Filtered by Topic: Monetary Policy Use setting Monetary Policy
Almost as fast as gilt yields rose (see here ) they have subsided. After surging from 4.68% on 2 nd October to a 21-year high of 5.11% last Friday, the 30-year gilt yield dropped to 4.72% on Thursday, although it has since ticked up to 4.85% on the back …
13th October 2023
The latest activity and survey data have provided even more evidence that the resilience in activity in advanced economies over the first half of 2023 is now fading. High interest rates are clearly weighing on credit growth, and a further rise in debt …
The Hamas-Israeli conflict has so far had relatively little impact on oil prices but has pushed up European natural gas prices by nearly 30% this week, to €53 per MWh at the time of writing. There has been a small direct impact on the supply of gas as …
Credit growth has stabilised After slowing sharply in Q2, broad credit growth edged up in August and held steady last month. Although a sharp rebound seems unlikely, we do think credit growth could pick up somewhat over the coming quarters, especially if …
The Monetary Authority of Singapore (MAS) kept monetary policy settings unchanged today which was in line with both our and consensus expectations. While another hold is likely in January, further falls in the core inflation rate and weaker growth are …
In contrast to the past few years, when the risks to the euro-zone inflation outlook have been consistently skewed to the upside, those risks now look more balanced. So in this Focus , we explore the downside risks and how the ECB might respond to them. …
12th October 2023
Minutes stress uncertainty over economic outlook Despite the ‘higher for longer’ message from the Fed’s updated rate projections last month, the minutes from the September FOMC meeting suggest that officials’ confidence in those forecasts is limited, with …
11th October 2023
Tightness in Mexico’s labour market continues to fuel wage pressures, with real wages now rising at their fastest pace since the early 2000s. But this isn’t being matched by productivity growth and, in turn, threatens to keep inflation above Banxico’s …
This page has been updated with additional analysis since first publication . Services inflation remains stubbornly strong The further rise in Brazilian inflation to 5.2% y/y probably marks the peak in this mini-inflation cycle and the headline rate …
Headline inflation has jumped across much of Emerging Asia over the past couple of months on the back of rises in food and fuel prices. This won’t prompt central banks to resume tightening (the Philippines is the exception). However, the rise in inflation …
This report has been updated with additional analysis, as well as a chart and table of the key data. Inflation at or close to its peak Egypt’s headline inflation rate picked up from 37.4% y/y in August to a fresh multi-decade high of 38.0% y/y in …
10th October 2023
Fall in inflation increases chances of November rate cut The larger-than-expected fall in Czech inflation in September, to 6.9% y/y, increases the chance of policymakers kickstarting a monetary easing cycle at their next meeting in November. We remain …
Any fall in bond prices resulting from higher bond yields won’t affect the BoJ’s balance sheet unless the Bank decides to sell its holdings. By contrast, rising interest payments on commercial banks’ reserve holdings could create losses, though those …
Central banks in both Australia and New Zealand are likely to retain their hawkish bias in the near term, given that inflation is far from tamed in either country. While we think the RBNZ's tightening cycle is over, we expect RBA to hand down one final …
Welcome to a world of higher interest rates. This in-depth analysis shows you how the structural forces that have weighed on equilibrium real interest rates over the past two decades have faded, and the powerful new drivers that are likely to push them …
9th October 2023
The attack by Hamas on Israel on Saturday has led to widespread casualties and deaths, and the declaration of war by Israel’s prime minister. From an economic perspective, the experience from the 2014 Gaza war suggests that the effects on Israel’s economy …
Our latest Chart Pack on Japan's economy is embedded below. With the economy growing at an above-trend pace, the labour market should soon start to tighten again. There are mounting signs that a virtuous cycle between wages and prices is starting to form …
We expect the euro-zone economy to struggle over the next 18 months, and a mild recession in the coming quarters looks more likely than not. Headline and core inflation should keep falling, but the labour market will remain tight, keeping wage growth …
6th October 2023
Feeling the spillovers… Latin America has been far from immune from spillovers from the sell-off in global bond markets. (For more on the impact on the global economy, see here .) Like in DMs, local currency bond yields in the region have risen sharply, …
Turkey: rebalancing now underway Data releases this week finally provided some signs that Turkey’s inflation and current account problems are starting to ease. Admittedly, inflation continued to rise in September, to 61.5% y/y, from 58.9% in August. But …
Singapore’s struggling economy Singapore’s economy has struggled in recent quarters, and only narrowly avoided falling into recession in Q2. Preliminary GDP figures to be published on Friday are likely to show the weakness continued in the third …
The RBI kept the repo rate on hold at 6.50% today as expected and continued to strike a hawkish tone despite the recent easing in inflation. Indeed, it even raised the possibility of open-market bond sales to drain excess liquidity. There is a significant …
RBI stands firm in fight against inflation The RBI kept the repo rate on hold at 6.50% today as expected and continued to strike a hawkish tone despite the recent easing in headline inflation. There is still a significant risk of the easing cycle that we …
One more hike for good measure On Tuesday new RBA Governor Michele Bullock began her tenure not with a bang but with a whimper, by leaving the cash rate unchanged at 4.10%. What’s more, the statement accompanying the policy decision gave few indications …
