Filtered by Topic: Monetary Policy Use setting Monetary Policy
Brazil’s communication problems The minutes to last week’s central bank meeting in Brazil again presented a somewhat different picture to the statement accompanying the decision itself. Whereas the statement was largely unchanged from the previous one, …
29th September 2023
MNB and CNB continuing to toe a hawkish line The Hungarian and Czech central banks maintained fairly hawkish communications at their meetings this week, but we still think that interest rates will fall sharply in both countries by mid-2024. The Hungarian …
Softer inflation print raises the chance of another rate cut The sharper-than-expected decline in Polish inflation to 8.2% y/y in September raises the chance of another interest rate cut by the central bank at its meeting next week but, at this point, we …
MPC to keep rates on hold next week as recent spike in vegetable prices fades But food inflation threat is not over yet Severe El Niño could push back start of easing cycle from early 2024 We agree with consensus expectations that the MPC will keep …
Sustainable 2% inflation coming into sight The minutes of the Bank of Japan’s July meeting revealed that Board members had a lively debate on the outlook for inflation and monetary policy. One member noted that “close attention was warranted on the risk …
Economic data flash mixed signals The big news out of Australia this week was the strong rise in consumer prices in August. Moreover, with underlying price pressures showing few signs of relenting, we’ve revised up our forecast for the RBA’s terminal cash …
The drivers of Brazil’s recent period of rapid growth seem to be the subject of a heated debate at the central bank – and policymakers’ conclusions will play a big role in determining the pace and scale of the easing cycle. For our part, we think the key …
28th September 2023
We suspect the pound will fall from $1.22 now to $1.20 by the end of this year. That’s not due to lower interest rate expectations in the UK compared to the US or the euro-zone, as we think the UK will be the last to cut rates. Instead, it’s due to the …
The direct hit to the economy from even an extended government shutdown beginning next week would be modest. But it could also result in delays to key data releases, including the September employment and CPI reports due over the next couple of weeks. At …
We think the “higher-for-longer” narrative that has taken hold in the market won’t last through 2024. We suspect that central banks will generally cut faster than investors seem to expect and that, as a result, the bond market sell-off will turn into a …
Click here to read the full report. Overview – Russia and Turkey have outperformed the rest of the region this year amid support from loose policy, but both economies look set for a slowdown in 2024 while recoveries take shape across Central and Eastern …
Brazil and Mexico will outperform others in the region this year, but that’s likely to flip on its head in 2024 as they slow – and by more than most expect – while the Andean economies recover. Central banks across the region will continue to lower …
Nigeria’s policy shift has stalled in recent weeks as officials have responded to a growing political backlash by reverting to the interventionist tendencies of the Buhari administration. The result is that the naira has plunged on the parallel market and …
China’s economy is regaining some momentum 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 (Sep. …
After a sharp slowdown this year, GDP growth across the Middle East and North Africa will improve in 2024 as OPEC+ starts to raise its output quotas and high oil prices allow the Gulf economies to keep fiscal policy supportive. Outside of the Gulf, …
Overview – 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 …
27th September 2023
Strong immigration and the resilience of the housing market raise the chance that the economy will avoid recession but, with the Bank of Canada keeping further rate hikes on the table, we still judge that GDP will contract later this year. Even if …
This page has been updated with additional analysis since first publication. Easing cycle just around the corner The Czech National bank (CNB) left interest rates on hold again at 7.00% at today’s meeting, but we still think that an easing cycle will …
Overview – 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. Lower energy prices and improved global supply chain conditions should keep headline inflation on a …
Emerging Asia Chart Pack (Sep. 2023) …
Activity is holding up better than expected, while disinflation is stalling Another 25bp rate hike now seems more likely than not Policy easing pushed back to mid-2024 Stronger-than-expected GDP and inflation data should cement the case for the RBA to …
Overview – China’s economy is regaining some momentum after stalling for a brief period during the summer. A step up in policy support looks set to deliver a modest cyclical recovery but trend growth remains under pressure. Consumer Spending – …
The latest euro-zone money and credit data show that tighter ECB policy is continuing to weigh on households’ and firms’ borrowing, as well as influencing what they do with their savings. The weakness in money and lending growth supports our view that the …
Final hike of the cycle The Bank of Thailand (BoT) today raised interest rates by a further 25bps (to 2.50%), but hinted this was likely to be the last hike of the cycle. With inflation below target and headwinds to the economic recovery mounting, we …
This page has been updated with additional analysis since first publication. Resurgent price pressures raise risk of tighter policy With Australia’s disinflationary process stalling, there’s a growing risk that the Reserve Bank of Australia will resume …
The Hungarian central bank (MNB) delivered another 100bp interest rate cut (to 13.00%) and simplified its monetary policy toolkit at today’s meeting, paving the way for the second phase of the easing cycle in the coming months. The hawkish tone of the …
