Filtered by Topic: Monetary Policy Use setting Monetary Policy
Rates to stay on hold throughout most of next year The central bank of Taiwan (CBC) is likely to leave interest rates unchanged at its meeting on Thursday (both the consensus and ourselves expect no change), but with the economy operating well-above its …
10th December 2021
Bank to raise 2022 inflation forecast but still predict an undershoot in 2023. Policymakers will keep open possibility of using the PEPP after March. Christine Lagarde will stress uncertainty and need for flexibility. Just a day after we expect the Fed to …
9th December 2021
Emergency lending facility and corporate debt buying scheme to be extended Risks to inflation posed by worst-case Omicron scenario balanced Upside inflation surprise wouldn’t cause Bank to lose control of the yield curve While renewed virus restrictions …
We think US headline CPI inflation rose to just under 7% in November (13.30 GMT) UK GDP growth probably slowed in October (07.00 GMT) Peru’s central bank likely to hike rates by another 50bp, to 2.0% (23.00 GMT) Key Market Themes While the real has …
A hike this month does not look likely, but is possible Omicron is unlikely to prompt more QE or negative interest rates Lift off to occur early next year, but rates probably won’t rise as far as investors expect We wouldn’t completely rule it out, but we …
Omicron means that a Norges Bank rate hike next Thursday is no longer as nailed on a prospect as it once was, but we still think that policymakers will decide to raise rates to +0.50%. Meanwhile, although the SNB has let the franc rise in recent weeks, it …
Iran nuclear deal talks hit (another) bump The seventh round of talks to revive the Iran nuclear deal resumed today, having been halted on Friday as both sides failed to make headway. It appears that an agreement is a long way off, which could put upwards …
Brazil’s central bank gave a clear steer that, even though the economy entered recession in Q3 and shows little sign of growth in Q4, it will follow the 150bp hike in the Selic rate yesterday (to 9.25%) with further aggressive tightening. We now think …
The National Bank of Poland’s decision to slow the pace of its tightening cycle with a 50bp interest rate hike (to 1.75%) seems a bit inconsistent with its more hawkish tone on inflation in the accompanying press statement. Even so, we think the backdrop …
8th December 2021
The Bank of Canada’s unchanged policy rate guidance implies it could wait until the third quarter before raising rates but, given wage growth is now picking up sharply, we expect it to pull the trigger in April. As the Bank updated its forward guidance …
Fed markedly shifts stance, with inflation no longer seen as transitory Taper will be stepped up – asset purchases to end in spring rather than summer We now expect two hikes in 2022, followed by four hikes in 2023 In sharp contrast to the surprisingly …
The MPC voted to keep policy rates on hold today, opting only to introduce further small measures to withdraw liquidity from the banking sector. With the RBI still focusing primarily on supporting the fragile economic recovery, we continue to think that …
This Update answers some of the most common questions that we have received from clients during Turkey’s recent turmoil. In short, the economic fallout doesn’t look like it will be as bad as it was after the 2018 crisis. However, policymakers look less …
7th December 2021
While the emergence of the Omicron COVID-19 variant has increased the downside risks to our GDP forecasts, it has arguably increased the upside risks to our CPI inflation forecasts. The transmissibility, severity and capacity for Omicron to escape …
The RBA still sounded dovish when it kept policy unchanged policy. We think that rates will rise earlier than the Bank anticipates but later and by less than what the financial markets price in. As widely anticipated, the Bank kept its policy rate …
We expect China’s trade surplus to reach a record high RBA not likely to make major policy changes this month, may taper in early 2022 (03.30 GMT) Industrial production in Germany probably declined again in October (07.00 GMT) Key Market Themes The recent …
6th December 2021
High frequency data show that travel to retail and recreation destinations, restaurant bookings and flights have all declined in the past few weeks as coronavirus restrictions have been tightened in the face of rising hospitalisations. (See Chart 1.) It …
We expect the Bank of Korea to continue raising interest rates next year, but the worsening near-term prospects for growth mean the outlook for monetary policy has become less clear cut. Recent economic data from Korea make for disappointing reading. The …
The People’s Bank (PBOC) has just announced a cut to the required reserve ratio (RRR) for most banks, shortly after Premier Li and the Politburo each separately hinted at an increase in policy support. There is already evidence of fiscal easing, and we …
More variants more problems? It goes without saying that the emergence of the Omicron variant presents a key risk to economic recoveries. But, for the time being, we think that central banks across the region will continue to focus on tackling high …
3rd December 2021
As the labour market is nearing a full recovery and wages are rising strongly, we now expect the Bank to hike interest rates in April, rather than waiting until July, as we previously expected. Fourth-quarter GDP growth not as strong as it looks …
Powell signals turning point in inflation fight Fed Chair Jerome Powell’s congressional testimony this week was markedly more hawkish. We wouldn’t characterise it as a full-blown Volcker moment. But there could be parallels with former Chair Alan …
CEWC to discuss policy easing amid slowdown China’s leadership will gather soon for the Central Economic Work Conference (CEWC), an annual meeting that sets economic targets and policy priorities for the coming year. The discussions are private but a …
Immunity to high inflation won’t wane While there are still far more questions than answers surrounding the new Omicron variant, in a worst-case scenario we think it would temporarily derail Japan’s economic recovery and cause underlying inflation to …
Omicron is reducing socialising Just one week after the emergence of the Omicron COVID-19 variant there are lots of anecdotal reports of Christmas parties being cancelled and some tentative evidence that activity has softened. In the week before the …
