Filtered by Topic: Monetary Policy Use setting Monetary Policy
The nomination of Kazuo Ueda to lead the Bank of Japan could be read as a sign that the Kishida government is seeking a shift away from ultra-loose policy, but we aren’t fully convinced that this is the case. According to media reports, Japan’s government …
10th February 2023
RBI still cautious on inflation Though the RBI slowed the pace of tightening with a 25bp hike to the repo rate (to 6.50%) this week, the tone of the communications was more hawkish than we had anticipated. The slight rise in the 10-year bond yield …
With trimmed mean inflation surpassing the Bank’s November forecast in Q4, the RBA turned more hawkish when it lifted the cash rate by 25bp on Tuesday. Today’s Statement on Monetary Policy shows that the Bank expects inflation to only touch the top end of …
Banxico hikes by 50bp, and flags another increase Mexico’s central bank delivered a larger-than-expected 50bp interest rate hike, to 11.00%, today most probably because the recent uptick in services inflation spooked the Board. Another rate hike (probably …
9th February 2023
We anticipate interest rate hikes in Mexico and Peru… (Thu.) … but think Russia’s central bank will leave rates on hold (Fri.) UK GDP data likely to show that the economy avoided a recession in 2022 (Fri.) Key Market Themes Shrinking central bank …
We expect “high-beta” developed market (DM) currencies to weaken against the dollar over the coming months as risk sentiment worsens and, in some cases, yield gaps move against them. But we anticipate a rebound in appetite for risk later this year and …
Tightening cycle over, but cuts unlikely until 2024 The National Bank of Romania (NBR) left its policy rate on hold today, at 7.00%, and we think that its tightening cycle is now over. Even so, interest rate cuts probably won’t arrive until 2024. Today’s …
Rise in Mexican inflation paves the way for 25bp rate hike later today Mexico’s headline inflation rate edged up to 7.9% y/y in January, setting the scene for Banxico to raise interest rates by 25bp, to 10.75%, later today. We think that this will mark …
The Riksbank’s 50bp rate hike today was expected but the decision to begin actively selling government bonds and the emphasis on the exchange rate were a surprise. Possibly this simply reflects the new Governor’s desire to make his mark. Either way, we …
Governor Thedéen steps on the brakes The Riksbank’s decision to raise its policy rate by 50bp today was expected but the decision to begin actively selling government bonds is a surprise. We now think the policy rate will rise a bit further in the coming …
Bank balancing risks of sticky services inflation and housing market The Summary of Deliberations reveals that the Bank of Canada is still concerned about the risk that inflation will not decline all the way back to the 2% target, but that it ultimately …
8th February 2023
We expect the Riksbank to conclude its tightening cycle with a 50bp hike (08.30 GMT) The central banks of Mexico and Peru are also likely to deliver final 25bp hikes… …while policymakers in Romania will probably keep interest rates on hold Key Market …
Brazil’s president Lula seems to be on the warpath in his quest for lower interest rates and now has the central bank’s (BCB’s) independence in his sights. Were Lula to get his way, the experience from Brazil in the early 2010s and elsewhere in the …
We think sovereign bond yields in Canada, Australia, and New Zealand will drop further by end-2023. The central banks of Canada, Australia, and New Zealand have generally been at the forefront of this tightening cycle in terms of starting to hike rates ( …
Since the full effects of the previous surge in energy prices and the hike in interest rates have yet to be felt, we still think the economy will succumb to a recession this year. Admittedly, pandemic savings and the government’s handouts appear to have …
Rates unchanged, rate cuts possible by year-end Poland’s central bank (NBP) kept its main policy rate on hold at 6.75% as expected today and, with the economy slowing and inflation near a peak, further hikes are unlikely. We expect the central bank to …
Markets’ focus shifting to forward guidance as pace of rate hikes slows Any hints of an end to tightening cycles are still strongly data-dependent But the data will allow for rate cuts sooner than many central banks now imply Now that inflation has …
The RBI further slowed the pace of monetary tightening with a 25bp hike to the repo rate (to 6.50%) today and, though it has left the door ajar for further tightening, the softer growth outlook and improvement in the inflation picture suggests to us …
RBI’s tightening cycle is probably at an end The RBI further slowed the pace of monetary tightening with a 25bp hike to the repo rate (to 6.50%) today and, though it has left the door ajar for further rate hikes, the softer growth outlook and improvement …
The latest business surveys suggest that the euro-zone will stagnate or suffer only a mild recession, but the money and credit data paint a much gloomier picture. Net lending was negative in December and lower than in any month since 2014, when the …
7th February 2023
The RBA raised interest rates by another 25bp and signalled that further tightening will be needed. We’re sticking to our forecast that the Bank will lift the cash rate to an above-consensus 3.85% by April. The Bank’s decision to lift the cash rate from …
RBA signals further interest rate hikes ahead The RBA raised interest rates by another 25bp and signalled that further tightening will be needed. We’re sticking to our forecast that the Bank will lift the cash rate to an above-consensus 3.85% by April. …
We think euro-zone retail sales contracted sharply in December (Tuesday) UK Q4 GDP is likely to confirm the economy avoided recession in 2022 (Friday) We expect central banks in Australia, Sweden, India, Mexico and Peru to hike rates next week Key …
3rd February 2023
The strength of the early January data appears to rule out the possibility of an imminent recession, but that won’t prevent inflation from continuing to fall sharply from here. Jobs report appears to justify Fed’s caution Fed officials seem to agree …
Survey data point to weak start to 2023 Data published this week provided the first signs of how the region’s economies fared at the start of this year. And it’s not good news. In Brazil, the FGV confidence indicators all dropped back in January, with …
