Filtered by Topic: Monetary Policy Use setting Monetary Policy
Drag from higher interest rates intensified in December December’s money and credit figures revealed that higher interest rates further dampened economic activity at the end of last year. Moreover, the drag on activity will continue to intensify this …
31st January 2023
Recession likely in first half of this year The small increase in euro-zone GDP in Q4 was better than we feared a few months ago but the economy excluding Ireland still flat-lined. As the data deteriorated towards the end of the quarter and tighter …
Consumption remains resilient and labour market still very tight With inflation still accelerating, we expect the cash rate to reach 3.85% by April However, sharp slowdown in activity and inflation will prompt rate cuts by year-end The incoming data …
It’s well known that, with the yield curve inverting the Fed is now racking up losses, but what is less appreciated is that the higher interest payments it is making are going mostly to foreign banks and money market funds. The Fed earns interest on …
30th January 2023
The outlook for Latin America has turned more positive at the start of the year as China has shifted away from its zero-Covid policy and commodity prices have rallied. But this comes against a backdrop in which regional growth is showing clearer signs …
The Lunar New Year holiday wasn’t quite back to normal this year as fears of spreading COVID to elderly relatives prevented many households from returning to their hometowns – long-distance journeys, while the highest since the start of the pandemic, …
Asian currencies have continued to rebound against the US dollar over the past month, and most are now up by around 5-15% against the greenback since early November. Optimism around China’s reopening and expectations for a Fed policy pivot have been the …
The shift away from floating-rate to fixed-rate mortgages presents risks as well as benefits. It will protect homeowners who are lucky enough to have a long time remaining on their fixed rate contract from higher mortgage payments. But that reduces the …
This week’s Australian CPI data delivered an unwelcome surprise for the RBA. The headline rate rose from 7.3% to 7.8% in Q4, compared with an analyst consensus of 7.5%. While that was lower than the RBA had been expecting back in November (8.0%), the …
27th January 2023
Governor Tiff Macklem stressed on Wednesday that the pause in the Bank of Canada’s tightening cycle is conditional on looser conditions in the labour market and a fall in inflation expectations. The CFIB Business Barometer showed evidence of both a day …
Turkish policymakers deepen de-dollarisation Turkish policymakers deepened their “lira-isation” drive this week by increasing the incentive for firms to convert their FX into lira, but we’re not convinced that the policy changes will be successful and …
The recent persistence of inflation leads us to think that the Bank of England will proceed with another 50 basis point (bps) rise in Bank Rate, from 3.50% now to 4.00% next Thursday. (See here .) We will be discussing the policy outlooks for the BoE, the …
China has made an abrupt shift away from zero-COVID, prompting a wave of market euphoria – and some anxiety – about a surge in demand. But what does the economy’s reopening really mean for emerging markets? Our latest dive into the big stories in EM macro …
We held a Drop-In today to discuss the big economic and financial market development across Emerging Asia. (You can see an on-demand recording here .) This Update answers several of the questions that we received, some of which we couldn’t answer during …
26th January 2023
The South African Reserve Bank’s (SARB’s) smaller-than-expected 25bp interest rate hike today and large cuts to its growth forecast make clear that its focus is pivoting to concerns about activity rather than inflation. The next meeting will be a close …
A 50bp rate hike next week seems to be literally a done deal. The recent strength of the economy means ECB will hike further. Quantitative tightening looks set to accelerate from June. With a 50bp rate hike at next week’s ECB meeting seemingly a done …
Despite some good news, another 50bps rate hike is most likely Next phase will be MPC pausing to assess influence of higher rates, but we’re not there yet Next big surprise may be that rates are cut by more than investors expect in 2024 Another 50 basis …
Central bankers let their hair down Climate change was front and centre of the discussions earlier this month when a host of heavy-hitters from the world of central banking descended on Stockholm for an International Symposium on Central Bank …
Inflation looks to have peaked across Emerging Asia, and is likely to fall back more sharply than most analysts expect over the coming year as fuel price inflation drops, the disruption from the pandemic eases and economic growth slows. With inflation …
We think the US economy expanded by nearly 2% annualised in Q4... (13.30 GMT) South Africa’s central bank will probably hike by 50bp on Thursday Sign up here for our Drop In on the latest economic and market developments in Asia Key Market Themes …
25th January 2023
The Bank of Canada accompanied its smaller 25 bp hike with new guidance that it intends to hold the policy rate at the current 4.5% while it assesses the impact of the cumulative interest rate increases so far. While the Bank did not rule out future …
Bank hints that smaller 25 bp hike likely to be the last The Bank of Canada accompanied its smaller 25 bp hike with new guidance that it intends to hold the policy rate at the current 4.5% while it assesses the impact of the cumulative interest rate …
Many officials support downshift to 25bp hike at upcoming policy meeting. But officials still see multiple hikes beyond next week. We expect rates to peak just below 5%, with cuts starting later this year. We expect the Fed to downshift to a 25bp rate …
The Bank of Thailand hiked interest rates today by a further 25bps (to 1.50%), and hinted that more rate hikes were likely in the near term amid worries about rising underlying price pressures. We expect one more 25bps increase this year before the …
The losses which central banks are now incurring on the bonds they bought via their quantitative easing (QE) programmes are not a big cause for concern. These losses will not compromise central banks’ ability to operate monetary policy. And while …
