Filtered by Topic: Monetary Policy Use setting Monetary Policy
One of the more eye-catching elements of the Union Budget was the pledge that the RBI would introduce a Central Bank Digital Currency (CBDC) “starting 2022 and 23”. That would make the Reserve Bank a global front-runner. Many central banks are considering …
4th February 2022
We think euro-zone retail sales fell in December (10.00 GMT) The Omicron wave may have caused US payrolls to fall in January (13.30 GMT) Virus cases may have weighed on employment in Canada as well (13.30 GMT) Key Market Themes Today’s hawkish surprises …
3rd February 2022
While the Riksbank is likely to leave the repo rate unchanged at zero next Thursday (10 th February), a hawkish shift is now long overdue. We have pencilled in a 25bp repo rate hike in November 2022, which is ahead of the economic consensus, but there is …
The Czech National Bank (CNB) slowed the pace of its tightening cycle for the second consecutive month today and the accompanying communications were less hawkish than expected and suggest that there is little appetite for much more significant …
While the ECB did not change its policy settings today, President Lagarde more than made up for it in the press conference. We now think the ECB will decide in March to taper its asset purchases faster than previously indicated, and are pencilling in 50bp …
The Central Bank of Egypt (CBE) kept interest rates unchanged at Thursday’s MPC meeting amid stronger price pressures and, if we’re right in expecting the authorities to let the pound weaken gradually this year at the same time that US Federal Reserve …
One challenge for central banks as they consider reducing the size of their balances sheets is that, if they sell assets bought during the pandemic, they will likely face a financial loss. This is less of an issue for the Bank of Canada because it has an …
While the decisions by the Bank of England to hike interest rates from 0.25% to 0.50% and to start reversing quantitative easing (QE) were both as expected, with four MPC members wanting to raise rates to 0.75% and all members deciding to sell the …
We are forecasting a hike in the reverse repo rate next week as Omicron fears fade Repo rate hikes to follow before long as inflation rises above the RBI’s target Repo rate likely to rise by more than the consensus expects this year After months of …
The statement accompanying the Brazilian central bank meeting yesterday, at which the Selic rate was hiked by 150bp to 10.75%, made clear that policymakers will slow the pace of tightening from here. But with inflation worries still prominent, we think …
Back to the early 2000s Turkey’s headline inflation rate rose to a stronger-than-expected 48.7% y/y in January due to the effects of the recent collapse in the lira and large hikes to energy tariffs and it is likely to stay close these high rates …
We expect the Bank of England to raise Bank Rate by 25bp, to 0.5% (12.00 GMT) In contrast, the ECB will probably keep its policy settings unchanged (12.45 GMT) We think the US ISM services index dropped sharply last month (15.00 GMT) Key Market Themes We …
2nd February 2022
The markets are right to be sceptical of claims that the Fed could begin its tightening cycle with a “shock-and-awe” 50bp interest rate hike next month. At a time when the yield curve is already unusually flat, an aggressive start to the tightening cycle …
Tight labour market will keep RBNZ hiking cycle going The further decline in the unemployment rate to a record low of 3.2% will keep the RBNZ on its hiking cycle in the months ahead. But we suspect the unemployment rate will rise again before long. The …
The Q4 GDP data released over the past week underline the fact that the two largest developed markets – the US and euro-zone – have so far experienced very different crises and recoveries. These differences help to explain why economic growth in the …
1st February 2022
The RBA today ended its bond purchases, revised up its inflation forecasts and no longer signalled that wage growth needs to be “materially higher” to meet its inflation target on a sustained basis. We expect the first rate hike in August . The Bank’s …
We expect the RBA to announce an end to its bond purchases (00.30 GMT) Omicron cases may have weighed on UK households’ borrowing in December (09.30 GMT) The US ISM Manufacturing Index probably fell this month (15.00 GMT) Key Market Themes While we think …
31st January 2022
Waves of the Omicron variant that spread across the region in December have subsided sharply in recent weeks. In South Africa, cases have fallen by over 85% since their mid-December peak, and the latest outbreaks have receded with similar speed elsewhere …
The surprisingly hawkish shift on Colombia’s central bank board at Friday’s meeting, when the policy rate was increased by 100bp to 4.00%, suggests that the tightening cycle will be more aggressive than we had thought. We now expect the policy rate to …
Millions of people traditionally travel across China to spend this evening, the eve of Lunar New Year, with their families. The tradition has been severely disrupted by the pandemic. Last year, amid a flare-up in COVID infections, local governments …
Nigeria’s fuel subsidies: Don’t stop me now The announcement this week by the Nigerian authorities to maintain fuel subsidies – instead of ending the scheme as planned – will limit inflation risks, but the budget deficit is set to come in wider than …
28th January 2022
Argentina & the IMF: Devil will be in the details The Argentine government’s agreement with the IMF for a new $44.5bn deal is a positive step to improve macroeconomic stability. But, at first glance, the deal seems to be based on rosy economic …
Central banks in the Gulf will have to raise interest rates in line with the Fed (which we expect to hike four times both this year and next) by virtue of their dollar pegs, adding to headwinds facing non-oil sectors. Outside the Gulf, the main risk is …
Powell fuels fears of Ratemaggedon The conventional wisdom is that Fed Chair Jerome Powell left the door open to more than four rate hikes this year in his post-FOMC press conference this week. To our minds that was a bit of a stretch. There is enormous …
Although the Bank of Canada kept policy unchanged this week, its signal that it intends to start quantitative tightening soon was more hawkish than most were expecting. In the press conference, Governor Tiff Macklem and the new Senior Deputy Governor, …
