Filtered by Topic: Monetary Policy Use setting Monetary Policy
Softer trade figures a sign of things to come There are growing signs that demand for the region’s exports are starting to soften, a trend we expect to continue over the coming months. Figures published on Wednesday show that Taiwanese export orders …
22nd April 2022
RBA bringing forward rate hikes The Reserve Bank of Australia is increasingly coming around to our view that rate hikes will be needed before long. The minutes of the RBA’s April meeting revealed that the Bank is becoming concerned about the second-round …
BoJ intervenes again to cap 10-year yields With 10-year yields again at the ceiling of the BoJ’s 0±25bp target band, the Bank launched another fixed rate auction on Wednesday. Then, on Thursday, it announced consecutive fixed rate auctions for a total of …
All set for 2% Inflation picked up in March due to a further rise in utilities inflation and a jump in food inflation. And headline inflation will hit 2% in the April data released in just under a month’s time as most of the drag from mobile phone tariffs …
Overview – Economic activity should expand at a strong pace this year but, with the Bank of Canada set to tighten policy rapidly, we expect the quarterly pace of GDP growth to slow below potential in 2023, as residential investment falls from its elevated …
21st April 2022
Overview – The surge in commodity prices will drive stronger regional growth than the consensus expects this year, but not all economies in Latin America will benefit. While Brazil and Colombia will see a terms of trade windfall – we expect GDP growth in …
Having so far been a bastion of dovishness amongst G10 central banks, we think that the stage is set for the Riksbank to start to raise the repo rate next Thursday, and it will press on with further rate rises thereafter. But with “QT” likely to do some …
Egypt looks to tourism to bolster FX revenues Egyptian officials appear to be hoping for a revival of the tourism sector as part of their strategy to improve the external position, but we still think that the currency will need to weaken further. The …
With the yen falling to a 20-year low against the dollar, talk of foreign exchange market intervention is growing. While we think the bar for any intervention is high , this Update answers some key questions. 1. Who decides whether to intervene? Bank of …
Inflation will hit the Bank’s 2% target this month But BoJ won’t tighten due to stuttering recovery & weak domestic price pressures And Governor Kuroda won’t sacrifice Yield Curve Control for a stronger yen Despite coming under significant pressure in …
Inflation is surging in both Australia and New Zealand. That is putting pressure on central banks to hike interest rates to slow the economy and curb inflation. But both the RBNZ and the RBA highlighted waning consumer confidence at their April meeting. …
Overview – The Russian economy will collapse this year and we expect spillovers from the war in Ukraine to cause a recession in many of the smaller countries in the region, particularly Bulgaria and the Baltic States. Loose fiscal policy and strong labour …
20th April 2022
While we are confident that inflation will fall back sharply in the second half of this year, that will not stop the Fed delivering a series of 50bp rate hikes at its upcoming meetings. Although gasoline prices have stabilised this month, though the surge …
Despite calling on banks to nudge down borrowing costs, the PBOC stopped short of requiring that they lower the Loan Prime Rate (LPR) benchmarks this month. For now, policymakers are mostly relying on targeted measures to help support firms hit by the …
The expansion of the government’s “Home Guarantee Scheme” will only result in a modest boost to housing demand. And with affordability set to worsen sharply as the RBA hikes interest rates, it won’t prevent house prices from falling next year. After …
Bank Indonesia (BI) left its main policy rate unchanged at 3.5% at its meeting today, and the relatively benign outlook for inflation means the tightening cycle is likely to be very gradual. The decision to leave rates on hold came as little surprise …
19th April 2022
With all domestic restrictions gone and the booster rollout further severing the link between cases and deaths, the conditions for a reopening bounce are in place. Moreover, consumers have ample room to splash the cash. The household savings rate remained …
Most analysts are overestimating the near-term negative impact of RBA rate hikes on household finances and are therefore underestimating the degree of tightening required to bring inflation under control. We now expect the RBA to hike rates to 2.5% by …
The People’s Bank (PBOC) has just announced a cut to the reserve requirement ratio (RRR). This will help nudge down bank lending rates. But in order to make much difference to credit growth it needs to be followed up by cuts to policy rates and a …
15th April 2022
This Update was originally sent to clients as a Rapid Response immediately after the announcement by the PBOC. The People’s Bank (PBOC) forwent the opportunity to lower its policy rates today. That’s somewhat surprising given the sharp economic downturn …
Chinese activity data will reveal a sharp slowdown in March … (Mon.) … which reinforces our view that the PBOC will cut the Loan Prime Rate (Wed.) Register for our Drop-In on the key implications of the French election here Key Market Themes While the ECB …
14th April 2022
ECB President Christine Lagarde suggested at today’s post-meeting press conference that the Bank would be sticking to its plans for policy normalisation, despite inflation surprising to the upside since the last meeting. She highlighted the hit to …
Today’s ECB statement and press conference indicate that policymakers expect to end their net asset purchases early in Q3 and raise interest rates soon after that. With inflationary pressures still rising, we think they will lift the deposit rate sooner, …
Price pressures building This week brought March inflation releases from Norway, Denmark and Sweden. Norway’s inflation data were a little weaker than expected, with the headline rate at 4.5% and the core rate unchanged at 2.1%. (See here .) Those …
8.5% inflation marks the peak The news that core prices rose by a more modest 0.3% in March, even as higher energy prices drove headline inflation to a 40-year high of 8.5%, explains why investors pared bets this week on how far interest rates would rise. …