26th September 2023
Overview – We expect another few quarters of near-zero GDP growth to lead to an annual gain of just 0.7% next year. Even with higher oil prices, the weakness of economic growth leaves scope for CPI inflation to fall back to the 2% target in 2024. That …
This page has been updated with additional analysis since first publication . Inflation data and minutes pour cold water on hopes for larger rate cuts The jump in Brazilian inflation to 5.0% y/y in the first half of September, taken together with the more …
Entering the second phase of the easing cycle The Hungarian central bank’s (MNB’s) decision to cut the top of its interest rate corridor, by 250bp, today is a first step in what is likely to be a shift in the monetary policy framework that will be …
The sharp slowdown in broad money growth since late last year suggests that higher interest rates are working by reducing households’ and firms’ demand for borrowing, which should lead to softer activity and lower inflation. This supports our view that a …
RBNZ to reassert its tightening bias as activity surprises on the upside Given the noise in the recent data, we don’t expect further rate hikes However, policy will remain restrictive for longer, with rate cuts only in Q3 2024 Although economic activity …
Overview – After a sharp slowdown this year, GDP growth across the Middle East and North Africa will improve in 2024 as OPEC+ starts to raise its output quotas and high oil prices allow the Gulf economies to keep fiscal policy supportive. Outside of the …
25th September 2023
Overview – GDP growth across most of Emerging Asia has struggled over the past year and we expect growth to remain weak in the near term as tight monetary policy at home and subdued activity abroad weigh on demand. Next year should be a little better, but …
Given clearer signs of economic weakness in recent weeks, we think the surprise increase in underlying inflation pressures in August means the Bank of Canada is more likely to keep interest rates at their current level for longer than to raise rates …
The abandonment of Yield Curve Control would probably prompt the Bank of Japan to reduce its bloated holdings of government bonds, which could push up long-term bond yields. However, there are good reasons to think that the fiscal consequences wouldn’t be …
Nigeria's fuel subsidy unexpectedly returns The recent pick-up in oil prices will provide welcome hard currency income for Nigeria. But high oil prices and a weak naira also signal the return of the fuel subsidy. As a major oil exporter, Nigeria benefits …
22nd September 2023
Brazil’s services inflation: how soft? The big economic event this week was the central bank meeting in Brazil on Wednesday at which the Selic rate was lowered by another 50bp (to 12.75%). As we noted in our response , the key messages in the statement …
The September Flash PMIs add to evidence that economic activity in the US and Europe is weakening. This supports our view that the Fed, ECB, and Bank of England have finished hiking interest rates. Our estimate of the DM average composite PMI edged down …
This week’s news that interest rates are probably at their peak (see here ) and the news that public borrowing in the current fiscal year is £11bn below the Office for Budget Responsibility’s forecast has raised the pressure on the Chancellor to deliver …
We do not expect the recent rise in oil prices to cause the ECB to hike rates, as the impact on headline inflation will be limited. Since the end of June, the Brent crude oil price has risen by almost 30% to around $94pb, predominantly due to cuts in …
Poland-Ukraine relations show some cracks The dispute that escalated this week between Poland and Ukraine shows how Poland’s ruling PiS party is hoping to capitalise on nationalism, and public fatigue over the war, ahead of elections next month. Poland, …
The new projections published by the Fed this week signalled that officials are fully onboard with the idea of interest rates staying ‘higher for longer’, but that is based on forecasts for real economic growth and inflation which we believe are …
We held a Drop-In yesterday to discuss the latest policy meetings of the Fed, ECB, and Bank of England and what they might mean for the future path of policy and financial markets. (See the recording here .) This Update answers several of the questions …
Although EM growth held up well in H1, growth will disappoint over the coming quarters. Recent upside inflation surprises have pushed back the timing of rate cuts in some places, but we expect the EM monetary easing cycle to broaden out in H2. Strong wage …
Loose fiscal policy to support Thai growth Thailand’s new government this week unveiled a budget for fiscal year 2024 (Oct. 2023 – Sep. 2024) which envisages a significant loosening of policy. The centrepiece is a 10,000 baht (US$275) cash handout to all …
Higher inflation lowering deficit and debt/GDP Even though inflation excluding fresh food and energy remained stubbornly high at 4.3% in August, the Bank of Japan didn’t drop any further hints that it might tighten policy anytime soon at its meeting …
The Bank of Japan still sounded dovish when it kept policy settings unchanged today. But with inflation proving stickier than expected, we expect the Bank to lift its policy rate in January and have pencilled in the full-fledged dismantling of Yield Curve …
Overview – Both economies have dodged a recession so far, but we still consider it more likely than not that output will shrink across the second half of the year. With inflation softening and labour markets loosening, both central banks are done hiking …
Negative rates will end in early-2024 The Bank of Japan didn’t provide any hints that it will abandon loose monetary policy anytime soon when it kept policy settings unchanged today, but Governor Ueda may do so later today. We think the Bank will lift its …
