Macroeconomics

Monetary policy

Inflation “transitory”, but Fed now projects rate hikes

The Fed continued to stick to its view that the surge in inflation "largely" reflects "transitory factors", but officials revised their inflation projections up significantly for this year and the median projection now shows two 25bp interest rate hikes in 2023. In his press conference, Chair Jerome Powell argued that the Fed was still “a ways off” from achieving the substantial further progress toward its dual mandate goals that would trigger a tapering of its monthly asset purchases.

16 June 2021

15 April 2021

31 March 2021
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Taper talk a prelude to bigger policy debate

Talk of tapering in recent weeks has been premature and we suspect that most major central banks will keep up asset purchases at their current pace for the rest of the year. Assuming that tapering starts once recoveries are well underway, and that the process is well communicated, we do not foresee a repeat of the “taper tantrum” of 2013. With that being said, the sheer scale of the expansion in central banks' balance sheets over the past year will have major implications of the conduct of monetary policy in the post-pandemic era – and is likely to require further unconventional thinking by policymakers.

 

4 February 2021

CBR closing the door on its easing cycle

The central bank of Russia (CBR) left its key policy rate unchanged at 4.25% as expected today but the accompanying communications delivered a clear hawkish shift. With headline inflation likely to remain high into 2021, interest rates are set to stay on hold for some time. We now think there is just about scope for one more 25bp interest rate cut to 4.00% next year (from our previous forecast of 3.50%).

18 December 2020

Nigerian policymakers in a bind, but easing to resume

Policymakers in Nigeria kept their benchmark rate unchanged at 11.50% today, highlighting the dilemma they face due to high inflation and a weak economy. But we think that the central bank will, on balance, opt to provide more monetary stimulus in early 2021 once inflation has peaked.

24 November 2020

What will Poland’s central bank do next?

Poland’s central bank appears to have become concerned about the strength of the zloty recently and the negative impact this could have on the pace of the economic recovery, suggesting that it is likely do more to loosen policy this year. We think that this is most likely to consist of a more aggressive expansion of its asset purchase programme as well as a shift to intervene in the foreign exchange market.

2 July 2020

Lending facilities offering vital support

This month has seen a further shift among the world’s major central banks from essential liquidity provision to recovery support, with a focus on uptake of the various lending programmes. The results so far have been somewhat mixed. It seems likely that uptake of the various schemes will rise in the months ahead as the newer ones become better established and as government schemes are gradually phased out.

2 July 2020
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