Filtered by Topic: Monetary Policy Use setting Monetary Policy
The national accounts data provided two pieces of good news this week, with revisions to the historical series and stronger-than-expected third-quarter growth leaving GDP higher than expected. While some argue that this will cause the Bank of Canada to …
2nd December 2022
While food inflation has surprised to the upside in major DMs, it seems to be at or near a peak. We expect a combination of base effects and an easing of underlying price pressures to drag on food inflation in 2023. Food inflation soared in the past …
With weaker growth overseas and the drag from the stronger dollar now pushing exports lower, the resilience of consumption is the only thing keeping the economy from falling into recession. Mixed signals for Q4 GDP Although third-quarter GDP growth was …
This week’s data releases showed that higher interest rates are starting to influence the economy. This means that at some point the Bank of England will have to start to think more about the appropriate level of interest rates rather than the pace of …
Off the peak? The big event this week was the publication of flash inflation data which showed that, after rising for seventeen months in succession, headline inflation fell from 10.6% in October to 10.0% in November. (See here .) This was lower than we …
Valuations may stall equity outperformance India’s Sensex hit a fresh record high of 63,000 this week (see Chart 1), continuing its remarkable performance over the past few months in the context of the sell-off in equities elsewhere in the world. The …
Weak data, slowing inflation, dovish BoK A string of weak activity data, a sharp drop in inflation and dovish comments from the central bank support our view that the Bank of Korea’s tightening cycle is coming to an end soon. The final estimate of third …
Soft data prompt repricing of rate expectations The financial markets this week scaled back their expectations for interest rate hikes by the RBA and are now pricing in a peak in the cash rate of 3.6%, down from 3.9% last week. (See Chart 1.) Chart 1: …
Hopes may be rising that price pressures may finally be easing, but investors risk missing the fact that not all inflation cycles are alike. We think core inflation in the US will fall far faster than it will in the euro-zone, and this will have big …
1st December 2022
Stable inflation keeps pressure off SNB The low inflation rate in November supports our view that the Swiss National Bank will not need to raise interest rates much further in the current cycle. Indeed, there is a growing chance that policymakers raise …
Croatia’s adoption of the euro on 1 st January 2023 is likely to bring only small benefits to the economy given how widely used the euro already is in the country. Even so, we think prospects for Croatia’s economy remain bright and expect it to outperform …
30th November 2022
Higher interest rates weighing on domestic demand Core inflation pressures eased in October Bank to drop down to 25 bp hike as it balances risks of over- and under-tightening The easing of the three-month annualised measures of core inflation in October …
Economy holds up in Q3, but higher rates now taking a toll While base effects caused a sharp slowdown in headline GDP growth in India in Q3 (Q2 of FY22/23), growth held up well in quarter-on-quarter terms. However, there are signs in more timely activity …
Peak headline inflation won’t stop ECB hiking Euro-zone inflation may now be past its peak but with the core measure unchanged in November and set to remain well above 2% next year, we expect the ECB to hike rates by 50bp or 75bp in December. The fall …
Labour market remains very tight but consumption moderating and inflation peaking Risks to our above-consensus cash rate forecast are shifting to the downside With GDP growth slowing sharply next year, we still expect rate cuts from late-2023 With …
The Bank of Thailand hiked interest rates today by a further 25bps (to 1.25%), and reiterated that it is likely to continue tightening policy gradually over the coming months. The decision was correctly predicted by 17 out of the 19 analysts polled by …
Thailand: gradual tightening cycle to continue The Bank of Thailand hiked interest rates today by a further 25bps (to 1.25%), and reiterated that it is likely to continue to tighten policy gradually over the coming months. The decision was correctly …
Headline inflation close to a peak, but core may rise further November’s fall in headline inflation in Germany and Spain suggest that the euro-zone headline rate will come in lower than we had anticipated when it is published tomorrow, and is now close …
29th November 2022
Concrete signs of an effort to exit from zero-COVID are emerging, with a notice today of a push to vaccinate the elderly. The low level of vaccine coverage of the most vulnerable is, along with a lack of healthcare capacity, the major constraint on …
Most central banks across Sub-Saharan Africa raised interest rates over the past month and, in contrast to many other parts of the emerging world, we think tightening cycles will last a while longer. Interest rates were hiked in Nigeria, South Africa, …
Higher interest rates beginning to influence the economy October’s money and credit figures highlight how higher interest rates are starting to influence the economy. Higher interest rates are weakening the demand for credit, especially for mortgages, …
Most countries in the region have now reported GDP figures for the third quarter, and growth was generally faster than we (and the consensus) had expected. One factor behind this resilience was the strength of private consumption, which held up well in …
Pace of tightening to slow as growth comes off boil and inflation passes the peak 25bp hike to repo rate likely next week, and cycle to draw to a close by early-23 Rate cuts could come onto the agenda by late next year With inflation having passed the …
Higher interest rates are weighing on credit and attracting savings October’s money and credit figures reveal further signs that households continue to remain cautious and higher interest rates are starting to weigh on the economy. The £0.8bn rise in …