The Bank of Canada embraced a new-found hawkishness this week, hiking its policy rate by 50bp to 1.00% and announcing an almost immediate start to what amounts to a relatively more aggressive quantitative tightening than the Fed is contemplating south of …
N. Africa: some benefits from Europe’s energy war The war in Ukraine has prompted the EU to commit to reducing its dependence on Russian gas and, as we’ve highlighted before , Algeria and Egypt stand to be two key beneficiaries. So far, Italy’s Eni S.p.A …
World GDP appears to have expanded at a below-trend pace in Q1 as high inflation limited real consumer spending and supply shortages and Omicron waves continued to disrupt activity. March’s broad-based drop in consumer confidence suggests that consumer …
Upside risks to inflation are materialising We’ve been arguing for several months that both the consensus and the RBI have been underestimating the upside threats to inflation. Consumer price data for March released this week have reinforced our view. The …
Today’s decision by the Bank of Korea (BoK) to hike its policy rate by 25bp to 1.50% is unlikely to mark the end of its tightening cycle given the strength of inflationary pressures. We expect at least two more 25bp rate hikes in the coming quarters, …
Ban on Russian coal won’t lift energy prices Prime Minister Kishida’s decision last Friday to follow the EU in banning imports of Russian coal is unlikely to put much additional upwards pressure on Japanese energy prices. To be sure, Japan is the world’s …
Labour market tightening, inflation surging The Reserve Bank of New Zealand’s 50bp rate hike on Wednesday was in line with our forecast and financial market pricing, but defied the analyst consensus of a 25bp hike. We’ve pencilled in another 50bp hike in …
The Monetary Authority of Singapore (MAS) tightened monetary policy again at its meeting today. With growth set to remain strong and core inflation likely to stay elevated, we expect the MAS to maintain its tight policy stance for at least the next couple …
South Africa’s headline inflation rate will stay close to the upper bound of the central bank’s 3-6% target range in the coming months before falling sharply in the second half of the year. Some MPC members are in a hawkish mood, but we think that …
13th April 2022
We expect Korea’s central bank to hike its policy rate by 25bp (02.00 BST) Australia’s unemployment rate may have fallen to a multi-decade low in March (02.30 BST) We think the ECB will leave policy unchanged tomorrow (12.45 BST) Key Market Themes While …
The Bank moved into full-blown hawkish mode today, hiking its overnight policy rate by 50bp to 1.00% and announcing that quantitative tightening will start later this month, with no caps on the value of maturing bond principal allowed to roll off each …
We held a Drop-In on the political and economic problems facing Pakistan earlier today (see an on-demand recording here ). This Update answers some of the most common questions that we received. Question 1: What have we learned about the new prime …
Overview – The surge in global commodity prices will take a little gloss off India’s economic recovery this year but we still expect stronger GDP growth than the consensus. Higher commodity prices will also keep inflation elevated, which we think will …
The RBNZ’s decision to accelerate its hiking cycle shows it is willing to move decisively to get a hand on surging inflation. That’s in line with our forecast that it will hike the OCR to 3.0% by the end of this year. The Bank’s decision to hike rates by …
Overview – We expect the economy to bend rather than break under the pressure of a rapid monetary tightening by the Fed. We anticipate that real economic growth will remain consistently below its 2% potential pace over the next two-and-a-half years, but …
12th April 2022
Egyptian inflation rose to a near-three year high in March and will continue to pick up on the back of the spillovers from the war in Ukraine and last month’s devaluation. We now think interest rates will be hiked by a further 350bp, to 12.75%, by …
11th April 2022
The Bank of Israel kick-started its tightening cycle today with a 25bp interest rate hike to 0.35% and we think it will deliver further hikes at its upcoming meetings, taking rates to around 2.00% in the first half of next year. This is currently more …
The RBI’s policy announcement and the introduction of the Standing Deposit Facility has prompted a number of questions from clients on its intended purpose and what it means for monetary policy. This Update aims to provide further clarity on the new …
Credit growth rebounds to an eight-month high Broad credit growth was much stronger than expected last month amid increased policy support. With more easing on the horizon, we expect a further acceleration although a sharp pick-up in lending still seems …
The government used its 2022 Budget to set out a host of proposals to make housing more affordable for Canadians, but the impact of these measures on house prices will be far overshadowed by the effect of rising interest rates, with the Bank of Canada …
8th April 2022
The age of turbulence all over again As it was with Alan Greenspan, we suspect that, although he still receives favourable reviews now, history will judge Jerome Powell’s tenure as Fed Chair far more harshly. With the benefit of less than 24 months of …
Ghana’s economic recovery will remain sluggish over the next couple of years as policy is tightened in a bid to shore up the public finances and tackle high inflation. The risk of an imminent sovereign default appears low but, if fiscal consolidation …
Pressure mounting on India-Russia relations Relations between India and Russia came under fresh scrutiny this week, with US officials warning of “significant and long-term” consequences if India moves towards a “more explicit strategic alignment” with …
Prime Minister loses case in Supreme Court A change of leadership in Pakistan looks likely this weekend, calling the future of the country’s IMF deal into question. Yesterday, the Pakistani Supreme Court ruled unconstitutional the dissolution of the …
The MPC’s unanimous decision to keep the repo rate unchanged at 4.00% today came as no surprise but the introduction of a new policy rate that sets a higher floor for the interest rate corridor indicates a less accommodative policy stance. And with …
