Filtered by Topic: Monetary Policy Use setting Monetary Policy
The Bank of Canada’s 25bp interest rate hike today is unlikely to be the last, with the rapid turnaround in the housing market and concerning underlying inflation dynamics raising the case for at least one more hike in July, to take the policy rate to …
7th June 2023
According to our proprietary interest rate-sensitive indicators, activity in advanced economies has so far proven remarkably resilient to higher interest rates. A lot of this has been due to a rebound in auto sales related to pandemic distortions, whereas …
Bank resumes rate hikes and probably another to come in July The Bank of Canada’s 25bp interest rate hike today is unlikely to be the last, with the rapid turnaround in the housing market and concerning underlying inflation dynamics raising the case for …
What will major advanced economy central banks decide at their June meetings, and how will those decisions be messaged? In this special briefing, Paul Ashworth , Andrew Kenningham and Paul Dales , our Chief Economists for the US, Europe and UK, …
This webpage has been updated with a table and chart of key data Inflation hits multi-year low, but rate cuts still some way off The fall in Brazilian inflation to 3.9% y/y in May, alongside the government’s new fiscal framework, has strengthened the …
More than €1trn of TLTROs will be redeemed over the next eighteen months, significantly reducing euro-zone banks’ liquidity and pushing up their funding costs as they adjust their balance sheets. Banks may also increase their holdings of government bonds …
A version of this report was published as an opinion piece in the Financial Times on Wednesday 7 th June Signs that newly re-elected Turkish president Erdogan is willing to move away from unorthodox economic policies has led to an increase in investor …
In response to the hawkish shift by RBA Governor Lowe and the further acceleration in unit labour cost growth, we now expect the Bank to lift the cash rate to 4.85% by September. That aggressive monetary tightening will push the Australian economy into a …
RBA could be forced to keep hiking into economic downturn Real GDP growth slowed sharply last quarter as household spending ground to a standstill. However, with productivity falling for a fourth consecutive quarter, unit labour costs grew apace. …
NBP remains on pause The National Bank of Poland (NBP) left its main policy rate on hold again today, at 6.75%, and we think that rates will remain unchanged for at least the next few meetings. While we maintain our forecast that interest rates will be …
6th June 2023
The Reserve Bank of Australia lifted the cash rate by 25bp today and the hawkish tone of the statement suggests that the risks to our terminal rate forecast of 4.35% are tilted to the upside. Indeed, we still think that the Bank will cut interest rates …
Optimism about a shift towards more orthodox economic policymaking in Turkey has taken hold following the appointment of Mehmet Simsek to the cabinet this weekend. Recent developments look encouraging but the next big test will be whether President …
5th June 2023
The upside surprise to first-quarter GDP growth means there is a rising probability that the Bank of Canada will raise interest rates again. While the commonly held view seems to be that the Bank will wait until July, the passing of the US debt ceiling …
2nd June 2023
Colombia: baby steps towards sustainable growth Data out this week suggest that Colombia’s economy has started to undergo an adjustment process, albeit a gradual one. In an Update last week, we explained how Colombia’s unsustainably strong recovery had …
Debt ceiling ends not with a bang but a whimper The debt ceiling standoff ended not with a bang but a whimper – as the bill easily passed the House and Senate with comfortable majorities. In the end, the debt ceiling negotiations played out largely as …
Core inflation on its way down? Data published this week showed that euro-zone core inflation fell for the second consecutive month in May. (You can read our response to the data here or watch our Drop-in on the outlook for inflation, ECB policy and …
Revising up our GDP forecast for 2023 The activity data released this week suggest that the economy is holding up better than we had been anticipating. GDP growth accelerated from 4.5% y/y in Q4 2022 to 6.1% y/y in Q1 (Q4 of FY22/23). Based on our …
The latest data suggest that Brazil’s labour market isn’t softening as quickly as we and many others (not least the central bank) had anticipated. That’s keeping wage growth high and, while that may help to support growth in Q2, it will probably deter …
1st June 2023
We think Korea’s inflation fell in May, in line with weaker economic growth (00.00 BST) The US labour market probably loosened further last month (13.30 BST) Watch back today’s Drop-in on the outlook for EM equities on demand here Key Market Themes …
Growing evidence that UK price pressures are becoming increasingly domestically generated has driven up market interest rate expectations and at one point pushed the 10-year gilt yield up to 4.38% in late May, close to its peak seen after the …
MPC to keep rates on hold next week Slower growth and inflation could mean MPC is laying groundwork for cuts before long Consensus has come round to our view that rates will be cut in early 2024 We think the MPC will keep policy unchanged at the …
Korea set for a weak Q2, BoK still too optimistic While the economy avoided a technical recession in Q1 on the back of a sharp rise in automotive exports , activity data for April released this week showed that Korea’s economic woes are far from over. …
CoreLogic data published earlier today showed that house prices continue to make gains in May, heightening risks to our long-held view that the housing downturn has further to run. If house prices do stabilise or rise higher, that in turn raises the …
Sri Lanka’s central bank (CBSL) cut interest rates in a surprise move today but we think further monetary loosening will be gradual as concerns about the external position are likely to persist in the near-term. The decision to cut both the Standing …