Untangling Ghana’s fiscal mess? Official statements this week by the authorities in Ghana signalled commitment to restoring fiscal and debt sustainability, and left little doubt that this will include a sovereign debt restructuring. Finance Minister Ken …
25th November 2022
Banxico tightening debate set to heat up Data and developments this week suggest that the debate at Banxico over when to end the tightening cycle is set to heat up. The risks are tilting towards rates rising a bit more than we currently expect. …
ECB officials were out in force again this week, disseminating clues about the size of the next rate hike and their plans on quantitative tightening (QT). Their comments suggest that a slowdown in the pace of tightening, from a 75bp to a 50bp hike, …
The Treasury has started to make payments to the Bank of England’s Asset Purchase Facility (APF) to cover the losses it has racked up because of the Bank of England’s gilt purchases. While this won’t force the Chancellor to tighten fiscal policy …
The reduction in the required reserve ratio (RRR) that the PBOC just announced will help banks follow through on a directive to defer loan repayments from firms struggling with widening lockdown restrictions. Market interest rates may also edge down as a …
RBNZ willing to send New Zealand into recession While the analyst consensus is that New Zealand will generate decent GDP growth of just under 2% next year, we already predicted last month that the economy will enter recession. And with the RBNZ this week …
A fall in Tokyo’s inflation might suggest that Japan’s national inflation has peaked (Thu.) Catch up on today’s Asia Macro Drop-In, and all our Drop-Ins, here … …or check out our Weekly Briefing podcast episodes here Key Market Themes Despite the …
24th November 2022
The big surprise so far this year has been the resilience of housing starts which, despite falling from their 10-month high of 300,000 annualised in September, remained at a relatively strong 267,000 in October. While developers have largely shrugged …
Inflation appears to have finally peaked for emerging markets – but how quickly will price pressures now ease, and what will that mean for the 2023 outlook? In December's monthly dive into the big stories in EM macro and markets, economists from across …
Today’s decision in South Africa to raise the benchmark rate by 75bp, to 7.00%, signalled that policymakers remain in inflation-fighting mode and the tightening cycle has further to run. That said, the balance on the MPC appears to be shifting towards …
ECB account gives little away on next steps There are no significant clues in the account of the ECB’s October meeting about the pace and extent to which the Bank will raise interest rates in December and next year. A 50bp hike seems most likely next …
Stronger core inflation will support the hawks at Banxico The further fall in Mexico’s headline inflation rate, to 8.1% y/y, in the first two weeks of November was driven by easing non-core price pressures. But core inflation picked up, which will …
CBRT final act? Turkey’s central bank (CBRT) delivered another 150bp interest rate cut, to 9.00%, at today’s meeting and suggested that this marked the end of the easing cycle. We’ll take the CBRT for its word but there is clearly a risk that President …
Monetary tightening cycles in EMs are advanced relative to DMs, and are now drawing to a close in many countries. Elevated inflation will mean that policy will stay tight over the coming months, but the conditions for several EM central banks to start …
This morning’s 75bp increase in the Riksbank’s policy rate was in line with expectations, and both the press statement and Monetary Policy Report are consistent with our view that policymakers will raise rates to a peak of around 3% next year. Beyond …
Tightening cycle not yet finished This morning’s 75bp increase in the Riksbank’s policy rate was in line with the consensus and market expectations while the press statement is consistent with our view that policymakers will raise rates to a peak of …
The Bank of Korea (BoK) today raised interest rates by a further 25bps (to 3.25%) and the accompanying hawkish statement suggests the tightening cycle still has a little further to run. We are tweaking our forecasts for next year and now expect one more …
The Bank of Korea today raised interest rates by a further 25bps (to 3.25%), but with growth slowing and inflation easing, we think there is a good chance this marks the end of the central bank’s tightening cycle. Today’s decision came as little surprise …
How many is “various”? The minutes of the Fed’s early-November policy meeting suggest that although most officials were in favour of slowing the pace of rate hikes at upcoming meetings, there was no consensus on how high the peak in rates would ultimately …
23rd November 2022
Having surged for the best part of two years, EM inflation appears to have passed the peak in this cycle. Our measure of aggregate EM inflation dropped from 7.8% y/y in September to 7.4% y/y in October. (See Chart 1.) Looking ahead, we think that …
With fiscal policy no longer expected to be ultra-loose and some signs emerging that domestic price pressures will ease further ahead, we no longer expect the Bank of England to raise interest rates to a peak of 5.00%. Our new forecast of an increase …
Surprisingly strong inflation to keep hawks in majority South Africa’s headline inflation rate picked up unexpectedly in October, to 7.6% y/y, and the jump in core inflation will be a particular worry for policymakers. Another 75bp hike in the repo …
The Reserve Bank of New Zealand hiked the overnight cash rate by 75bp as most had anticipated but signalled a much higher peak in the OCR than in August. We’re now forecasting another 75bp hike in February followed by a final 50bp hike in April, but we …
RBNZ will hike rates above 5.0% The Reserve Bank of New Zealand hiked the overnight cash rate by 75bp as most had anticipated and it now seems likely that rates will peak closer to 5.5% instead of our current forecast of 5.0%. The statement was very …
Although the annual rates of core inflation increased in October, we suspect the Bank of Canada will point to the declines in the 3-month annualised rates of CPI-trim and CPI-median to justify dropping down to a 25 bp interest rate hike at its meeting …
22nd November 2022
