Filtered by Topic: Monetary Policy Use setting Monetary Policy
The account of October’s ECB meeting suggests that it is by no means guaranteed that net PEPP purchases will end in March. And even if they do, the Bank may well leave open the possibility of re-starting PEPP purchases later in 2022 if needed. Meanwhile, …
25th November 2021
In comparison to the chaotic scenes in the Riksdag yesterday, the Riksbank’s November meeting was a more sedate affair. While the Bank is in no rush to raise the repo rate, the insertion of a rate hike into the end of its three-year projection period …
Today’s move by the Bank of Korea is likely to mark the second hike of at least five, in a tightening cycle that began in August and will extend well into next year. The Bank of Korea’s (BoK) decision to hike its policy rate from 0.75% to 1.00% was well …
Political developments in Latin America have generally turned in investors’ favour this month. Right-wing José Antonio Kast beat his left-wing rival, Gabriel Boric, in the first round of Chile’s presidential election which buoyed local markets. Elsewhere, …
24th November 2021
Sweden’s Riksbank may strike a slightly less dovish tone at its policy meeting (08.30 GMT) Brazil’s inflation probably remained very high in early November (12.00 GMT) We expect Korea’s central bank to raise its policy rate by 25bp Key Market Themes We …
The Turkish lira’s sharp fall yesterday looks similar to the experience of sudden stops elsewhere. In those instances, central banks usually responded with interest rate hikes of around 600bp as well as other regulatory measures, which supported a …
The sharp tightening of financial conditions in Latin America and Emerging Europe will add to headwinds facing both regions and feeds into our view that recoveries there are entering a slower phase. Financial conditions in Asia have tightened too, albeit …
The repeal this month of controversial reforms aimed at liberalising the agriculture sector is arguably the biggest political setback that the Modi government has faced since coming to power in 2014. And while the direct economic impact of abandoning …
While the RBNZ only hiked rates by 25bps at today’s meeting, it is set to continue lifting rates next year. However, we think a slowdown in the economy will end the Bank’s hiking cycle with the OCR at 2.0%. Today’s 25bp hike in the OCR was correctly …
High household debt will magnify the impact of interest rate hikes on the housing market and we now expect prices across the eight capital cities to fall by 5% from H2 2023. The upshot is that the RBA is unlikely to hike rates as sharply as the financial …
We think the RBNZ will raise its policy rate by 50bp (02.00 GMT) US durable goods orders probably dropped back in October (13.30 GMT) FOMC minutes may show extent of support for a faster taper (19.00 GMT) Key Market Themes Turkey ’s currency crisis – the …
23rd November 2021
The Central Bank of Nigeria kept its benchmark rate on hold at 11.50% today, but the statement signalled that monetary policy normalisation is now on the horizon. While we don’t expect interest rates to be raised imminently, we have pencilled in 200bp of …
The sharp slowdown in the pace of hiring in the October Labour Force Survey caught the headlines, but the more important development was the sharp rise in fixed-weight average hourly earnings. Based on our seasonal adjustment, the fixed-weight index, …
The Turkish lira has plunged this morning after President Erdogan signalled yesterday that policymakers have no appetite to respond to the currency’s recent falls by hiking interest rates. Further falls in the lira are likely to lie in store and we think …
The Bank of Israel (BoI) left its policy rate on hold at 0.10% as expected at its meeting today, confirmed that it will end its bond purchase programme next month and emphasised that it will continue to intervene in the FX market for as long as necessary. …
22nd November 2021
Inflation hasn’t emerged as a concern across Emerging Asia in the same way it has in the rest of the emerging world, in part because food price inflation in Asia is much lower, but also because the region has experienced much less disruption from the …
Media reports that suggest that the Bank of Japan is losing control of short-term interest rates due to its “Special Deposit Facility” encouraging banks to park reserves at the BoJ are wide of the mark. The scheme does not threaten the viability of the …
The Loan Prime Rate (LPR) remained unchanged for the 19th consecutive month today. But officials are already easing policy in other ways, such as by relaxing constraints on mortgage lending. The PBOC has also pushed down bank funding costs via recent …
Turkey roasted In a turbulent week for Turkey, we’ve written various pieces on our services looking at the implications so we’ll summarise the key points in this Weekly . We looked at how a sell-off in the lira could damage the economy and financial …
19th November 2021
SARB joining in… This week, the South African Reserve Bank (SARB) joined its EM counterparts in tightening monetary policy, but we don’t think that policymakers in South Africa will hike interest rates as aggressively as those in Emerging Europe and Latin …
“Given these two-sided risks – weaker activity and higher inflation – the labour market story really is the crucial part of it, and we haven’t yet seen enough of that story, post furlough scheme.” ”Don’t forget what our framework is. It’s about inflation. …
Pakistan’s central bank (SBP) today raised interest rates by an aggressive 150bp and with inflation set to remain above target and the currency likely to come under further downward pressure, further hikes are likely over the coming months. While the …
RBA still a long way from raising rates RBA Governor Phillip Lowe pushed back once again this week on financial market expectations of a hike in the cash rate in 2022. Lowe reiterated that the economy would need to perform very differently from the RBA’s …
Inflation in the emerging world has generally surprised to the upside in recent months. But while inflation in most parts of Asia remains at levels which central banks are comfortable with, it has risen well above target in much of Emerging Europe and …
The fresh falls in the Turkish lira following the CBRT’s interest rate cut today have left Turkey firmly in crisis territory and echoes of previous “sudden stops” during major EM currency crises in the past are growing louder. Without an aggressive policy …