While the Bank of England raised interest rates by a further 50 basis points (bps) yesterday, from 3.50% to 4.00%, it hinted that if Bank Rate is not already at a peak, it is very close to one. As we unpacked in our “Drop-In” webinar on this week’s policy …
Weak start to the year in Korea Recent economic data from Korea paint a depressing picture. GDP figures published late last month showed the economy contracted by 0.4% q/q at the end of 2022 – the third worst quarterly performance since the Asian …
With the dust now settled after yesterday’s ECB meeting, it is clear investors have stuck with their dovish interpretation of the decision. They now expect the deposit rate to peak at around 3.4%, rather than 3.6%. (See Chart 1.) Meanwhile, 10-year …
As we argued in our latest Riksbank Watch , the fact that Sweden’s inflation rate rose more than expected in November and December is a key reason why we expect policymakers to raise rates by 50bp next week. But looking further ahead, we are …
The Central Bank of Egypt (CBE) surprisingly left interest rates unchanged at Thursday’s MPC meeting but, with inflation likely to rise even further above the central bank’s target, we still think that policy will be tightened further. We have pencilled …
We expect growth in US payrolls in January continued to slow (13.30 GMT) ISM Services Index likely to be consistent with mild US recession (15.00 GMT) We held a Drop-In on the Fed, ECB & BoE today – clients can catch up here Key Market Themes Despite …
2nd February 2023
The hawkish tone struck by the Czech National Bank (CNB) as it left its policy rate on hold again today, at 7.00%, isn’t prompting us to abandon our view that rates will be cut around the middle of this year. That said, we have now pushed the timing of …
Whereas the Bank of England and (arguably) the Fed delivered dovish surprises over the past twenty four hours, we think the ECB decision did not amount to a clear change of policy stance. The ECB is still likely to raise its deposit rate from 2.5% today …
The suggestion by Brazil’s President Lula that the central bank’s inflation target should be raised is likely to be a bigger concern for the second half of his presidential term (2025-26) than the first half (2023-24). While Lula seems to be motivated by …
While raising rates by 50 basis points (bps) today, from 3.50% to 4.00%, the Bank of England implied that rates are very close to their peak. We still think that rates may rise to 4.50%, but perhaps via two 25bps increases rather than one 50bps rise. …
Peak rate still some way off Whereas the Bank of England and (arguably) the Fed delivered dovish surprises over the past twenty four hours, we think the ECB’s statement does not amount to a clear change in the policy stance. The 50bp hike today was almost …
Dovish pivot coming soon The Czech National Bank (CNB) delivered no surprises in leaving its policy rate on hold again today, at 7.00%, but we maintain our view that it will cut interest rates a bit more quickly than most others expect. Our current …
Rates closing in on their peak, but rate cuts unlikely to come until 2024 While raising rates by 50bps today, from 3.50% to 4.00%, the Bank of England implied that rates are very close to their peak. We still think that rates may rise to 4.50%, but …
MPC to mark end of tightening cycle with 25bp hike to repo rate (to 6.50%) next week Slower growth and inflation could mean MPC is laying groundwork for cuts before long Rate cuts to materialise in early 2024, sooner than consensus expects With …
With inflation and price pressures still high, the Riksbank will probably raise interest rates by 50bp next week. However, in contrast to the market, we think this will probably end the tightening cycle and are bringing forward our forecast for a first …
The statement accompanying yesterday’s Brazilian central bank meeting, at which the Selic rate was left at 13.75%, hinted that interest rates may need to stay at their current high level into next year. We recently pushed back the timing of the first rate …
As expected following a blitz of speeches by officials ahead of the blackout window, the Fed raised its policy rate by a smaller 25bp, to between 4.50% and 4.75%, but tempered any hopes of a major dovish shift by maintaining the language in the statement …
1st February 2023
The slowdown that we expect in Brazil’s economy should take some steam out of the labour market, but it looks like it won’t be enough to stop wages from rising at a rapid pace. This appears to be a bigger risk to the inflation outlook than the fiscal …
The Fed will probably deliver a smaller 25bp hike, pushing the FFR to 4.50%-4.75% (Wed.) We think strong recent data will prompt the BoE to raise rates by 50bp, to 4%... (Thu.) …while the ECB will increase its deposit rate by 50bp to 2.5%, as signalled …
The minutes to the Colombian central bank meeting last Friday revealed that worries about the growth outlook will bring the tightening cycle to a close soon. We expect the central bank to deliver one final 50bp hike, to 13.25%, at the next meeting in …
With interest rates nearing a peak, the next two phases of monetary policy will most probably be rates being held at that peak and then being cut. The Bank of England may soon provide some guidance on both, although ultimately it will be the economy that …
Headline inflation to fall sharply, but core rate will be sticky January’s drop in headline inflation should be taken with a pinch of salt because a “data processing problem” meant that the data for Germany had to be estimated and might therefore be …
The shift away from floating-rate to fixed-rate mortgages has meant that it was always going to take longer than in past tightening cycles for the rise in interest rates to feed through to the real economy. This is one reason why we think that once Bank …
While the economic outlook in much of the world has turned less downbeat in recent weeks, the prospects for Sub-Saharan Africa’s two biggest economies have, if anything, got gloomier due to homegrown economic troubles. In South Africa, power cuts – a …
31st January 2023
The further falls in the Egyptian pound over the past month will push up inflation and prompt the central bank to deliver more monetary tightening, but there are already signs that the benefits of a weaker currency are materialising. The government …