Bond market sell-off pushes yen to one-year low The big event this week was the sharp fall in the yen after it breached 150 against the dollar while Tokyo was asleep in the early hours of Wednesday. Government officials have refused to comment on …
Sub-Saharan African central banks are unlikely to follow their peers in other EMs in cutting interest rates soon. With inflation falling more slowly, alongside balance of payment and public debt strains, interest rates will stay high for longer. Nigeria …
5th October 2023
The ‘higher for longer’ narrative on interest rates that is baked into market pricing is at odds with evidence of widespread falls in inflation. Higher oil prices mean that fuel inflation will be a bit higher than seemed likely a few months ago. But the …
NBR holding firm in inflation fight The National Bank of Romania (NBR) kept its main policy rate unchanged at 7.00% today, and we expect policy to remain on hold into next year. The NBR will be the last in Central and Eastern Europe to start cutting …
Rising food prices have already led to upside inflation surprises in parts of Asia, and central banks in the region are likely to ease policy later than their EM peers. But inflation should eventually resume its downward path and, once it does, policy …
We think the yields of 10-year government bonds in Australia, New Zealand and Canada will diverge from the yield of 10-year US Treasuries – which they have tracked very closely this year – over time, with bonds in all three countries outperforming those …
The central bank (CBSL) today cut interest rates by a further 100bps. With inflation low and the economy still very depressed, further easing is likely over the coming months. Today’s 100bps cuts take the lending and deposit rates to 10% and 11% …
The latest activity data from Korea were downbeat. Although industrial production grew strongly, the manufacturing PMIs, along with the export figures and retail sales data, all point to continued weakness. However, with inflation rising again last month, …
The sell-off in bond markets has taken a breather today, helped in part by softer data on the US labour market. However, the scale of the moves over the past week has invoked comparisons to previous financial crises that have been caused by sharp moves in …
4th October 2023
Slowing momentum in activity, the recent decline in employment, and the sharp falls in core CPI and services inflation in August are clear signs that higher interest rates are weighing more heavily on the economy. This strengthens our view that the mild …
NBP cuts again, but rates won’t fall as far as most expect The National Bank of Poland’s (NBP’s) decision to cut interest rates again today, from 6.00% to 5.75%, suggests that the doves are ruling the roost on the MPC, but we think that interest rates …
With its assessment of the balance of risks broadly unchanged, the Reserve Bank of New Zealand left rates on hold at its meeting today. Although the Bank will likely retain its tightening bias, we continue to believe that the official cash rate is at its …
RBNZ’s next move will be down Although the RBNZ will retain its tightening bias, we believe that the official cash rate is at its cyclical peak. All 27 of the analysts polled by Reuters, including ourselves, had expected the Bank to leave the OCR …
Brazil’s monetary easing cycle will probably lead to higher spending in interest rate sensitive areas, such as furniture and appliances, autos and construction materials. But that won’t be enough to prevent overall GDP growth from slowing sharply – and by …
3rd October 2023
Talk of “dollarisation” has recently re-emerged, despite broader moves in the EM world to challenge the hegemony of the US dollar. Indeed, the fact that Argentina is considering adopting the dollar underscores that the greenback will remain the currency …
Note: We discussed the key takeaways from our Q4 Global Economic and Markets Outlooks in a Drop-In on Wednesday, 11 th October. To view the recording Click here . Table of Key Forecasts Global Overview – We think that the now popular assumption that …
Inflation surge starting to cool, but further rate hikes in store The small (by Turkey’s recent standards) rise in inflation to 61.5% last month, from 58.9% in August, provides the first signs that the inflation spike is close to levelling off. But the …
While new RBA Governor Michelle Bullock didn’t spring any surprises at her first interest rate decision today, we think that the Bank will hike interest rates to a peak of 4.35% at its next meeting in November . However, we expect the RBA to pivot towards …
RBA will deliver final rate hike next month While new RBA Governor Michelle Bullock didn’t spring any surprises at her first monetary policy decision today, we think that the Bank will hike interest rates to a peak of 4.35% at its next meeting in …
By putting upward pressure on JGB yields and the yen, tighter monetary policy could lead to falls in the value of bonds and overseas assets held by Japanese investors. Insurance companies and pension funds have the most to lose. However, we do not think …
Markets have been in a febrile mood amid a growing belief that central banks will need to keep interest rates at elevated levels in order to properly throttle inflation. But are expectations that interest rates will remain high misplaced? Does that in …
2nd October 2023
The EM manufacturing PMIs for September were the proverbial mixed bag, but one commonality is that external demand remains fairly soft across the regions. Meanwhile, the further rise in the price components last month probably reflects the jump in oil …
We suspect that before the end of the year, the ECB will announce that it will end PEPP reinvestments before the end of 2024. This would allow the ECB to shrink its balance sheet more quickly and reinforce the message that monetary policy will remain …
Overview – We expect GDP growth to slow from 2.1% this year to only 0.8% in 2024, with the economy still likely to experience a near recession around the end of this year. Core inflation will continue to fall back to the 2% target by mid-2024, with much …
29th September 2023
Economic growth across Sub-Saharan Africa is likely to pick up over the coming quarters, 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 …
