Filtered by Topic: Monetary Policy Use setting Monetary Policy
Most central banks will raise interest rates next year. But in some cases, interest rates may not rise by as much as markets are anticipating. And the People’s Bank of China will cut interest rates further. With underlying inflation set to stay …
21st December 2021
The Omicron variant has supercharged the seasonal wave of virus cases sweeping parts of the US, adding to the existing headwinds to consumption growth over the coming months. (See Chart 1.) In contrast to governments in Europe, however, there are still …
The closure of many high-contact services in Quebec yesterday is likely to soon be matched by tighter coronavirus restrictions elsewhere. That said, if other provinces also allow stores and restaurants to stay open, then the hit to GDP will be smaller …
Inflation pressures have shown no signs of letting up across Emerging Europe, with headline inflation rates surging to multi-year highs in November. Producer price inflation has hit rates not seen in decades, food inflation continues to surge and strong …
20th December 2021
Upside inflation risks are building in India. Damage to crops from bad weather has caused spikes in vegetable prices recently. And base effects aren’t helpful: food inflation will accelerate in year-on-year terms over the next few months even if prices …
The People’s Bank has taken another modest easing step with a 5bp reduction to the One-Year Loan Prime Rate, although it kept the Five-Year rate on hold. We expect more easing to follow in the coming months. The one-year rate decreased from 3.85% to …
Following yesterday’s interest rate cut in Turkey, the lira has plunged again and is now faring worse than other Emerging Europe currencies have done during recent sudden stops. There are some signs of stress emerging in the banking sector. These aren’t …
17th December 2021
Our hits and misses from a volatile 2021 2021 was another whirlwind year for Latin America. The economic recovery has been bumpy, financial markets have underperformed, and Lionel Messi finally won the Copa América (sorry Brazil fans). In the final Weekly …
We think that policymakers in China could deliver a surprise rate cut (Mon.) But the Czech central bank is likely to continue with its tightening cycle (Wed.) We forecast a strong rise in headline US durable goods orders (Thu.) Key Market Themes While the …
Poland: overheating fears, but NBP stepping up Concerns that Poland’s economy is overheating will have only been reinforced by figures this week that showed a surge in nominal wage growth and a sharp widening of the current account deficit in October. But …
Market pricing suggests investors remain unconvinced that the now-hawkish Fed will hike interest rates as high as officials are projecting, either because inflation will drop back more quickly or because real economic growth will falter. In this case, we …
African officials keeping virus-fighting gloves off Three weeks after the detection of the Omicron variant in South Africa, the government is showing no signs of changing course from its approach of minimising virus-related restrictions even as COVID-19 …
Twelve months ago we said that 2021 would bring a “quicker and fuller” recovery, still-loose monetary policy and that the pandemic wouldn’t leave a large permanent dent in the economy and the public finances. (See here .) So we have managed to notch a …
The majority of this week’s multiple central bank decisions turned out to be a little more hawkish than most had anticipated, and the ECB was no exception. We commented on its decision here , but a couple of points are worth underlining. First, the ECB …
Fed rate hikes pose little threat to Asia With the start of US monetary tightening drawing near, questions have been asked about whether Asia’s central banks will respond with tightening of their own. Hong Kong and Singapore will: their exchange rate …
Russia’s central bank (CBR) stepped up the pace of its tightening cycle today with a 100bp interest rate hike, to 8.50%, and the hawkish communications reinforce the message that it will not hesitate to raise interest rates further. We now expect a 75bp …
Shifting sands at ECB change landscape for the SNB As expected, Thursday morning’s SNB announcement did not throw up any surprises, and the ability of Swiss policymakers to play a straight bat puts England’s openers to shame. However, the mildly hawkish …
We expect growth in almost every major economy to slow next year, with the US and China in particular falling some way short of current expectations. At the same time, while headline inflation will drop sharply, core inflation will remain higher than most …
Banxico added to this week’s global central banking bonanza with a surprise 50bp hike, to 5.50%, and the widespread hawkish shift on the Board suggests that policymakers will act more aggressively to tame above-target inflation. We now expect a further …
While central banks elsewhere are becoming increasingly hawkish, the Bank of Japan kept policy loose today and is set to remain among the most dovish central banks for the foreseeable future . The Bank left its interest rate targets unchanged as widely …
The end is coming for QE In a speech this week, RBA Governor Lowe noted that the RBA’s central forecasts were consistent with the Bank tapering its bond purchase programme in February, and ending it altogether in May. But he also acknowledged two other …
UK retail sale probably rose significantly in November (07.00 GMT) Germany’s Ifo likely to have fallen again in December amid tighter restrictions (09.00 GMT) We expect Russia’s central bank to hike its policy rate by 75bp to 8.25% (10.30 GMT) Key Market …
16th December 2021
The ECB confirmed today that it will reduce the pace of its monthly asset purchases to €40bn by April next year. It plans to reduce them to €20bn by October and then continue as long as necessary. We have brought forward our forecast of the first rate …
The surprise hike in interest rates by the Bank of England today, from 0.10% to 0.25%, could just be a case of the Bank moving a bit quicker than expected, but the hawkish tone of the commentary suggests to us that it is now also willing to move a bit …
A deep-dive into Saudi Arabia’s ‘austere’ budget The Saudi 2022 Budget released earlier this week revealed that the government expects to cut spending to help it run a budget surplus for the first time since 2013. But the true fiscal stance is being …
