Filtered by Topic: Monetary Policy Use setting Monetary Policy
The latest data have revealed that the world’s major economies are all struggling, but for different reasons. In Europe, the energy crisis is largely behind the recent softness in consumer and industrial activity. In the US, higher interest rates are …
14th September 2022
August CPI data guarantee rate hike of at least 75bp next week New projections may show rates peaking slightly higher We still expect eventual sharp fall in inflation to prompt rate cuts next year The continued strength of core inflation points to …
The continued resilience of the economy means that the RBA will have to raise rates more sharply than most expect, which in turn will result in a more severe slowdown in activity than widely anticipated. However, the more benign nature of the recent …
Large shortfall in labour supply keeps labour market exceptionally tight With further evidence that the weaker economy is leading to a cooling in labour demand, the renewed fall in the unemployment rate to a new 47-year low of 3.6% was driven by a …
13th September 2022
Rise in headline CPI rate should ensure another 50bp rate hike this month The rise in Indian CPI inflation in August to further above the RBI’s 2-6% target range should ensure that the central bank delivers another 50bp hike to the repo rate (to 5.90%) in …
12th September 2022
Reports that the ECB will soon start debating QT add to the risks facing euro-zone government bond markets. While the Bank could still expand its holdings of peripheral sovereign debt through the PEPP, QT would raise the bar even further for it to …
The Bank of Canada’s hawkish communications this week, alongside its 75bp policy rate hike, suggest that it remains unfazed about the downside risks to activity and that it initially favours a 50bp hike at the next meeting in October. That said, the …
9th September 2022
Chile and its constitution: back to square one While the surprisingly strong rejection of Chile’s proposed new constitution in Sunday’s referendum has eased some concerns about a radical shake up of the country’s economic model, the outcome doesn’t put an …
Frozen in the headlights Early indicators suggest that China’s economy was even weaker in August than it was in July, when the rebound from the Shanghai lockdown prematurely fizzled out. And constraints faced by policymakers – some they have little …
Zambia: pending debt relief may not be enough Analysis from the IMF this week suggests that, even with debt relief in the pipeline, putting Zambia’s public debt on a sustainable footing will be difficult. We will look in detail at the IMF’s projections …
Notwithstanding the big policy announcements in the UK this week, we still think that the pound and the UK stock market will struggle over the rest of this year, but expect 10-year Gilts to rally. We set out what we think the “Energy Price Guarantee” …
Fed still in hawkish mood In the run-up to the Fed’s next policy announcement on 21 st September, the release of August’s consumer price data next Tuesday could still be pivotal in determining whether the Fed will follow the ECB and Bank of Canada with …
CEE and the Nord Stream 1 gas shut-off The indefinite closure of the Nord Stream 1 gas pipeline by Russia late last Friday has added to the risks around energy supply in Central and Eastern Europe (CEE) and presents downside risks to our GDP growth …
The ECB went big this week, delivering on Thursday a 75bp rate rise, which President Lagarde described in the post-meeting press conference as a “frontloading step in [the Bank’s] journey of normalisation”. While she wouldn’t be drawn explicitly on how …
Inflation to reach 7% later this year We are adjusting our inflation and policy rate forecasts for Indonesia in response to the recent fuel price hikes. The 30% increase in the price of gasoline and diesel that was announced earlier in the week is aimed …
Another 50 bps hike, a 75 bps increase is not out of the question PM’s fiscal expansion means Bank may have to raise rates further to hit 2% inflation target Rates to peak at 4.00% Although the new Prime Minister, Liz Truss, has saved some of the …
8th September 2022
The ECB is almost certain to follow today’s 75bp rate hike with further aggressive increases in the coming months. We doubt that even a recession would cause the Bank to halt rate hikes. Against that backdrop, and with uncertainty about policymakers’ …
We think a combination of domestic and external factors will push up risk premia in Brazil over the rest of this year. This informs our forecasts that the real will weaken and the country’s bonds will sell off. Brazil’s financial markets appear to have …
Inflation rise shortens odds of 75bp hike, but we expect Banxico to opt for 50bp The further rise in Mexico’s headline inflation rate to 8.7% y/y in August will strengthen the case for Banxico to deliver a third consecutive 75bp increase to interest rates …
Malaysia’s central bank (BNM) today raised its main policy rate by 25bp (to 2.5%), and signalled that further hikes were likely over the coming months. However, with inflation set to fall back later in the year, we think the tightening cycle will be …
Weaker pound pushing up inflation; CBE waits in wings to hike rates Egypt’s headline inflation rate jumped to a near-four-year high of 14.6% y/y in August as the impact of the weaker pound continued to filtered through. Inflation is likely to rise a …
Further tightening to be “measured and gradual” Malaysia’s central bank (BNM) today raised its main policy rate by 25bp (to 2.5%), and with inflation likely to remain elevated, further hikes are likely. Today’s move came as little surprise and was …
The Monetary Policy Report released by Chile’s central bank today, following on from its larger-than-expected 100bp rate increase to 10.75% yesterday, suggests that its tightening cycle is drawing to a close. But with inflationary pressures still acute …
7th September 2022
The Bank of Canada remains concerned about the risk of high inflation expectations becoming entrenched but, with the economy now slowing sharply and inflation set to ease by more than the Bank expected, we still see scope for it to follow the 75bp hike …
The National Bank of Poland (NBP) slowed down the pace of its tightening cycle again today with a 25bp rate hike to 6.75%. There was no new guidance in the communications in terms of the central bank’s next move, but with policymakers seemingly more …
