Filtered by Topic: Monetary Policy Use setting Monetary Policy
The surge in interest rate expectations is a key risk to housing. We recently set out how, due to the much larger share of variable rate mortgages than before the pandemic, the Bank of Canada would need to raise its policy rate to 2.5% to achieve the same …
23rd March 2022
The war in Ukraine will have several economic repercussions for the emerging world. We have lowered our aggregate EM GDP growth forecast for 2022 by 1%-pt, to 3.2%. Russia aside, the biggest downward revisions have been to other Emerging European …
New Zealand’s high share of fixed mortgage rates won’t insulate the housing market from RBNZ rate hikes. Indeed, we’re sticking to our view that house prices will fall this year and cause the RBNZ to reverse course next year by cutting interest rates. The …
Hopes for a large support package from UK Chancellor Sunak may be disappointed… …even though inflation in the UK probably reached a 30-year high last month (07.00 GMT) Sign up for our Drop-In on the impact of war in Ukraine on commodity markets here Key …
22nd March 2022
Hungary’s central bank (MNB) stepped up the pace of tightening today with a 100bp increase in its base rate, to 4.40%, and the hawkish communications underline the view that the central bank will respond to the deterioration in the inflation outlook with …
For the most part, EMs are well placed to withstand rising US interest rates, but there are pockets of vulnerability where external financing needs are significant. Among the large EMs, Turkey (unsurprisingly) stands out, and current account risks are …
The Central Bank of Egypt’s (CBE) decision to hike interest rates by 100bp, to 9.25%, and devalue the pound by 10% against the dollar suggests that policymakers have finally woken up to the worsening external position. The move could pave the way for a …
21st March 2022
Governor Kuroda admitted last week that inflation could hit the Bank of Japan’s 2% target in April but stressed that “that in no way signifies there will be a revision of our current monetary policy”. Even if rising import costs cause inflation to …
Migration is rebounding much faster after the border reopening than we had anticipated. While that will slow the decline in the unemployment rate, the labour market is already historically tight and inflation is set to surge. The upshot is that the RBA …
Even after its broad-based appreciation today, the US dollar seems set to end the week a bit lower against most major currencies. This is somewhat surprising given the FOMC’s hawkish tone on Wednesday and Fed Governor Waller’s comment today that a 50bp …
18th March 2022
While the start of a US Fed tightening cycle has historically sent alarm bells ringing in Latin America, the region generally looks well placed to weather any potential storm this time. Chile may be an outlier, though, given its worrying external …
Flash PMIs for March to give first steer on how the war in Ukraine has impacted DM economies UK chancellor may announce a small support package for households in the spring statement We expect Mexico’s central bank to raise its policy rate by 75bp on …
The Fed delivered on expectations of a 25bp rate hike this week but went further than we anticipated in pencilling in a further six 25bp hikes this year and four next. With their forecasts for core inflation in future years close to our own, we have …
Russia dodges default The saga over whether Russia’s government would make coupon payments on two Eurobonds this week seems to have been settled for the time being. At least some creditors are reported to have received payments (albeit a little late). …
The post-meeting speech by Russia’s central bank (CBR) governor Elvira Nabiullina made clear that policymakers think sanctions and autarky are here to stay for the long term. But at the same time, officials at the CBR appear to want to revert back to …
What’s Swedish for “fundamental change of view”? In a week when the US Fed and the Bank of England both raised interest rates, Riksbank Governor Ingves finally appears to have woken up to the need for tighter policy in Sweden. Mr Ingves reportedly said …
The Bank of Japan kept policy settings unchanged today and signalled that it is more worried about the negative impact of higher commodity prices on activity than about inflation spiralling out of control. Indeed, we expect the Bank to keep policy loose …
Today’s 25bps hike takes interest rates up to the pre-pandemic and post-Global Financial Crisis high of 0.75% and, although the Monetary Policy Committee (MPC) sounded a bit less hawkish than it did at its past meeting in February, it still signalled that …
17th March 2022
The Norges Bank will kick off the post-Olsen era next Thursday with a 25bp interest rate hike, to +0.75%, and while we expect it to raise rates three more times this year, the balance of risks is skewed towards it proceeding even faster. Meanwhile, …
The rise in mortgage rates implied by our new higher policy rate forecasts would reduce affordability by 12% over the next year which, in isolation, is not especially alarming when considering that the home sales-to-new listing ratio is still pointing to …
On the verge of Iran nuclear deal 2.0 Media reports seem to suggest a revived Iran nuclear deal could be signed off imminently, which will boost global oil supplies and could put downwards pressure on prices. It may also help to ease geopolitical tensions …
The surge in commodity prices as a result of the war in Ukraine will have several repercussions for India’s economy. As a major net commodity importer, its terms of trade will deteriorate and we think the current account deficit could reach almost 4% of …
Taiwan’s central bank (CBC) today unexpectedly raised its main policy rate by 25bps to 1.375%, but we doubt this is the start of an aggressive tightening cycle given the mounting downside risks to growth and the relative weakness of inflation. We had …
Brazil’s central bank slowed the pace of its hiking cycle with a 100bp hike (to 11.75%) yesterday, but the hawkish tone of the statement suggests that Copom is more concerned about the coming jump in fuel inflation than we had thought. As a result, we …
Bank Indonesia (BI) left interest rates unchanged at 3.5% at its meeting today, and the weakness of inflation and strong performance of the rupiah mean the tightening cycle is likely to be very gradual. The decision came as little surprise and was …