Inflation and GDP growth have surprised to the upside since April meeting Housing turnaround an upside risk to inflation and inflation expectations Progress on US debt ceiling deal means little reason to wait until July before hiking As GDP growth and CPI …
31st May 2023
Good news on inflation but core rate still high The fall in German headline inflation in May and signs that core price pressures eased echo the message from the inflation figures for France and Spain and supports the case for the ECB to limit further …
The Bank of Thailand (BoT) raised its policy rate by 25bps, to 2.0%, today but given the relatively benign outlook for inflation we think this marks the end of the tightening cycle. Today’s decision was accurately predicted by 17 of 22 analysts polled …
Further tightening unlikely The Bank of Thailand (BoT) raised its policy rate by 25bps, to 2.0%, today but given the relatively benign outlook for inflation we think this marks the end of the tightening cycle. In the accompanying statement to today’s …
Economy softening, but not collapsing Inflation overshooting Bank’s forecasts and upside risks abound We now expect two more 25bp hike in June and July; rate cuts unlikely until Q2 2024 With inflation set to overshoot the Reserve Bank of Australia’s …
The renminbi strengthened sharply against the US dollar in response to China’s move away from zero-COVID. But the currency has since reversed much of those gains and is now approaching 7.10/$, its weakest level since December. Optimism over China’s …
30th May 2023
Note: We’re discussing potential EM equity outperformance, monetary easing and “friend-shoring” in our next EM monthly online briefing on Thursday, 1 st June. Register here to join. Brazil’s fiscal framework gets strong support The approval of Brazil’s …
26th May 2023
The title of the UK Economic Outlook we published in March was “Recession needed to solve the inflation problem”. (See here .) The argument was that the drags from high inflation and a rise in interest rates to 4.50% would weaken activity and domestic …
Weak Q1, disappointing early data for Q2 Most countries in the region have now published Q1 GDP figures, and in the majority of places the data were weak as high interest rates and subdued demand from abroad weighed on growth. (See Chart 1.) The …
Chief Europe Economist Andrew Kenningham and colleagues from the Europe team were online shortly after the May HICP release to talk through the latest inflation numbers and their implications for policy. During this 20-minute online session, Andrew and …
We think UK retail sales contracted again last month (07.00 BST) US real consumption and durable goods orders probably picked up in April (13.30 BST) Meanwhile, we think US core PCE inflation rose by another 0.3% m/m (13.30 BST) Key Market Themes Higher …
25th May 2023
The South African Reserve Bank (SARB) hiked interest rates by 50bp, to 8.25%, today on the back of policymakers’ growing concerns about the inflationary impact of persistent power cuts. For now, we think that today’s move marks the end of the tightening …
The results of elections in major EMs over the past month have increased macroeconomic policy risks. Most notably in Turkey , President Erdogan now has the edge ahead of a second-round presidential election run-off next week. Hopes of an opposition …
Tunisia’s central bank independence under fire A new wave of reforms supposedly laid out by Tunisia’s President Saied’s have taken aim at the central bank’s (BCT’s) mandate which could result in it being used for unorthodox measures. That would …
This webpage has been updated with a table and chart of key data Inflation shows broader signs of easing The surprise fall in Brazilian inflation to 4.1% y/y in the first half of May, coming alongside this week’s approval of the new fiscal framework in …
Hopes for CBRT rate hikes are evaporating Turkey’s central bank (CBRT) left its key policy rate on hold at 8.50% again today and, with Recep Tayyip Erdoğan in pole position to be re-elected as Turkey’s President this Sunday, the probability of much-needed …
Note: We’re discussing potential EM equity outperformance, monetary easing and “friend-shoring” in our next EM monthly online briefing on Thursday, 1 st June. Register here to join. Colombia’s very strong post-pandemic recovery has come at the expense of …
Falling inflation to open the door for early rate cut Bank Indonesia (BI) kept its main policy rate unchanged today (at 5.75%) as was widely expected. With inflation falling and growth easing, we think there is a good chance the central bank could cut …
The Bank of Korea today left interest rates unchanged (3.5%) for a third consecutive meeting, and pushed back against the possibility of early interest rate cuts. However, with inflation falling back, the economy struggling and the housing market …
Singapore’s economy is being hit hard by multi-decade high interest rates and elevated inflation. And with external demand set to weaken, we expect growth to be much weaker than consensus projections. The revised estimate for Q1 GDP published today …
On hold again, first cut likely in August The Bank of Korea today left interest rates unchanged (3.5%) for a third consecutive meeting, but we don’t think it will be long before the central bank starts cutting interest rates. With inflation falling …
Some officials looking to resume rate hikes The minutes of the early May FOMC meeting reveal that although Fed officials agreed “the extent to which additional increases in the target range may be appropriate after this meeting had become less certain”, …
24th May 2023
The flash Q1 GDP figures for Saudi Arabia showed the economy grew at its weakest pace in two years at the start of 2023, reflecting the cut in oil production in line with the OPEC+ decision in October. And the even more recent voluntary output reductions …
History suggests that in the absence of a major financial shock, central banks usually leave interest rates at their peak for a year or more. That’s consistent with our view that the ECB is unlikely to start cutting interest rates until around the middle …
We think Turkey’s central bank will keep its policy rate at 8.5%... (12.00 BST) … while policymakers in South Africa will deliver a 50bp rate hike, to 8.25% (14.00 BST) Clients can sign up here for tomorrow’s Drop-In on China’s economic outlook Key …
