Filtered by Topic: Monetary Policy Use setting Monetary Policy
Chair (pro tempore) Jerome Powell indicated in his congressional testimony today that, with Russia's attacks on Ukraine roiling markets and creating additional uncertainty, he was inclined to support a 25bp hike later this month and that the Fed should …
2nd March 2022
The Bank of Canada’s decision to raise interest rates by 25bp today was widely expected and the statement supports our view that it will follow up with another hike next month, but there was little indication that the Bank intends to start quantitative …
The spread of Russian interbank interest rates over the central bank’s policy rate – which was hiked aggressively on Monday – has widened pointing to some stress in the banking sector. But for now it is far from the levels recorded during 2008/09 and …
The RBA still sounded dovish when it kept interest rates unchanged today. However, we suspect that another upside surprise in Q1 inflation will convince the Bank that tighter policy is needed even if wage growth remains modest and have pencilled in the …
1st March 2022
The Gulf economies are key beneficiaries from the rise in energy prices caused by the Russia-Ukraine crisis. On an annualised basis, oil at $100pb would increase hydrocarbon export revenues by 7-10%-pts of GDP across the Gulf (relative to 2021). This …
28th February 2022
Elevated commodity prices on the back of the Russia-Ukraine crisis will almost certainly add to inflationary pressures across Sub-Saharan Africa. High prices for energy, metals and agricultural products that African countries export seem to have shielded …
The sanctions imposed on Russia’s central bank freeze a significant portion of its foreign currency assets, rendering at least half largely unusable. The sharp tightening of capital controls today will remain the order of the day for some time, but …
As well as a geopolitical quagmire for China’s leadership, the Russia-Ukraine conflict has become a headache for the PBOC. It has been signalling its dissatisfaction with the strength of the renminbi in recent months. But the renminbi is one of very few …
The recent jump in oil prices poses a significant upside risk to our inflation and interest rate forecasts for this year. Central banks would normally “look through” a one-off jump in the price level and try and cushion the blow to real incomes by keeping …
The ratcheting up of Western sanctions over the weekend has left Russian banks on the edge of crisis. They face both large deposit withdrawals and the prospect of a rise in non-performing loans, which are likely to cause credit conditions to tighten and …
This briefing note is intended to bring clients up to speed with developments over the weekend in the conflict in Ukraine. On the military front, while events remain in flux, the Russian advance has proceeded more slowly than had been anticipated . Kyiv, …
The good and the bad from high commodity prices The main economic fallout of the Russia-Ukraine crisis on Latin America will come via higher commodity prices, with oil and grains producers set to benefit. But it will also cause inflation to trend higher …
25th February 2022
In his speech late last night, Christopher Waller became the first Fed Governor to throw his weight behind St Louis Fed President James Bullard’s call for 100bp of rate hikes by the middle of the year. Nevertheless, we expect Chair Jerome Powell to push …
Russia’s military invasion of Ukraine has caused turmoil in financial markets across the region. Western nations have imposed sanctions on Russia, including targeting some of its largest banks and their access to the international financial system. …
The Bank of England has yet to provide any clues to how Russia’s invasion of Ukraine on Thursday may influence how far and how fast interest rates need to rise. (All our analysis on the conflict is collated on one page of our website. See here .) The …
Back in safe-haven mode Just weeks after hawkish messaging from the ECB helped to weaken the Swiss franc against the euro (see here ), the Russia-Ukraine conflict has put the currency back into full-on safe-haven mode. Perhaps unsurprisingly, the exchange …
The easing of Omicron waves, and loosening of restrictions, across Latin America will have given a lift to recoveries in recent weeks, but the fallout from the Russia-Ukraine crisis presents a fresh headwind to the region. While the recent surge in global …
24th February 2022
A large upwards revision to the Bank of Korea’s (BoK) inflation forecast as it left rates on hold today signals that more tightening is just around the corner. We still expect three more 25bp hikes in 2022, taking the policy rate to 2.00%. Today’s …
Bank sent heavy hint that March rate hike was likely Set to accompany 25 bp hike with start of quantitative tightening With inflationary pressures broadening, Bank to follow with another hike in April We expect the Bank of Canada to kick off its …
23rd February 2022
The evidence of broadening inflationary pressures and the further rise in oil prices suggest that the balance of risks to our inflation forecast lies to the upside. The January consumer price data showed a surprisingly large rise in headline inflation, to …
Net portfolio outflows from Indian financial markets have picked up over recent weeks as the growing prospects of war between Ukraine and Russia and tighter global monetary policy have caused risk appetite to sour. Outflows from the equity market have …
Inflation set to surge further; first rate hike will come in June. High household debt is a concern, but high savings rate means households have buffers. We expect rates to reach 1.75% by mid-2023. We now expect the RBA to start hiking in June in response …
The RBNZ sounded hawkish when it lifted rates today suggesting the OCR will rise further than we had previously anticipated. But a more aggressive hiking cycle will be an even bigger headwind to the economy next year, so we still think the RBNZ will …
The Russia-Ukraine crisis poses a challenge for central banks in advanced economies as they weigh the upside risks to inflation against the downside risks to activity. For now, we suspect that the two are finely balanced and have not changed our forecasts …
22nd February 2022
We expect New Zealand’s central bank to raise its policy rate by 25bp (02.00 GMT) Sign up to hear our take on South Africa’s upcoming budget here Read our latest reports on the Russia-Ukraine crisis here Key Market Themes While continued escalation of …