The Fed began its tightening cycle with a 25bp hike today and, despite the uncertainty caused by the war in Ukraine and China's efforts to contain the spread of the Omicron variant, officials look set to hike rates by an additional 25bp at each of the …
16th March 2022
Central banks in the Gulf will have to follow the US Federal Reserve in raising interest rates by virtue of their dollar pegs, which will weigh on domestic demand and recoveries in non-oil sectors. And higher debt servicing costs could cause concerns in …
We now expect inflation to reach a 21-year high of 5.2% in Q3 as fuel prices surge and firms pass on higher raw material costs to consumers. With the labour market nearing full employment and inflation expectations picking up, we reiterate our long-held …
We warned at the start of the year that global growth would disappoint, while inflation would surprise to the upside in 2022 and recent events have added to those concerns. The surge in commodity prices related to the war in Ukraine means that headline …
15th March 2022
Stronger-than-expected start to 2022 Activity data for the first two months of the year was stronger than anticipated, which probably explains why the People’s Bank (PBOC) unexpectedly kept its policy rates on hold today. But the economy looks set to come …
Concerns about inflation in Korea are rising, just as those about financial stability risks are starting to recede. Despite the worsening growth outlook caused by the surge in energy prices and war in Ukraine, we expect the Bank of Korea (BoK) to continue …
14th March 2022
The surprisingly strong rise in employment in February reduces the downside risks to near-term economic activity from higher energy prices and reinforces our view that the Bank of Canada will now hike more aggressively than we previously assumed. A …
11th March 2022
We expect the Fed and the BoE to raise their policy rates by 25bp… (Wed. & Thu.) … and Brazil’s central bank to hike interest rates by 100bp, to 11.75% (Wed.) In contrast, policymakers in Japan, Russia and Turkey will probably leave rates unchanged Key …
Fed to hike by 25bp and “proceed cautiously” We expect the Fed to hike interest rates by 25bp at next week’s FOMC meeting and, despite the war in Ukraine, to unveil new projections showing at least five interest rate hikes this year in total. We also …
Russia’s economy is in the early stages of a deep recession and we’ve revised our forecast for GDP to collapse by 12% this year. We’ve also revised our forecasts for Central and Eastern Europe as a result of the war in Ukraine with inflation set to be …
Franc(ie) goes to Hollywood parity The Swiss franc rose through parity with the euro in the early hours of Monday for the first time on record. However, its foray into uncharted territory was brief, and it has since given up the gains it made in March. It …
Yesterday’s ECB announcement was more hawkish than expected, but so far the Bank’s Chief Economist Philip Lane hasn’t published a new blog post to correct the message as he has done a number of times in the past. You can read our response to the decision …
Rising inflation to keep Copom’s tightening cycle going The rise in Brazilian inflation to 10.5% y/y in February will be followed by further increases to more than 11% in the coming months on the back of higher fuel prices. While Copom hinted at its last …
Credit growth disappoints Broad credit growth was much weaker than expected last month, reversing much of the acceleration of the past few months. This suggests that more easing measures will be needed to meet the policy objectives that were recently laid …
We think UK GDP will have reversed all of December’s drop in January (07.00 GMT) Higher oil prices probably weighed on US consumer confidence this month (15.00 GMT) Clients can view our new Oil Market Monitor dashboard here Key Market Themes While the ECB …
10th March 2022
War in Ukraine worsening the tricky mix between rising inflation and slowing GDP growth Rising price expectations to force MPC to raise interest rates by 25bps A tight labour market may mean that rates rise to 2.00% next year The economic consequences of …
We estimate that the impact of higher fuel, food and potentially goods prices triggered by the war in Ukraine will add roughly 1.0%-pt to headline inflation rates across major Latin American economies this year. One key lesson from the past year is that …
In today’s monetary policy statement, the ECB said the Russian invasion of Ukraine was a watershed moment for Europe, but it concluded that it does not require a big change in monetary policy. Indeed, the Bank announced an acceleration in the pace at …
The latest surge in global commodity prices has intensified the dilemma facing the world’s major central banks: on the one hand it will push headline inflation (and inflation expectations) even higher, but on the other there’s little monetary policy can …
War in Ukraine will lift inflation above 2% But Bank has made clear it will look through transitory, cost-push inflation Kishida will probably appoint a continuity candidate to replace Kuroda While the war in Ukraine will lift Japanese inflation to the …
Surging commodity prices have led us to substantially increase our forecasts for consumer price inflation, but the negative impact of higher prices on household purchasing power, and therefore real consumption, should be more than offset by stronger …
9th March 2022
The UK is not as exposed to the economic consequences of the war in Ukraine as the rest of Europe. Even so, in response to the surge in global commodity prices caused by the war we have dramatically revised up our inflation forecasts and modestly revised …
We expect five 25bp rate hikes this year and another four next year War in Ukraine doesn’t alter policy outlook Fed likely to downplay inflationary impact of energy price surge We expect the Fed to hike interest rates by 25bp at next week’s FOMC meeting …
The National Bank of Poland (NBP) stepped up the pace of tightening today with a 75bp interest rate hike, to 3.50%, and the marked deterioration in the inflation outlook due to the war in Ukraine is likely to mean that rates rise much further in the …
8th March 2022
The State Bank of Pakistan (SBP) today left interest rates on hold at 9.75%, but the surge in oil prices mean it is likely to resume its tightening cycle soon. The consensus ahead of today’s meeting was split. Of the 46 analysts polled by Bloomberg, 21 …