Bank gives little away as it hikes by 75 bp The Bank of Canada remains concerned about the risk of high inflation expectations becoming entrenched but, with the economy now slowing sharply and inflation easing by more than the Bank expected, we still …
We expect Chile’s central bank to hike by 75bp… (Tue 21.00 BST) …and we think the Bank of Canada will do likewise (Wed 15.00 BST) Poland’s central bank may end its tightening cycle with a 50bp hike Key Market Themes Even though we expect the RBA to …
6th September 2022
Hopes that policymakers can engineer a soft landing rest heavily on the belief that wage growth can be tamed without a surge in unemployment. This ‘Phillips curve’ relationship has changed recently, with G7 pay growth now higher than it was before 2020 …
The RBA lifted rates by 50bp today and dropped some hints that further tightening will be less aggressive . Even so, we still expect the Bank to hike rates more aggressively over coming months than most expect, which will weigh heavily on activity and …
RBA will slow pace of tightening before long While the RBA hiked rates by 50bp today as widely anticipated, it dropped some hints that further tightening will be less aggressive. The Bank’s decision to hike the cash rate by 50bp was correctly anticipated …
We continue to expect euro-zone “peripheral” spreads to rise over the remainder of the year, owing to a combination of deteriorating appetite for risk, higher policy rates, and ambiguity about the ECB’s willingness to support the peripheral bond market. …
5th September 2022
Egypt is facing growing external strains and downward pressure on the pound, with policymaking coming under increased scrutiny in recent weeks following the sudden resignation of central bank governor Tarek Amer. In this Update , we answer five questions …
Inflation concerns easing Inflation and activity data published over the past few days have surprised to the downside, supporting our view that Korea’s tightening cycle will finish by the end of the year. Headline inflation in Korea fell back from 6.3% …
2nd September 2022
Labour market conditions normalising The slower pace of payroll gains in August, together with the big rebound in the labour force, and the more modest increase in wages, would seem to favour a smaller 50bp rate hike from the Fed next month , rather than …
SNB with more work to do In the week when Joel Wicki was crowned “Schwingen King” in the national Swiss wrestling championships, SNB Chairman Thomas Jordan used his speech at Jackson Hole to reiterate his intention to grapple inflation into submission. Of …
While US and euro-zone 10-year government bond yields have surged over recent weeks, we think this sell-off has mostly run its course – we expect these yields to end this year a bit below their current levels. The yields of 10-year government bonds in the …
New GDP forecasts GDP data released this week showed that growth surged from 4.1% y/y in Q1 to 13.5% y/y in Q2 (Q1 of FY22/23). But on our own seasonal-adjustment, that implied a gain of only 0.1% q/q. That seems improbably small given the strength of …
ECB likely to raise rates by 75bp next week. Further bumper rate hikes to follow even as economy falls into recession. But the hawks’ hopes to shrink the balance sheet will go unfulfilled. There is a case for the ECB to raise rates by 1% next week. …
1st September 2022
GDP growth and inflation lower than the Bank expected But core inflationary pressures still point to 75 bp hike Bank unlikely to give much away about policy beyond September GDP growth and inflation will be lower than the Bank of Canada …
Manufacturing activity remains robust India’s manufacturing PMI moderated a touch in August but the more important point is that the reading is still consistent with robust growth in the sector. The RBI will remain comfortable tightening policy and we …
Caixin manufacturing PMI likely to suggest that China’s recovery lost steam (02.45 BST) Euro-zone unemployment rate may have risen for the first time in two years (10.00 BST) US ISM manufacturing survey will probably point to sluggish growth in August …
31st August 2022
Relatively peaceful election proceedings in Kenya and Angola this month have provided a lift to investor sentiment. But with the respective losing presidential candidates challenging official results through the courts, the risk of violence lingers. …
Resilience so far, but much tougher times ahead Economies across the region were generally resilient in Q2 despite tightening financial conditions and the war in Ukraine. Russia’s downturn was milder than expected as it was able to re-orientate trade to …
We think developed market (DM) monetary policy may be a threat to emerging market (EM) assets for some time yet . Hawkish monetary policy has arguably been the biggest headwind for global financial markets this year. Rapid upward revisions to …
The region faces a busy political calendar. Chileans head to the polls on Sunday to vote on a new constitution which would usher in sweeping changes to the country’s current economic model. While the latest polls suggest that the charter will be …
30th August 2022
We expect some of the recent surge in travel services prices to be reversed after the summer which, together with signs that global goods shortages are easing, suggests that core inflation is close to a peak. That said, strong wage growth raises the …
MNB firmly focused on inflation and the forint Hungary’s central bank (MNB) continued with its aggressive tightening cycle today as it raised its base rate by another 100bp, to 11.75%. It’s clear that the MNB is struggling to contain very strong and …
Outlook for credit weakening The decent rise in consumer credit values in July may overstate the current resilience of real consumer spending as credit is being supported by the rapid increases in consumer prices. Either way, as households’ spending power …
Australia consumers going from strength to strength while inflation remains high Bank to hike rates by 50bp in September before reverting to smaller 25bp hikes Slump in house prices and slowdown in inflation to prompt cuts next year With the …
While attention has understandably focused on Fed Chair Jerome Powell’s Jackson Hole speech made last Friday, there were also important interventions over the weekend by ECB policymakers. These suggest that the risks to our above-consensus forecasts for …
29th August 2022
