Filtered by Topic: Monetary Policy Use setting Monetary Policy
The RBNZ’s decision to begin its hiking cycle while Auckland is still in lockdown highlights that the New Zealand economy is on the brink of overheating. And as restrictions ease, we think the Bank will continue hiking rates in the months ahead. Today’s …
6th October 2021
Korean consumer prices saw another strong m/m rise last month, and while we don’t think this is a major cause for concern it still adds weight to our view that the central bank will hike rates again later this year. Data released today show that while the …
The National Bank of Romania (NBR) raised its policy rate by 25bp to 1.50% at today’s meeting, and the backdrop of rising inflation, large twin deficits and currency weakness means that further rate hikes are likely to be delivered over the next 12 …
5th October 2021
The RBA today stuck to its guns by predicting that rates won't rise until 2024, but our view that inflation will remain higher for longer means it will happen in early-2023 already . As universally anticipated, the Bank kept its interest rate and asset …
Mexico & Colombia: pace of tightening to diverge Central banks in Mexico and Colombia raised their policy rates by 25bp yesterday and more rate hikes are in the pipeline in both economies. The pace of tightening will remain gradual in Mexico but, similar …
1st October 2021
United façade at the Riksbank set to be tested Against the backdrop of the recent hawkish shifts by the US Fed and the Bank of England – and the start of hikes in Norway – the release of the minutes from the Riksbank’s last policy meeting underline that …
Rising living costs will eventually worry RBA We brought forward our forecast for the Bank of England’s first rate hike from 2023 to 2022 last week as second-round effects of higher commodity prices have started to emerge. A similar story is unfolding in …
While the announcement of a 10bp interest rate cut by Denmark’s Nationalbank this afternoon seemingly goes against the grain of the recent hawkish shifts by the US Fed and Bank of England, it is the logical culmination of sustained upward pressure on the …
30th September 2021
We still don’t have enough data to judge the extent of the disruption to China’s factory output from power rationing with much certainty. But with supply chains already stretched, even a modest hit to output, which producers downstream might normally …
The Czech National Bank (CNB) stepped up the pace of its tightening cycle with a 75bp interest rate hike, to 1.50%, at today’s meeting and its hawkish communications signalled that further aggressive hikes will be delivered in the coming months to tackle …
The threat of messy outcomes to Sub-Saharan Africa’s debt problems seems to have diminished recently. In Zambia, the new administration vowed to tackle debt problems and press on with restructuring talks under the G20’s Common Framework. And Ethiopia, …
The RBA expects headline inflation to drop back from 3.8% in Q2 to 1.5% by mid-2022. By contrast, we now only expect it to fall to 2.5% over this period, reflecting the pass-through from soaring coal, gas and food prices. We also expect the recent …
We think industrial production in Japan increased last month (00.50 BST) China’s PMI data will probably point to further loss of momentum in September (02.00 BST) Central banks in Czechia, Mexico, and Colombia likely to hike rates Key Market Themes …
29th September 2021
Concerns that price pressures will become sustained have prompted a hawkish shift. We have brought forward anticipated rate hikes in the US, UK and some EMs. But we doubt that tightening will go as far as most central banks have implied. There has been a …
Over the past month or so, the central banks of Korea, Pakistan and Sri Lanka have all raised interest rates, but we don’t think other countries will be in any rush to follow suit. There is certainly little to worry about on the inflation front. …
Economies across Emerging Europe enjoyed a rapid rebound in Q2, but all the signs suggest that the recovery has come off the boil in Q3. Surveys of sentiment in services sectors have started to flatline and, in some cases, fall. What’s more, hard activity …
The Bank of Thailand (BoT) left interest rates on hold today at 0.5%, and we have taken out the rate cut we originally had pencilled in for this year. However, rate hikes are still a long way off. Unlike the central bank’s August meeting when two of the …
RBI likely to keep rates on hold next week as inflation pressures eases Admittedly, some liquidity draining measures could be announced… …but these are likely to be marginal tweaks rather than signs of policy tightening Policy rates are highly likely to …
New Zealand has eased its strict lockdown RBNZ still keen to lift rates in October Rates will be gradually raised to 1.50% by the middle of next year New Zealand has slowed the spread of the Delta variant and eased its lockdown, which stopped the RBNZ …
Inflation in many economies in the region has risen to multi-year highs in recent months. In general, this has been driven higher by a combination of unfavourable base effects from the pandemic, as well as some re-opening inflation and the effects of …
28th September 2021
Falling new virus cases and the lifting of restrictions have boosted economies across the region in Q3, but the deteriorating external backdrop will put a lid on growth from here. Even with an orderly resolution to the Evergrande saga , a slowdown in …
Labour market should cope well with impact of lockdowns Slump in net migration means that staff shortages won’t ease soon Wage growth still set to accelerate next year, paving way for rate hikes in early-2023 With the latest lockdowns set to end next …
Labour shortages have intensified in recent months, which could both act as a brake on the recovery and lead to a stronger acceleration in wage growth. According to the CFIB Business Barometer, the share of small firms suffering from labour shortages …
27th September 2021
Weak recovery suggests further easing is likely Pakistan’s decision to raise interest rates earlier this week came as a surprise to many ( although not to us ), and we think another surprise could be in store at the Bank of Thailand’s scheduled meeting on …
24th September 2021
Chile and Peru most exposed to Evergrande fears Fears over Evergrande, a highly-leveraged Chinese property developer, rocked global markets earlier this week. Latin American economies are among the most exposed to problems in China’s property sector. In …
