Filtered by Topic: Monetary Policy Use setting Monetary Policy
Further rise in services inflation will keep Banxico in hawkish mood Mexico’s headline inflation rate edged down to 7.8% y/y in the first half of February but the further pick-up in services inflation will continue to concern policymakers at Banxico. We …
23rd February 2023
CBRT eases policy after earthquakes hit Turkey’s central bank (CBRT) lowered its key policy rate by 50bp, to 8.50%, today as policymakers sought to support the economy in the wake of the devastating earthquakes this month. Another rate cut in March looks …
After a stellar performance for most of 2022, the Gulf economies are slowing. Primarily, that has reflected the impact of oil production cuts agreed with the rest of OPEC+ which is weighing on growth in oil sectors. And in the UAE and Qatar at least, the …
The Bank of Korea today left interest rates unchanged (3.5%), but appeared to leave open the door to further hikes later in the year. However, with the economy struggling badly and inflationary pressures set to ease further over the coming months, we …
Cuts coming sooner than consensus expects The Bank of Korea today left interest rates unchanged (3.5%), bringing an end to the country’s tightening cycle. With the economy struggling badly and inflationary pressures set to ease further over the coming …
The latest data suggest that current account deficits in the region’s major economies narrowed towards the end of last year, which is particularly good news for Colombia and Chile. Both were running alarmingly large shortfalls last year which helps to …
22nd February 2023
The January CPI data provided mixed signals about developments in underlying inflation. The CPI excluding food and energy and the CPI excluding the eight most volatile components each rose by just 0.1% m/m, which were the lowest gains since early 2021. …
The first year of the war in Ukraine has had an enormous impact on the country’s economy and left it highly dependent on financing from allies. Russia’s economy has contracted too, but it weathered the impact of Western sanctions better than expected and …
The war in Ukraine, which marks its one year anniversary on Friday, has had a profound impact on the emerging world. Ukraine’s economy has collapsed, while Russia’s has contracted too even though the imposition of sanctions has not been as severe as …
Even though the Reserve Bank of New Zealand slowed the pace of tightening at today’s meeting, it still signalled a peak in the overnight cash rate of 5.50% by the middle of this year. Our more pessimistic forecasts for economic activity and wage growth …
The higher bond yields that would follow abandonment of Yield Curve Control would make it more difficult to stabilise Japan’s public finances. But the long maturity of government debt means that the government’s interest rate bill would only creep up …
Bank will lift rates to 5.25% The RBNZ slowed the pace of tightening this month and we suspect it will now only lift the overnight cash rate to 5.25% instead of our previous forecast of 5.5%. The Bank’s decision to slow the pace of tightening from the …
In a crowded field given the FY23/24 Union Budget and the RBI’s more-hawkish-than-expected policy announcement, the Adani short-selling crisis has been the main story over the past month. So far at least, there are few signs of broader contagion. Foreign …
21st February 2023
The near-term economic outlook for Korea is very poor, with falling real incomes, problems in the housing market and weak global demand all set to weigh on prospects this year. Our forecast is that the economy will grow by a below-consensus and …
RBA isn’t done tightening just yet The minutes of the RBA’s February meeting, where policymakers lifted the cash rate by 25bp to 3.35%, confirmed the Bank’s pivot to a slightly more hawkish stance. In contrast to its December meeting, the Bank didn't …
Being ranked by the Sunday Times as the top UK economic forecaster for 2022 is a great accolade and has generated a lot of interest in what we expect to happen next. Our forecasts for 2023 imply a tougher year than the consensus, with higher inflation …
20th February 2023
The Bank of Israel (BoI) hiked interest rates by another 50bp, to 4.25%, today and while it continued to point to signs of slower growth, it sounded more concerned about the strength of inflation than it did at its last meeting. It now looks likely that …
Q uantitative tightening and the repayment of TLTROs mean that the ECB’s assets are likely to decline by around one quarter by the end of 2024. We expect the repayment of TLTROs to have a negligible macroeconomic impact. QT should also proceed smoothly, …
The minutes of the Riksbank’s latest policy meeting show that the previously dovish Executive Board members have become less so, and that the new members are on the hawkish side. That reinforces our view that the Bank will raise rates by 50bp in April …
Governor Tiff Macklem reiterated this week that the Bank of Canada wants time to assess the impact of high interest rates, suggesting it will not respond to the strength of employment by immediately resuming interest rate hikes. The weakness of home …
17th February 2023
In a previous edition of the UK Economics Weekly we said that the CPI core services inflation and private sector pay figures released this week would prove pivotal in determining whether the Bank of England raises interest rates further or calls time on …
Food price inflation may be overstated The consumer price data for January released this week proved something of a nasty surprise , with the headline rate jumping unexpectedly sharply to 6.5% y/y, pushing it above the ceiling of the RBI’s 2-6% target …
UK retail sales volumes probably rose by 0.5% m/m in January (07.00 GMT) We think Russia’s GDP fell by 3.5% y/y in Q4 (16.00 GMT) Catch-up here on yesterday’s Drop-In on our UK economic outlook Key Market Themes The recent strength of the US dollar and …
16th February 2023
Inflation across most of Latin America has peaked, but this is mainly an energy story – core price pressures are proving much more persistent. And underlying price pressures are likely to ease only gradually over the coming months, which will keep …
A raft of strong data out of the US have poured cold water on the idea that its economy has tumbled into recession at the start of 2023. And this comes after GDP data revealed that the euro-zone and UK economies (narrowly) avoided outright contraction …
