild recession we forecast could …
30th November 2023
Our View: We are more dovish than investors regarding the amount of rate cuts that the Fed – and several other DM central banks – will deliver next year. As a result, we forecast that Treasury yields will fall further over the next year or so, putting …
Economic strength and latest jump in food prices suggest no change in policy next week RBI will be reluctant to loosen too quickly given persistent food inflation threat We now think that rate cuts won’t materialise until second half of next year We …
In this Global Economics Update , we describe eight of the biggest risks to our economic forecasts for 2024. The unusual nature of this cycle and uncertainties surrounding the transmission of monetary policy mean that the biggest risks relate to central …
The key indicators that have usually convinced the Bank of England to cut interest rates suggest the first cut could come in Q1 2024. That said, rates have risen to a lower peak than most models suggest, which implies they need to stay higher for longer …
Disinflation process entering a slower phase The small fall in Polish inflation to 6.5% y/y in November is likely to mark the start of a slower phase for the disinflation process over the coming months. Against this backdrop, we think the central bank …
The Bank of Korea (BoK) today left its policy rate unchanged (at 3.5%) for a seventh consecutive meeting, and hinted that interest rates would remain elevated as it continues to clamp down on inflation. While we think interest rates will be left on hold …
On hold again, rate cuts in Q2 next year The Bank of Korea (BoK) today left interest rates unchanged (at 3.5%) for a seventh consecutive meeting. The decision came as no surprise and was correctly predicted by all 36 economists polled by Reuters, …
Economic growth and inflation both weaker than Bank expected Bank likely to tone down, or even drop, its tightening bias Policy rate to be cut by much more than markets expect in 2024 The second consecutive month of muted core inflation pressures in …
29th November 2023
The falls in the Egyptian pound over the past year have increased the size of commercial banks’ net FX assets, but what has flown under the radar is banks’ growing exposure to the government’s FX debt. So long as the authorities get the IMF deal back on …
The Bank of Thailand (BoT) today left interest rates unchanged (at 2.50%) and hinted that rates are likely to be left on hold for the foreseeable future. With inflation below target and the recovery likely to disappoint, we expect interest rates to remain …
In much of the world, interest rates are likely to settle at higher levels than was the case prior to the pandemic. But China is a key exception, with its shrinking population, slowing productivity gains, low inflation rate and increasingly-heavy debt …
Bullock has continued to sound hawkish, leaving the door open for another rate hike Trimmed mean inflation still stubbornly high, but set to slow further Bank’s next move will be a rate cut, perhaps as early as Q2 next year We expect the Reserve Bank …
This page has been updated with additional analysis since first publication. RBNZ will cut rates in the second half of next year While the RBNZ signaled that it could hike rates further, we still think that the tightening cycle is now over and that the …
Economic growth across Sub-Saharan Africa is likely to pick up in 2024, but a challenging external environment means that balance of payments positions will remain under strain and fiscal and monetary policy will need to stay tight. Our GDP growth …
28th November 2023
The rebound in the activity data in November has convinced investors that the first interest rate cut will happen later, in August next year instead of June. Our view that core inflation will ease only slowly explains why we think interest rates won’t be …
After a sharp slowdown this year, GDP growth across the Middle East and North Africa will improve in 2024 as OPEC+ starts to reverse recent oil output cuts, while fiscal policy in the Gulf remains supportive. Outside of the Gulf, balance of payments …
This page has been updated with additional analysis since first publication . Fall in headline inflation keeps another 50bp cut on the cards The decline in inflation in Brazil to 4.8% y/y in the middle of November means that – barring a major surprise in …
China’s economy is making headway again after stalling during the summer. A step up in policy support looks set to deliver a modest cyclical recovery but trend growth remains under pressure. … China Chart Pack (Nov. …
Central bank in “wait and see” mode Israel’s central bank left interest rates on hold at 4.75% again today and the communications continued to emphasise risks to the inflation outlook. But policymakers provided the first hint that an easing cycle could be …
27th November 2023
Following a temporary reversal in Q3, EM inflation has started to fall again in the last few months. While this is set to continue, we think it marks the start of a second phase in the EM disinflation process – one that will be characterised by a much …
Soft growth, falling inflation, lower interest rates, bond market rallies, and an election bonanza – here are the key themes that will shape 2024. Growth will undershoot the consensus. Economic growth is likely to be weaker than the consensus expects …
The recent period of high inflation in Japan has kick-started a virtuous cycle between wages and prices. If inflation expectations remain elevated and structural forces push up the neutral rate of interest over the coming years, monetary policy will …
Zambia and Angola hikes, Nigeria resists High inflation is pushing some African economies to return to monetary tightening but Nigeria has resisted so far. We doubt this will last. Inflation rose again in Nigeria, Angola and Zambia last month as currency …
24th November 2023
The S&P Global PMIs have provided misleading signals about the strength of activity in the US and Europe this year. But, for what it’s worth, the flash surveys for November suggest that DMs are ending 2023 on a weak note, with activity stagnating or …
It would be a stretch to say the government showed fiscal restraint in the Fall Economic Statement , but the announcement of only a few billion dollars in extra spending measures means that Finance Minister Chrystia Freeland did not pour much more fuel on …
CBRT bringing tightening cycle to a close Turkey’s central bank (CBRT) delivered another chunky 500bp rate hike to 40% this week but it also signalled that its tightening cycle was very close to an end. The local elections in March may be playing a part …
Strong Q3 growth Most countries in Emerging Asia have now published GDP figures for the third quarter. Growth slowed in China, was unchanged in Korea, but rebounded strongly everywhere else. (See Chart 1.) To view our various responses click here . …
Surveys point to renewed slowdown in inflation Following a rather hawkish speech by Reserve Bank of Australia Michele Bullock, the financial markets now price in a 60% chance of another 25bp rate hike at the Bank’s February’s meeting, up from 40% before …
Tensions within OPEC+ rise as threat of cut looms OPEC+ was meant to be in the spotlight this weekend but, in a surprise move, the meeting has been delayed until Thursday. The slide in oil prices and the Israel-Hamas conflict suggest that output quotas …
23rd November 2023
Our latest monthly Drop-In on the big macro and market stories in Asia focused on new analysis making the case for Japanese inflation and the Bank of Japan policy rate both to hit 2% by 2030. We also discussed the outlook for China in 2024 and previewed …
India’s economy continues to show resilience this year and annual GDP growth is likely to come in stronger than the 6.3% we had been forecasting. While inflation is well within the RBI’s tolerance range, the renewed surge in food prices in November is a …
A year of the most aggressive monetary tightening in a generation is expected to end with the major DM banks leaving rates on hold at their December meetings. Following our briefings on the world in 2024 , our senior economists will be held a special …
This page has been updated with additional analysis since first publication . High services inflation will stop Banxico from cutting for now Mexico’s mid-month inflation reading of 4.3% y/y in November provides signs that the disinflation process is …