CBRT puts emphasis on “lira-isation” The upward revision to the Turkish central bank’s inflation forecast in its Q1 Inflation Report this week, from 11.8% y/y to 23.2% y/y for end-2022, was just a matter of catching up with reality. The lira has sunk 30% …
The announcement by Argentine President Fernández that the government has reached a new agreement with the IMF, the 22nd in their history, will give some relief to international bondholders in the near term. But this is just the start of a long journey to …
The raft of country-level Q4 GDP data published this morning point to the euro-zone eking out some marginal growth at the end of last year, with Germany contracting by 0.7% q/q. (See here and here .) Nor does the euro-zone appear to have made a strong …
Table of Key Forecasts Overview – Growth across much of the emerging world will be weaker this year than last, with Emerging Europe and China in particular likely to fall short of consensus expectations. The EM monetary tightening cycle will continue, …
Stage set for Riksbank mea culpa in February The 0.3% m/m increase in Sweden’s GDP Indicator in December, released this morning, left it a whopping 4.7% higher than its February 2020 level. (See Chart 1.) We will have to wait until the 28 th February for …
Overview – Sub-Saharan Africa’s economic recovery from the pandemic is likely to remain one of the weakest of any region over 2022-23 and our GDP growth forecasts are generally below the consensus. The latest virus waves already seem to be ebbing, but low …
New Zealand’s inflation surged to a 30-year high of 5.9% in Q4. And while Australia’s 3.5% was much lower, it is well above the RBA’s 2-3% target band. Trimmed mean inflation is about one percentage lower, but business surveys suggest it will rise further …
Underlying inflation set to surpass 3% The 1.0% q/q rise in trimmed mean consumer prices in Q4 was the largest since 2008 and lifted the annual rate to 2.6%. That marked the first time since 2014 that the RBA’s preferred measure of underlying inflation …
The unfavourable growth/inflation trade-off has worsened We think investors are right to price in an interest rate hike in February to 0.50% And we expect rates to rise to 1.25% by end-2022, further than most anticipate The further surge in inflation …
27th January 2022
GDP data for Germany may show that its economy contracted in Q4 (09.00 GMT) The Economic Sentiment Indicator for the euro-zone probably fell this month (10.00 GMT) We think Colombia’s central bank will increase the pace of its policy tightening (18.00 …
The South African Reserve Bank pressed ahead with its tightening cycle by raising the repo rate from 3.75% to 4.00% today as policymakers’ concerns about upside inflation risks and the global monetary policy backdrop increased. Overall, though, the …
Industry across Emerging Europe turned a corner in Q4 as auto production rebounded strongly. This comes amid signs that supply shortages are starting to ease; our proprietary shortages dashboard suggests that product shortages may have peaked. We think …
The decision by Chile’s central bank to deliver a surprisingly large 150bp rate hike yesterday, to 5.50%, supports our view that the tightening cycle will go further than the path it had previously signalled. That said, we think that the dramatic upward …
The Omicron variant is spreading quickly across Asia. Daily virus numbers are now at record levels in Korea, Singapore and the Philippines. However, the economic impact of Omicron is shaping up to be much smaller than previous virus waves. Restrictions, …
Omicron, market sell-off and Ukraine tensions won’t worry the ECB unduly. Lagarde to stress uncertainty over inflation and note rapid house prices increases. We think the Bank will prepare the ground for limited rate hikes next year. The impact of Omicron …
The rapid spread of the Omicron variant in India has caused economic activity to weaken so far in 2022. But the damage has been much less severe than during the previous two outbreaks. (See Chart 1.) Perhaps unsurprisingly, airport traffic has been one of …
Surging inflation will keep RBNZ hiking cycle underway The persistent rise in inflation to the highest levels in 30 years will be worrying the RBNZ. That’s why we expect the Bank to hike aggressively in the first half of this year. Consumer prices rose …
26th January 2022
The Fed’s announcement that it will “soon be appropriate” to raise interest rates and the numerous hints dropped by Chair Jerome Powell in the post-meeting press conference all but guarantee that a March rate hike is coming. Meanwhile, the Fed set out a …
Fed likely to hint that a first rate hike may be forthcoming in March (Wed. 19.00 GMT) We think US GDP grew by 4.6% annualised in Q4 (Thu. 13.30 GMT) We expect central banks in Chile and South Africa to hike rates further (Wed. & Thu.) Key Market Themes …
The Bank of Canada kept policy unchanged today but judges that the conditions to start raising interest rates have now been met, suggesting that it will hike its policy rate at the next meeting in March. Markets had given the Bank a green light to start …
The re-tightening of restrictions has overshadowed the start of the year in Switzerland and the Nordics, and our GDP growth forecasts for 2022 are about 0.5%-pts lower than the consensus. Nonetheless, the soft patches for activity should be short …
Overview - China will be buffeted in the first half of 2022 by COVID outbreaks and a further slowdown in property construction. Policy support should improve the picture later in the year, but mounting structural headwinds will limit the extent of any …
Trimmed mean inflation will probably climb above the upper end of the RBA’s 2-3% target band in Q1, which would add to the case for the RBA to start hiking rates in May. However, the RBA hasn’t changed its policy rate in an election month since it started …
Political risk will be a major theme once again in Latin America this year, although recent developments have given cause for cautious optimism. Chilean President-elect Boric’s appointment of Mario Marcel , the current Central Bank Governor, as the next …
25th January 2022
The Bank of Canada’s fourth-quarter Business Outlook Survey showed firms’ wage expectations at a record high, which suggests that wage growth could accelerate to far above the pre-pandemic norm this year. (See Chart 1.) With little sign yet of a rebound …