The central bank of the Philippines (BSP) today raised its main policy rate by a further 50bps (to 6.00%) and increased its inflation forecast for this year significantly. We are revising our interest rate forecasts, and now expect two more 25bps hikes …
Bank Indonesia (BI) kept its main policy rate unchanged today (at 5.75%) and signalled that further rate increases this year were unlikely. This supports our view that the tightening cycle has now come to an end. We expect the policy rate to remain on …
No more hikes this year Bank Indonesia (BI) kept its main policy rate unchanged today (at 5.75%), and signalled that further rate increases this year were unlikely. This supports our view that the tightening cycle has now come to an end. We expect the …
More tightening still to come The central bank of the Philippines (BSP) today raised its main policy rate by a further 50bps (to 6.00%), and we think more tightening is likely in the near term amid worries about high inflation. The decision was in line …
Signs of softening labour markets across Central and Eastern Europe (CEE) support our view that intense wage pressures in the region will ease in the coming months. Even so, we still think that wage growth will generally remain above levels consistent …
15th February 2023
The 6.9% annual rise in Australia’s trimmed mean CPI in Q4 was stronger than the RBA’s November forecast and has prompted some hawkish rhetoric from the Bank at its February meeting. Indeed, we now expect the cash rate to peak at 4.10% in May instead of …
Moderating services inflation makes Bank of England’s life easier The fall in CPI inflation from 10.5% in December to 10.1% in January (consensus and CE forecast: 10.2%, BoE forecast: 10.1%), the drop in the core rate from 6.3% to 5.8% and the easing in …
Easing price pressures to make way to final rate hike Inflation in South Africa continued to decline, to 6.9% y/y in January, but we think that the Reserve Bank will err on the side of delivering a final 25bp rate hike to (7.50%) at the next policy …
The government formally nominated Kazuo Ueda as the next Bank of Japan Governor at yesterday’s Diet session. Since the initial announcement of his candidature last Friday , analysts and investors have been looking for clarity on Mr Ueda’s views. So far …
Data a touch softer than expected, but not soft enough for RBNZ to back away We still expect rates to peak at 5.5% by the middle of this year Looming recession will prompt looser policy by year-end The incoming data have been a touch softer than the RBNZ …
The surge in employment in January highlights that some sectors are still recovering strongly and raises the prospect that the economy could avoid recession, although we still judge that a modest one is more likely than not. As the employment gains have …
14th February 2023
Wage growth continues to accelerate despite cooling labour demand December’s labour market data showed that, despite an easing in labour demand, labour market conditions stayed tight and the market continued to support strong wage growth. The Bank of …
Wage growth continues to accelerate despite cooling labour demand December’s labour market data showed that, despite an easing in labour demand, labour market conditions stayed tight and the market continues to support strong wage growth. The Bank of …
Click here to read full report. The Ukraine war has added to the forces reshaping the global economic system into two US-led and China-led economic spheres. While the economic diversity of the US-bloc should help it to adapt relatively easily, the …
13th February 2023
The surge in employment and rise in hours worked in January suggest that economic activity continued to expand at the start of 2023 and present clear upside risks to our forecasts for GDP growth. Nevertheless, we disagree with the market-implied view …
10th February 2023
Core inflation worries prompt hawkish response This week’s central bank communications suggest that worries about strong underlying price pressures are putting policymakers in a more hawkish mood than we had anticipated. Admittedly, Peru is something of …
We think annual US core CPI inflation fell to 6.1% in January… (Tue.) …while CPI inflation in the UK declined to 10.2%, from 10.5% in December (Wed.) We think Q4 GDP growth weakened in Colombia, Hungary, Romania, and Israel Key Market Themes Kazuo Ueda …
Markets have continued to swing round to the Fed’s view that rate cuts are unlikely this year. We still believe that those cuts are coming, however, as economic growth disappoints and core inflation falls more rapidly than the Fed is expecting. Markets …
Philippines is the outlier In most of the region inflationary pressures are continuing to ease and central banks are preparing to bring tightening cycles to an end. (See here .) A key exception is the Philippines, where a jump in headline inflation to a …
Further thoughts on Turkey’s earthquake disaster The earthquake that hit Turkey and Syria this week, killing more than 21,000 people, is a human tragedy and our thoughts are with everyone affected. It’s still too early to fully assess the macroeconomic …
First impressions are important because of the primacy effect which means they are, apparently, stored more easily in the long-term memory. That may be why Erik Thedéen used his first meeting as Riksbank Governor to spring a hawkish surprise this week, …
Hawks singing the same tune At February’s ECB meeting, policymakers were unwilling to commit to raising interest rates further beyond the promised 50bp hike in March. But their comments this week show a clear intention to do so. Table 1 summarises some …
The raft of EM central bank meetings over the past couple of weeks reinforces the view that monetary tightening cycles have now drawn to a close or are very close to doing so, several months earlier than in their DM counterparts. Policymakers in some EM …
CBR changes the script as inflation risks mount Russia’s central bank (CBR) left rates on hold at 7.50% today but its communications were far more hawkish than expected as it talked about a further build-up of inflation risks and the possibility of hiking …
The main development of the week happened in the past few hours: the reported nomination of Kazuo Ueda as the next BoJ Governor. Our initial response is here . While analysts and investors are looking for clarity on Mr Ueda’s views, there is little to …
