Filtered by Topic: Monetary Policy Use setting Monetary Policy
RBA Governor Lowe noted in a recent speech that the Bank no longer has specific criteria for deciding whether inflation is sustainably in the target range. But he highlighted that along with the actual rate of inflation and the outlook, the breadth of …
7th March 2022
This Update discusses three ways in which the outbreak of war in Ukraine has called into question our asset allocation views. While the situation is fluid and the outlook especially uncertain, it also provides our initial thoughts on how things might play …
4th March 2022
Governor Tiff Macklem’s speech on Thursday seemed much more hawkish than the policy statement that accompanied the Bank of Canada’s decision to raise interest rates by 25 bp this week. (See here .) Macklem said the evidence of broadening inflationary …
The war in Ukraine has prompted us to revise our forecasts for euro-zone GDP, inflation and monetary policy. Russia’s downturn in 2015 had no obvious impact on euro-zone GDP and Russia has become less important as an export market since then. But we …
Bank of Thailand in a tricky spot Inflation has become a major policy headache for the Bank of Thailand (BoT) after figures released today showed that the headline rate surged from 3.2% y/y in January to 5.3% in February, the highest rate since 2008. (See …
With inflation surging, the currency coming under downward pressure and the country on the verge of a sovereign default, today’s 100bp rate hike in Sri Lanka won’t be the last in the current cycle. We have long said that the Central Bank of Sri Lanka …
Supply disruptions easing, but risks are high There are signs that supply disruptions in India have eased a touch. The PMIs for February released this week show that the backlog of works components have stabilised after rising sharply since the middle of …
Governor Kuroda’s successor to be more hawkish PM Kishida’s decision to replace arch-dove Kataoka Goushi with centrist Takata Hajime from Okasan Securities at the Bank of Japan could create a slightly less dovish policy board. But it probably won’t make …
GDP will return to pre-virus trend by mid-year The 3.4% q/q rise in Q4 GDP left output just 1.4% below its pre-virus trend, but the recovery remains very lopsided. GDP outside the heaviest-hit sectors has risen by 4.5% since Q4 2019 even as output in …
Omicron outbreak probably weighed on euro-zone retail sales in January (10.00 GMT) We think US non-farm payrolls rose by 600,000 last month (13.30 GMT) Read our latest research on the economic impact of the war in Ukraine here Key Market Themes So far, …
3rd March 2022
ECB will stress caution and flexibility in light of Ukraine war. New ECB forecasts will show lower growth, much higher inflation. Policymakers will still plan to resume normalisation when and if the situation is clearer. At next week’s monetary policy …
Bank Negara Malaysia (BNM) today left its main policy rate on hold and the dovish tone of its statement supports our non-consensus view that rates will remain on hold throughout 2022. We think the market and consensus are wrong to expect hikes this year. …
Inflation smashes through 50% Turkey’s headline inflation rate leapt again to reach 54.4% y/y in February due to the combination of the lira’s collapse in late-2021 as well as higher domestic energy prices and a large minimum wage hike at the start of …
Chair (pro tempore) Jerome Powell indicated in his congressional testimony today that, with Russia's attacks on Ukraine roiling markets and creating additional uncertainty, he was inclined to support a 25bp hike later this month and that the Fed should …
2nd March 2022
The Bank of Canada’s decision to raise interest rates by 25bp today was widely expected and the statement supports our view that it will follow up with another hike next month, but there was little indication that the Bank intends to start quantitative …
The spread of Russian interbank interest rates over the central bank’s policy rate – which was hiked aggressively on Monday – has widened pointing to some stress in the banking sector. But for now it is far from the levels recorded during 2008/09 and …
The RBA still sounded dovish when it kept interest rates unchanged today. However, we suspect that another upside surprise in Q1 inflation will convince the Bank that tighter policy is needed even if wage growth remains modest and have pencilled in the …
1st March 2022
The Gulf economies are key beneficiaries from the rise in energy prices caused by the Russia-Ukraine crisis. On an annualised basis, oil at $100pb would increase hydrocarbon export revenues by 7-10%-pts of GDP across the Gulf (relative to 2021). This …
28th February 2022
Elevated commodity prices on the back of the Russia-Ukraine crisis will almost certainly add to inflationary pressures across Sub-Saharan Africa. High prices for energy, metals and agricultural products that African countries export seem to have shielded …
The sanctions imposed on Russia’s central bank freeze a significant portion of its foreign currency assets, rendering at least half largely unusable. The sharp tightening of capital controls today will remain the order of the day for some time, but …
As well as a geopolitical quagmire for China’s leadership, the Russia-Ukraine conflict has become a headache for the PBOC. It has been signalling its dissatisfaction with the strength of the renminbi in recent months. But the renminbi is one of very few …
The recent jump in oil prices poses a significant upside risk to our inflation and interest rate forecasts for this year. Central banks would normally “look through” a one-off jump in the price level and try and cushion the blow to real incomes by keeping …
The ratcheting up of Western sanctions over the weekend has left Russian banks on the edge of crisis. They face both large deposit withdrawals and the prospect of a rise in non-performing loans, which are likely to cause credit conditions to tighten and …
This briefing note is intended to bring clients up to speed with developments over the weekend in the conflict in Ukraine. On the military front, while events remain in flux, the Russian advance has proceeded more slowly than had been anticipated . Kyiv, …
The good and the bad from high commodity prices The main economic fallout of the Russia-Ukraine crisis on Latin America will come via higher commodity prices, with oil and grains producers set to benefit. But it will also cause inflation to trend higher …