Rising inflation piles pressure on CBSL The economic situation in Sri Lanka is going from bad to worse, with a surge in inflation undermining the credibility of the central bank (CBSL) and making a debt default all the more likely. Data released earlier …
“You shall not pass!” [the CHF 1.04 per euro mark] We were ahead of the curve in arguing that the SNB would wave goodbye to the implicit ceiling of CHF 1.05 per euro that it defended in earnest during the early stages of the pandemic. (See here .) …
In contrast to those at the US Fed, ECB policymakers are not ready to retire their argument that the current bout of high inflation is temporary. Indeed, Vice President Luis de Guindos said this week that “the high rate of inflation we’re experiencing …
Inflation rises again, set to breach 25% soon The rise in Turkey’s headline inflation rate to 21.3% y/y in November will almost certainly be followed by further chunky increases over the coming months that take it to 25-30% as the effects of the recent …
A week ago we argued that the reopening of the border was unlikely to ease labour shortages much. Indeed, the government has now delayed the re-entry of the 235,000 visa holders stuck overseas until mid-December to ward off the Omicron variant. However, …
Finance Ministry could respond to new virus wave India reported its first cases of the Omicron variant yesterday. Plenty of uncertainty remains about the new variant, but we outlined some of the key factors that could determine the extent of the economic …
The South African rand has rallied over the past few days after reaching its lowest level against the US dollar in more than a year following last week’s news about the Omicron variant. Even if the new variant doesn’t lead to a major round of renewed …
1st December 2021
We expect the Caixin Services PMI to show activity slowed further in China (01.45 GMT) We think that unemployment in the euro-zone continued to edge lower (10.00 GMT) Output in Brazil probably rose a bit last quarter but remains very weak (12.00 GMT) Key …
Economy a bit stronger than expected but BC floods and Omicron are downside risks Bank to keep forward guidance on policy rate unchanged despite rising wage growth We do not expect the Bank to significantly alter its monetary framework later this month …
MPC likely to stand pat next week as Omicron fears build Committee likely to announce further measures to drain bank liquidity… …laying the groundwork for policy rate hikes from mid-2022 Whereas many EM central banks have been hiking rates aggressively, …
The emergence of the Omicron strain of COVID-19 , a worrying new variant first detected in southern Africa, has already rattled financial markets. The economic impact on Sub-Saharan Africa and around the world will depend on how transmissible it is, the …
30th November 2021
We think that China’s Caixin manufacturing PMI edged up in November … (01.45 GMT) … but the US ISM manufacturing index was probably broadly stable (15.00 GMT) Headline inflation in Switzerland likely to have fallen slightly last month (07.30 GMT) Key …
The Middle East and North African economies are potentially among the most vulnerable to the fallout from the Omicron strain of COVID-19 . The North African economies as well as Lebanon and Jordan have low vaccination rates and large tourism sectors, …
COVID-19 outbreaks have diverged across the region in the past month, with new cases and deaths falling recently in the hard-hit Eastern European countries of Romania, Bulgaria and Latvia, stabilising in Russia and Turkey but rising sharply in parts of …
Economy rebounding rapidly from lockdowns Inflation and wage growth set to surprise to the upside RBA to end QE in August; first rate hike in early-2023 The rapid rebound in activity from the recent lockdowns coupled with a further pick-up in underlying …
The global spread of a more transmissible COVID variant is a particular challenge for a country trying to remain COVID-free. But after nearly two years of success suppressing infections domestically (see Chart 1), the bar to changing course before better …
29th November 2021
The restrictions announced by the government on Saturday in response to the new Omicron COVID-19 variant increase the downside risks to our GDP forecasts and the chances that the Bank of England delays increasing interest rates until next year. And …
Amid all the uncertainty caused by the arrival of Omicron (for our initial thoughts see this Global Update ), one thing we can say with some conviction is that the new variant is further bad news for the region’s beleaguered tourism industry. Up until …
While the RBNZ has lifted interest rates by 50bp and signalled that as much as 200bp of tightening is still to come, the RBA’s central scenario remains that interest rates won’t be raised until 2024. While we have pencilled in the first RBA rate hike for …
With cases of the new Omicron variant being reported on several continents now, there is a good chance that it is already present in the United States. We still know almost nothing definitive about whether Omicron is more transmissible or deadly than …
28th November 2021
New face but same gradual tightening at Banxico Mexican President López Obrador delivered another (unhappy) surprise to markets this week by unexpectedly changing his nomination for Banxico’s next governor from Arturo Herrera to Victoria Rodríguez. But we …
26th November 2021
Turkey tumult Safe to say that this week has been dominated by the collapse in the Turkish lira and we’ve been helping clients navigate through the crisis and its implications across our services. All of the research that we’ve published can be found here …
It is too early to judge how serious the B.1.1.529 variant will turn out to be (though see our initial thoughts here ) but it has already caused European equities to fall by over 2% as travel and energy stocks in particular have tanked on fears of new …
Recent hikes not the start of Asian tightening cycle Attention over the past week has been on the region’s more hawkish central banks, following rate hikes in Korea and Pakistan . Both countries, along with Sri Lanka (which unexpectedly left rates …
We think the end of lockdowns boosted Australia’s retail sales in October (00.30 GMT) Switzerland’s GDP growth probably slowed a bit in Q3 (08.00 GMT) Find our latest analysis of Turkey’s currency crisis here Key Market Themes While the accounts of the …
25th November 2021