Appetite for further monetary tightening wanes Central banks have started to slow tightening cycles in recent weeks and, in Turkey’s case, begin cutting interest rates. As inflation pressures ease, this pattern is likely to continue. But the Czech …
There are two reasons why we now think the Bank of England’s Monetary Policy Committee (MPC) will hike interest rates in 2022 rather than in 2023. First, underlying wage growth and inflation expectations have risen by more than we expected. These are …
This week, some of the world’s major central banks, from the US Fed to the Bank of England , hinted that they will be shifting towards tighter monetary policy in the months ahead. Indeed, the Norges Bank this week hiked its policy rate, the first G10 …
The phoney interest rate ‘war’ in Norway is over Norwegian policymakers would make terrible poker players because they have a habit of telling you what they will do and do not bluff. Accordingly, having finally started the long-awaited and well-signalled …
This week the focus was on the Fed, which appears intent on announcing a QE taper at the next FOMC meeting in early November. Next week the focus will shift to fiscal policy, with the Democrat’s plans to boost infrastructure and social welfare spending …
Rising house prices threaten financial stability The 17.4% annual rise in house prices in August was the strongest in nearly two decades and prices are set to rise the most since the 1980s by year-end. A speech by RBA Assistant Governor Bullock this week …
Several EM central banks have raised interest rates in the past couple of months on the back of growing inflation concerns (including many in Latin America) and/or strong economic recoveries (parts of Central Europe, Korea). Hiking cycles look set to …
23rd September 2021
Policymakers in South Africa kept their benchmark rate unchanged at 3.50% today and concerns about lasting economic damage from the pandemic and recent unrest appear to be growing. Against a backdrop of a sluggish recovery and weak inflation, we think the …
While rates were left at +0.10% in an 9-0 vote and the Bank of England’s target stock of purchased assets at £895bn, today’s Monetary Policy Committee (MPC) policy statement suggests that the Bank is moving closer to raising interest rates. As such, we …
Turkey’s central bank (CBRT) unexpectedly cut its one-week repo rate by 100bp to 18.00% today, despite the further rise in inflation in August, and we now think that further aggressive easing is likely over the coming year. But this could ultimately sow …
We think a sustained period of inflation in the region of 3-4% over the coming years could be dealt with relatively easily by central banks. But if inflation were to rise much further than this, policymakers would have to raise rates more aggressively and …
Taiwan’s central bank (CBC) today left interest rates unchanged at 1.125%, and we think policymakers will be in little rush to start tightening policy despite the strong economy. Today’s decision was unanimous and was correctly predicted by all 25 …
This morning’s policy decision double-header played out as planned, with the Swiss National Bank maintaining the status quo and the Norges Bank finally pulling the trigger on its tightening cycle. But while rate hikes in Switzerland are many years away, …
The fact that the central bank in the Philippines (BSP) left its main policy rate on hold at 2.00% today, despite the very weak state of the economy, suggests further easing is unlikely. While we are now taking out the cuts we had pencilled into our …
The statement from yesterday’s Brazilian central bank meeting, at which the Selic rate was raised by 100bp (to 6.25%), made clear that Copom is on the warpath to stop inflation expectations rising. With the inflation outlook worsening, we now think that …
High and rising household debt in Australia and New Zealand will limit central banks’ scope to hike interest rates. The upshot is that we expect the RBNZ to hike rates by a modest 125bp in the tightening cycle set to start next month, while the RBA’s …
Fed officials gave a heavy hint today that the QE taper will be formally announced in November and, presumably in response to concerns that the surge in inflation won't be as transitory as they originally hoped, there were notable increases in the median …
22nd September 2021
Speculation is building that India will be included in major global bond indices over the next year or so. If that happens, it would highlight the local bond market’s growing maturity and be cast as a coup by the government, for which bond index inclusion …
The Bank of Japan left policy settings unchanged today and while a new Prime Minister could appoint a more hawkish BoJ Governor, we expect the Bank to keep interest rates unchanged for years. As universally anticipated, the Bank of Japan kept its interest …
Commercial banks left the Loan Prime Rate (LPR) on hold for a 17th consecutive month today. But with the economy losing steam and concerns around the property sector growing, we think policy rate cuts by the PBOC could come as soon as next month. The …
The latest data provide mixed signals on the impact that the Delta variant is having on the economy. The high frequency indicators for high contact services suggest that activity levelled out in August and weakened a little in early September (See Chart …
21st September 2021
Probably too soon for a Fed tapering announcement (19.00 BST) China’s loan prime rate (LPR) likely to be steady for now, but to fall before long (02.30 BST) We expect Brazil’s central bank to hike its policy rate by 100bp (22.00 BST) Key Market Themes …
Problems at Evergrande in China have dominated the headlines recently, but (sovereign) debt risks are brewing in other EMs too. Concerns about higher government spending and rising public debt levels are building in parts of Latin America . Meanwhile, …
Hungary’s central bank (MNB) slowed the pace of its tightening cycle today, raising its base rate by a smaller-than-expected 15bp to 1.65%, and the post-meeting communications signalled that future rate hikes will remain at the smaller end of the …
Bank Indonesia today left its policy rate unchanged at 3.5% and signalled that it is likely to leave rates on hold for a prolonged period of time. With the economy rebounding on the back of a fall in virus cases but the rupiah holding up well, we think …