25th February 2022
In his speech late last night, Christopher Waller became the first Fed Governor to throw his weight behind St Louis Fed President James Bullard’s call for 100bp of rate hikes by the middle of the year. Nevertheless, we expect Chair Jerome Powell to push …
Russia’s military invasion of Ukraine has caused turmoil in financial markets across the region. Western nations have imposed sanctions on Russia, including targeting some of its largest banks and their access to the international financial system. …
The Bank of England has yet to provide any clues to how Russia’s invasion of Ukraine on Thursday may influence how far and how fast interest rates need to rise. (All our analysis on the conflict is collated on one page of our website. See here .) The …
Back in safe-haven mode Just weeks after hawkish messaging from the ECB helped to weaken the Swiss franc against the euro (see here ), the Russia-Ukraine conflict has put the currency back into full-on safe-haven mode. Perhaps unsurprisingly, the exchange …
The easing of Omicron waves, and loosening of restrictions, across Latin America will have given a lift to recoveries in recent weeks, but the fallout from the Russia-Ukraine crisis presents a fresh headwind to the region. While the recent surge in global …
24th February 2022
A large upwards revision to the Bank of Korea’s (BoK) inflation forecast as it left rates on hold today signals that more tightening is just around the corner. We still expect three more 25bp hikes in 2022, taking the policy rate to 2.00%. Today’s …
Bank sent heavy hint that March rate hike was likely Set to accompany 25 bp hike with start of quantitative tightening With inflationary pressures broadening, Bank to follow with another hike in April We expect the Bank of Canada to kick off its …
23rd February 2022
The evidence of broadening inflationary pressures and the further rise in oil prices suggest that the balance of risks to our inflation forecast lies to the upside. The January consumer price data showed a surprisingly large rise in headline inflation, to …
Net portfolio outflows from Indian financial markets have picked up over recent weeks as the growing prospects of war between Ukraine and Russia and tighter global monetary policy have caused risk appetite to sour. Outflows from the equity market have …
Inflation set to surge further; first rate hike will come in June. High household debt is a concern, but high savings rate means households have buffers. We expect rates to reach 1.75% by mid-2023. We now expect the RBA to start hiking in June in response …
The RBNZ sounded hawkish when it lifted rates today suggesting the OCR will rise further than we had previously anticipated. But a more aggressive hiking cycle will be an even bigger headwind to the economy next year, so we still think the RBNZ will …
The Russia-Ukraine crisis poses a challenge for central banks in advanced economies as they weigh the upside risks to inflation against the downside risks to activity. For now, we suspect that the two are finely balanced and have not changed our forecasts …
22nd February 2022
We expect New Zealand’s central bank to raise its policy rate by 25bp (02.00 GMT) Sign up to hear our take on South Africa’s upcoming budget here Read our latest reports on the Russia-Ukraine crisis here Key Market Themes While continued escalation of …
The economic and market consequences of a war between Russia and Ukraine will depend on the severity of the conflict, and the response of the West. But in most cases the economic impact on countries beyond Russia and Ukraine is likely to be limited. The …
If the Bank of Japan shortened the duration of its yield target, the impact on economic activity and inflation would probably be small but it could improve the long-term health of insurers and pension funds. It’s not clear though what could prompt such a …
The German IfO Survey is likely to show continued price pressures (09.00 GMT) We expect Hungary’s central bank to raise its base rate by 50bp (13.00 GMT) Read our latest reports on the Russia-Ukraine crisis here Key Market Themes We doubt that the rise in …
21st February 2022
The strength of the latest activity, labour market and inflation data prompted a shift in guidance from the Bank of Israel today in which it said that it may start a tightening cycle in the coming months. We think the firing gun will be started in April …
Yields on 10-year Swiss government bonds have moved in lockstep with those of Bunds since the start of the pandemic, and thus followed their German counterparts above zero in January. (See Chart 1.) While the Swiss yield has dropped back a bit since …
Services spending jumped to only 3% below its pre-virus level in Q4 2021 despite having begun the quarter on a weak footing with curfews still in place for bars and restaurants across many regions in October. (See Chart 1.) It will have been knocked …
The threat of sanctions has weighed on Russia’s stock market recently, but even if tensions abated we wouldn’t expect it to make big gains over the next couple of years. Russia’s equities have been volatile lately, but the big picture is that the tensions …
18th February 2022
Communications from the Bank of Canada this week suggest that, as well as raising interest rates next month, the Bank will also begin quantitative tightening (QT). With inflationary pressures broadening in January and house prices rising at the fastest …
This week saw tensions between Russia and Ukraine get close to boiling point. We have written extensively about the economic implications of a further escalation on both our Emerging Europe and Commodities services and all of our research on the topic can …
Yet another blow to Riksbank’s dovish stance Statistics Sweden made a bid for the most eyebrow-raising data release of the week with the news this morning that core inflation jumped from 1.7% in December to 2.5% in January. (See here .) We, the consensus …
The further rise in CPI inflation to 7.5% in January and hawkish comments from Fed officials have seen markets rush to price in a series of aggressive interest rate hikes this year. But recent weeks have also brought tentative signs that better news on …
17th February 2022
After a series of aggressive interest rate hikes, tightening cycles in parts of Emerging Europe and Latin America may now be nearing an end. But inflation concerns mean that policy rates will remain above their neutral level there for some time. In …