18th November 2021
Whether Jerome Powell or Lael Brainard is given the nod over the coming days, the next 12-18 months are shaping up to be an unusually challenging period for the Fed Chair. The October data showed a renewed jump in CPI inflation to a 30-year high, with …
While October’s trade data showed good exports still depressed by the recent collapse in domestic car production (see Chart 1), there is growing anecdotal evidence that the auto sector is on the cusp of a rapid rebound. Toyota said that its global …
The Riksbank is all but certain to leave its policy settings on hold next week. But against a backdrop of above-target inflation and the broader hawkish shift by policymakers elsewhere, we expect it to dial down the dovishness a bit and to perhaps further …
The South African Reserve Bank fired the starting gun on monetary policy normalisation with a 25bp hike in the repo rate, to 3.75%, today amidst growing concerns about inflation risks. But the statement lends support to our view that interest rates will …
The sharp falls in the lira over the past few days clearly weren’t enough for Turkey’s central bank to stand up to President Erdogan as it pushed ahead with a 100bp cut (to 15.00%) to its one-week repo rate. While the CBRT did signal that the easing cycle …
Bank Indonesia (BI) left interest rates unchanged at 3.5% today and appeared to signal that policy rates would remain unchanged for some time yet. A large output gap and weak inflation mean the central bank is in no hurry to follow other EM central banks …
The central bank in the Philippines (BSP) left its main policy rate on hold at 2.00% today to support the economic recovery, and with GDP still well below its pre-pandemic level, rates are set to remain low for a long time to come. The decision came as no …
There has been no let up for the Turkish lira today and all eyes are turning to the central bank’s interest rate decision tomorrow. Policymakers’ increased tolerance to falls in the lira as well as pressure from President Erdogan mean that an interest …
17th November 2021
New Zealand economy is running red hot RBNZ will hike by 50bps next week OCR will rise to 2.0% by the middle of next year The New Zealand economy is clearly overheating. Measures of underlying inflation are mostly above the ceiling of the RBNZ’s target …
Wage growth will firm up next year putting pressure on the RBA The 0.6% q/q rise in the wage price index in Q3 will provide the RBA with some confidence that rates need to remain low in the near term. But we think that wage growth will rise over 2022, …
Investors were initially disappointed following the decision by Hungary’s central bank (MNB) to raise its base rate by only 30bp (to 2.10%) today, but the hawkish post-meeting communications and a pledge to step up the pace of tightening by using other …
16th November 2021
The Turkish lira has remained under significant pressure at the start of this week and there is a growing risk that the central bank’s continued obedience to pressure from President Erdogan for interest rate cuts results in sharp and disorderly falls in …
By next year, Brazil’s public sector interest payments could be almost twice as large (at ~8% of GDP) as they were in 2020, making the challenge of stabilising the public debt-to-GDP ratio all the more difficult. A lot of the focus of the implications of …
15th November 2021
We expect the ECB to interpret a period of above-target inflation as “transient” even if it lasts for well over a year. Although it will end its emergency PEPP programme next March, we think the Bank will step up the pace of its conventional asset …
Core inflation running hot … Another week, another alarm bell for central bankers in the region. This time it was the turn of the October CPI figures, which showed further increases in Chile (to 6.0%), Mexico (6.2%) and Brazil (10.7%). Global energy …
12th November 2021
With the monetary policy normalisation debate heating up recently in South Africa, next week’s MPC meeting is likely to be a very close call. On balance, we think that the first rate hike will not be delivered just yet and the tightening cycle is likely …
Inflation hits new highs across CEE Inflationary pressures continue to strengthen across Central and Eastern Europe, keeping the onus on central banks to tighten policy aggressively. October inflation data this week provided for ugly viewing. In Hungary, …
Deciphering the SNB’s intentions on the FX front The weekly sight deposit data published by the SNB every Monday morning provide a timely, if imprecise, window into the Bank’s actions in the FX market. The last three data releases suggest that the SNB has …
Encouraging signs in Malaysia and Vietnam At face value, the 3.6% q/q contraction in Malaysia’s Q3 GDP that was revealed today was fairly gloomy. But the detail showed the economy rebounding strongly by the end of the quarter. The monthly national …
The Mexican central bank’s 25bp rate hike, to 5.00%, and the accompanying statement showed little sign that policymakers are likely to follow their peers in Latin America by upping the pace of tightening in response to strong inflation pressures. The …
Surveys point to strong inflation persisting The easing of Covid-restrictions and the reopening in New South Wales and Victoria in October prompted a lift in business confidence in the latest NAB business survey. Business confidence rebounded from 9.6 to …
Recent indicators confirm that the global recovery has continued, but also that it has entered a slower and more difficult phase. US GDP growth slowed sharply in Q3, and our China Activity Proxy suggests that there was a large contraction there. (See …
11th November 2021
We’ve been warning for a while that CPI inflation would rise further than most people expect and have recently pushed our own forecast even higher. We now think CPI inflation will rise from 3.1% in September to 4.0% in October and to almost 5.0% in April …
10th November 2021
The Bank of Thailand (BoT) left interest rates on hold today at 0.5%, and the poor outlook for the economy means rates are likely to remain low for some considerable time. Today’s decision was unanimous, and the outcome was correctly predicted by all 21 …
The sharp tightening of monetary policy in the region will strengthen the preference for savings, dampen lending growth and raise debt servicing costs next year. It is plausible to think that higher interest rates could trim 0.5-0.8%-pts off GDP growth …
9th November 2021