More tightening still to come The Bank of Thailand hiked interest rates today by a further 25bps (to 1.50%), and hinted that the tightening cycle still has further to run. The decision was correctly predicted by 21 out of the 23 economists polled by …
Sri Lanka’s central bank (CBSL) kept interest rates unchanged today, and we expect it to leave rates on hold for the rest of the year as it aims to strike a fine balance between supporting a struggling economy and clamping down on high inflation. The …
Rates set to stay on hold in 2023 Sri Lanka’s central bank (CBSL) kept interest rates unchanged today and we expect it to leave rates on hold for the rest of the year as it aims to strike a fine balance between supporting a struggling economy and clamping …
The flash PMIs for January provide further evidence that the euro-zone economy has so far avoided the deep downturn that most economists anticipated, whereas the US and UK surveys still point to recessions in both cases. Supply shortages have become less …
24th January 2023
As 2023’s calendar of central bank meetings began, we held a special briefing on the first Federal Reserve, European Central Bank and Bank of England policy decisions of the year. Chief Global Economist Jennifer McKeown lead a discussion with economists …
A closer look at Spain’s inflation data shows that there are significant measurement difficulties affecting both energy and core price data. However, we still expect measured headline inflation to remain lower in Spain than in most of the euro-zone and …
Recent data have shown that activity in the US is weakening as we had expected while that in the euro-zone has been surprisingly resilient. The resilience seems to reflect a combination of supply and demand factors, including easing shortages, lower gas …
The outlook for emerging markets is looking better than it did just a few weeks ago. Most obviously, China’s shift to living with COVID means that its economy will rebound far sooner than we had previously thought. That will provide a lift to countries …
The Central Bank of Nigeria (CBN) raised the benchmark rate by 100bp, to 17.50%, today in a surprisingly aggressive decision. But with incoming data likely to add to evidence of easing price pressures, we are not convinced that this hawkish tilt will …
Interest rate cuts still some way off Hungary’s central bank (MNB) left its base rate on hold today, at 13.00%, and we don’t think that it will cut its main policy interest rates until late-2023. In the meantime, we expect that the MNB will continue to …
The flash PMI might have edged up in the euro-zone in January… (09.00 GMT) … but we think it fell back in the UK (09.30 GMT) We expect central banks in Hungary and Nigeria to keep interest rates on hold Key Market Themes We don’t think government bond …
23rd January 2023
The sharp fall in hiring intentions in the Bank of Canada’s Business Outlook Survey suggests that the 104,000 surge in employment in December is not a sign of things to come. The survey points to a slowdown in average monthly employment growth to just …
Pakistan’s central bank (SBP) raised its policy rate today by a further 100bps (to 17.0%), and we expect more tightening over the coming months amid concerns about high inflation and the worsening external position. Interest rates have now been raised …
The shift away from variable towards fixed-rate mortgages in many European countries over the past 15 years means that it will take longer than in the past for interest rate hikes by the ECB to feed through to household interest expenditure. This …
Further tightening on the cards Pakistan’s central bank (SBP) raised its policy rate today by a further 100bps (to 17.0%), and we expect more tightening over the coming months amid concerns about high inflation and the worsening external position. …
Nigeria’s loan-to-bond swap up in the air Plans by the government of Nigeria to swap central bank loans to bonds have hit a sticky patch, making it unclear whether the country can reap the associated economic gains. Parliamentarians in Nigeria have …
20th January 2023
The CPI-trim and CPI-median measures of core inflation will be revised up next month but that does not change our view that they will fall sharply over the first half of this year. We think the 25 bp hike from the Bank of Canada next week will mark the …
Join Paul Ashworth , our Chief North America Economist, Stephen Brown , who leads our Canada coverage, and Jonathan Peterson , Senior FX Markets Economist, held a 20-minute briefing shortly after the Bank’s January decision announcement. Paul, Stephen …
Rebounding won An easing of inflation pressures in the US along with China’s reopening have provided a boost to Asian currencies over the past couple of months. The biggest rebound has been in the Korean won, which has now appreciated by 17% against the …
CPI inflation is falling and the Bank of England Governor, Andrew Bailey, sounded optimistic this week when he said that “a corner had been turned on inflation”. But he and most other Monetary Policy Committee (MPC) members will probably still be …
The Swiss franc is not immune to the shifting global landscape and we now suspect that it will be broadly stable against the euro in the coming months rather than appreciating. Looking back, the franc has been through three distinct phases since the …
10-year JGB yield retreats from ceiling Following the Bank of Japan’s decision on Wednesday to keep its short-term policy rate and Yield Curve Control (YCC) settings unchanged, 10-year Japanese Government Bond (JGB) yields fell to as low as 0.37% that …
China’s shift from zero-COVID is the big Asia story of the moment and our economists gave an update on what this means for the region’s growth outlook, including how quickly outbound tourism is recovering and which economies stand to benefit. But there’s …
19th January 2023
The Fed’s hawkish transformation has been so marked that, if its forecasts are to be believed, over the next couple of years it would effectively be adopting the same reaction function last followed during the Greenspan and Bernanke eras between 1987 and …
The account of the December meeting, along with data released since then and recent comments from policymakers, suggest the ECB will raise its deposit rate from 2% to 3% by March rather than May as we had previously expected, and that QT will accelerate …