Yesterday’s Fed meeting confirmed a hawkish shift. Turkey aside, we doubt that this is likely to cause major strains in the balance of payments of most EMs. But the Fed’s hawkish turn may cause domestic monetary policy to be tightened slightly more …
Much attention has been devoted to the Omicron-fuelled fourth COVID-19 wave ripping through South Africa but cases have picked up elsewhere in Sub-Saharan Africa as well, with especially sharp rises in Nigeria and Namibia. There are early signs of virus …
Turkey’s central bank shrugged off a currency crisis, rising inflation as well as the recent hawkish turn from the Fed and remained obedient to President Erdogan by cutting its one-week repo rate by another 100bp, to 14.00%, today. The accompanying …
While the Swiss National Bank maintained the status quo once again this morning (yawn), the Norges Bank continued its tightening cycle, as expected, and opened the door to another rate hike in March. We are sticking to our hawkish forecast that rates will …
Taiwan’s central bank (CBC) today left interest rates unchanged at 1.125% and despite rising inflation, surging property prices and the strong economy, we don’t think policymakers will be in any rush to tighten policy. Today’s decision was unanimous and …
Bank Indonesia (BI) left interest rates unchanged at 3.5% at its meeting today, and despite the prospect of the US Fed raising interest rates soon, we don’t think BI will be in any rush to tighten. The decision to leave rates unchanged came as no surprise …
The central bank in the Philippines (BSP) today left interest rates unchanged at 2.00%, and with inflation set to ease further over the coming months we think the central bank will keep monetary policy loose for the foreseeable future. Today’s decision …
The Fed delivered an even more hawkish shift at the December meeting than we had anticipated, with the pace of tapering doubled and officials now forecasting three rate hikes next year. Reflecting that new tone, we now expect the Fed to raise rates three …
15th December 2021
Chile’s central bank raised its policy rate by another 125bp yesterday, to 4.00%, and the accompanying statement, alongside today’s Monetary Policy Report , suggest that its tightening cycle will be more aggressive than we’d previously thought. We now …
We think the BoE will keep policy on hold due to renewed COVID uncertainty (12.00 GMT) We expect the ECB will signal that net asset purchases may continue indefinitely (12.45 GMT) See Key Data & Events below for a full summary of central bank policy …
Governments across the Gulf have begun to unveil their 2022 budgets and tight fiscal policy remains the order of the day. Saudi Arabia outlined a 6% cut in spending next year that is expected to push the budget into surplus for the first since 2013. And …
Virus disruptions and property downturn continue to hold back economy Industry in China continued to rebound last month from disruptions caused by power shortages while the recovery in services activity was held back by renewed virus outbreaks. A new …
The decision by Hungary’s central bank (MNB) to raise its base rate by 30bp, to 2.40%, at today’s meeting is largely symbolic. The key point is that the central bank struck a clear hawkish tone and will continue to push up interbank interest rates …
14th December 2021
Outside China, global inflation jumped from 5.0% to 5.5% in October, its highest level since 2008. And timely data point to a further rise in November. Base effects, fading ‘re-opening’ inflation, and falling commodity prices will drag on headline …
The State Bank of Pakistan (SBP) today raised interest rates by a further 100bp, which came as little surprise. What was unexpected, however, was the sudden shift in tone in the statement. Despite the worsening inflation outlook and the widening external …
The Bank of Canada’s updated policy framework will not have a material effect on policy over the next couple of years, but it does support our forecast that inflation will be slightly higher on average over the rest of this decade than it was in the …
13th December 2021
The recent batch of GDP figures showed that growth in Latin America as a whole picked up in Q3, but the region’s recovery so far has been one of the weakest in the emerging world. And growth prospects are only deteriorating, suggesting Latin America will …
Today’s US CPI data produced a relatively limited reaction in the US dollar, which is set to end the week a bit weaker against most major currencies. Attention now turns to the 17(!) central bank meetings next week, including the Fed, ECB, BoE, and BoJ. …
10th December 2021
QE to end sooner and more rate hikes in forecast Following Chair Jerome Powell’s markedly more hawkish tone at his recent congressional testimony, markets are braced for the Fed to pivot hard at next week’s FOMC meeting. Futures pricing suggests there is …
The Bank of Canada’s increased concerns about wage and cost pressures suggest it will start to tighten policy in April, especially if the government loosens fiscal policy in next week’s fall fiscal update. Bank to turn more hawkish in January In the …
The latest EM central bank meetings confirmed that policymakers in Emerging Europe and Latin America are still focused on high and rising inflation (see Chart 1), rather than any downside risk to the economic outlook from the Omicron variant. Central …
Sanctions threat rears its ugly head again The newswires have been abuzz this week with reports of a potential Russian military conflict with Ukraine and a renewed threat of US sanctions. The proposed sanctions are at the more aggressive end of the …
The government’s recently-imposed “Plan B” COVID-19 restrictions mean there is a good chance that the economy contracted in December. If the pressure on the NHS increases, restrictions might be tightened further, implying substantial downside risks to Q1 …
Interview coaching for SNB candidates This week’s announcement that Fritz Zurbrügg – one of the three members of the SNB’s Governing Board – will retire at the end of July 2022 sounded the starting gun to appoint his successor. We are not privy to the …
This week brought yet more bad news for the euro-zone economy. Although German industrial output grew by 2.8% on the month in October, driven by a rebound in the struggling auto sector, this followed months of declines and left production 6.5% below its …