The economic and market consequences of a war between Russia and Ukraine will depend on the severity of the conflict, and the response of the West. But in most cases the economic impact on countries beyond Russia and Ukraine is likely to be limited. The …
If the Bank of Japan shortened the duration of its yield target, the impact on economic activity and inflation would probably be small but it could improve the long-term health of insurers and pension funds. It’s not clear though what could prompt such a …
The German IfO Survey is likely to show continued price pressures (09.00 GMT) We expect Hungary’s central bank to raise its base rate by 50bp (13.00 GMT) Read our latest reports on the Russia-Ukraine crisis here Key Market Themes We doubt that the rise in …
21st February 2022
The strength of the latest activity, labour market and inflation data prompted a shift in guidance from the Bank of Israel today in which it said that it may start a tightening cycle in the coming months. We think the firing gun will be started in April …
Yields on 10-year Swiss government bonds have moved in lockstep with those of Bunds since the start of the pandemic, and thus followed their German counterparts above zero in January. (See Chart 1.) While the Swiss yield has dropped back a bit since …
Services spending jumped to only 3% below its pre-virus level in Q4 2021 despite having begun the quarter on a weak footing with curfews still in place for bars and restaurants across many regions in October. (See Chart 1.) It will have been knocked …
The threat of sanctions has weighed on Russia’s stock market recently, but even if tensions abated we wouldn’t expect it to make big gains over the next couple of years. Russia’s equities have been volatile lately, but the big picture is that the tensions …
18th February 2022
Communications from the Bank of Canada this week suggest that, as well as raising interest rates next month, the Bank will also begin quantitative tightening (QT). With inflationary pressures broadening in January and house prices rising at the fastest …
This week saw tensions between Russia and Ukraine get close to boiling point. We have written extensively about the economic implications of a further escalation on both our Emerging Europe and Commodities services and all of our research on the topic can …
Yet another blow to Riksbank’s dovish stance Statistics Sweden made a bid for the most eyebrow-raising data release of the week with the news this morning that core inflation jumped from 1.7% in December to 2.5% in January. (See here .) We, the consensus …
The further rise in CPI inflation to 7.5% in January and hawkish comments from Fed officials have seen markets rush to price in a series of aggressive interest rate hikes this year. But recent weeks have also brought tentative signs that better news on …
17th February 2022
After a series of aggressive interest rate hikes, tightening cycles in parts of Emerging Europe and Latin America may now be nearing an end. But inflation concerns mean that policy rates will remain above their neutral level there for some time. In …
We think that the gap between the yields of 10-year German and Swiss government bonds will re-emerge over the next couple of years as the ECB tightens policy more quickly than the SNB. Prior to the pandemic, there was a spread between the yield of the …
The further rise in inflation to close to 50% y/y in January was clearly not enough to sway Turkey’s central bank (and crucially, President Erdogan) to shift back to orthodoxy as the one-week repo rate was left at 14.00% at today’s MPC meeting. We expect …
The central bank in the Philippines (BSP) left its main policy rate unchanged at 2.0% today and we expect rates to be left on hold throughout 2022. In contrast, the consensus is expecting 50bps of hikes. Today’s decision came as no surprise and was …
FOMC minutes later on Wednesday may provide clues on the pace of rate hikes (19.00 GMT) The recovery in Australia’s labour market may have stalled in January (01.30 GMT) We think Turkey’s central bank will leave rates on hold on Thursday (11.00 GMT) Key …
16th February 2022
While the simmering tensions over Ukraine could keep euro-zone inflation higher for longer than most expect, we think that it is unlikely to put the ECB off plans to start normalising policy this year – provided that there is neither a drastic military …
Business investment has been much weaker in Canada than the US since the pandemic, which helps to explain why productivity growth has lagged. There are reasons to be optimistic about the next couple of years, but we are doubtful of the Bank of Canada’s …
With equilibrium interest rates in developed markets probably still close to record lows, actual interest rates are likely to peak at a far lower level in this cycle than in most previous ones. The main risk to our forecasts is that cyclical inflationary …
Even if tensions between Russia and Ukraine abated, we wouldn’t expect risky assets to gain all that much over the rest of this year and next, mainly because we think ongoing monetary tightening would continue to keep a lid on any rally. Risky assets have …
Strong data will keep the RBNZ’s hiking cycle on track The Bank will hike rates to 2.0% by August But we think the Bank will eventually have to reverse course, cutting rates next year The New Zealand economy remained hot at the end of last year. And while …
Inflation still not a concern in China Chinese inflation continued to drop back last month. Although there are some signs of supply disruption, we think these will be temporary. Factory-gate inflation should moderate further while consumer price inflation …
Quantitative tightening (QT), namely the shrinking of central banks’ balance sheets, is likely to play an active role alongside rising interest rates in the tightening of monetary policy over the coming months. However, central banks will have to play it …
15th February 2022
The People’s Bank (PBOC) has refrained from further policy easing for the time being. It left rates unchanged today when injecting liquidity via its reverse repo operations and medium-term lending facility (MLF). But the central bank’s latest monetary …
Fed minutes may shed more light on the likelihood of a 50bp rate hike in March (Wednesday) We think the UK labour market remained tight in December (Tuesday) We expect the PBOC to cut the rate on its medium-term lending facility by 10bp (Monday) Key …
11th February 2022
