Filtered by Topic: Monetary Policy Use setting Monetary Policy
Hawkish shifts by the RBA and the RBNZ in recent weeks have prompted us to forecast an even more aggressive hiking cycle by both central banks in the months ahead. Both central banks hiked rates by 50bp at their latest meeting and we have now pencilled in …
9th June 2022
Real economic growth is slowing rather than collapsing in the face of the twin drags of higher inflation and rising interest rates. The Chancellor’s latest fiscal handout will help support GDP in the second half of the year. And with the Prime Minister …
8th June 2022
With some important exceptions, including the German manufacturing sector, economic activity seems to have held up a little better than we had feared so far in Q2. We don’t think this will last. The recent strength has been helped by the re-opening of …
7th June 2022
GDP across Central Europe expanded strongly in Q1 and the latest figures for March and April suggest that activity has remained resilient since the war in Ukraine started. Russia’s economy has not (yet) fallen off a cliff as had been expected. Industry in …
31st May 2022
African central banks have turned up their hawkish noises over the past month. Policymakers in Nigeria and Kenya delivered their first interest rate hikes following pandemic-era cuts. In South Africa, the Reserve Bank stepped up the pace of its tightening …
The first round of Colombia’s presidential election has set up a close race between left-wing Gustavo Petro and populist Rodolfo Hernández in the second round vote on 19 th June. The vote was a major repudiation of the pro-business governments that have …
30th May 2022
Talks between Pakistan and the IMF ended last week without agreement, but the subsequent decision by the government to cut back fuel subsidies has cleared one of the major hurdles towards a deal being agreed. Financial markets in the country reacted well …
China’s beleaguered property developers may soon see some respite both from their inability to borrow at reasonable rates and from sliding property sales. Last week, PBOC Governor said that the government would “correct the contraction in credit to …
The RBI kicked off its tightening cycle this month with a 40bp hike to the repo rate (to 4.40%) in an unscheduled policy announcement. The minutes to that meeting show that several MPC members are keen to frontload policy tightening to keep a lid on …
27th May 2022
With core CPI inflation still rising, the Bank of Canada has no choice but to continue hiking its policy rate “forcefully’ back toward neutral. All three of the core measures tracked by the Bank are now above the 3% ceiling of the target range. (See Chart …
26th May 2022
A majority of central banks in the region hiked interest rates over the past month. In the Gulf, central banks raised interest rates in line with the Federal Reserve, although this won’t necessarily curb demand in the region. Credit growth tends to …
Upside surprises to inflation coupled with a hawkish Fed have prompted aggressive monetary policy responses by central banks across the emerging world over the past month. Policymakers in Czechia , Romania, Chile and Egypt raised interest rates by more …
23rd May 2022
The Bank of Japan’s attempt to relieve pressure on the Yield Curve Control framework by offering to buy an unlimited amount of 10-year Japanese government bonds (JGBs) at yields of 0.25% for as long as necessary appears to have done the trick so far. …
The strength of the hard activity data for April refutes the recent message from financial markets that the economy is at risk of imminent recession. The solid gain in control group retail sales, together with upward revisions to past months leaves the …
18th May 2022
We now expect Australia’s inflation to rise by more than 6% this year. Even allowing for an acceleration in earnings growth and a further solid rise in employment as immigration resumes, that will result in the first annual fall in real household …
17th May 2022
Just as policymakers at the ECB are becoming more concerned about inflation expectations (see here ), the rise in expectations in Sweden is giving the Riksbank plenty to fret about too. The Bank’s preferred measure – gleaned from a survey of money market …
13th May 2022
Recent data have shown the firmest evidence yet that high inflation is damaging real consumer spending in advanced economies. Real retail sales fell in the US, UK, and euro-zone in March, while increases in Australia and Japan reflected temporary rebounds …
The weaker economic outlook triggered by the surge in CPI inflation to a 30-year high of 7.0% in March has yet to put a dent in businesses own expectations for their selling prices. The Bank of England’s Decision Maker Panel survey found that in April …
10th May 2022
The latest data suggest that the increase in inflation is becoming more broad-based and persistent. While headline inflation only edged up in April, the core measure jumped to 3.5%. A range of alternative measures of underlying inflation, including our …
5th May 2022
Central banks across the region have recently turned more hawkish. Over the past month or so, policymakers in Korea, Taiwan, Singapore, Sri Lanka, India and Pakistan have all tightened policy. Governor Benjamin Diokno in the Philippines has also hinted …
29th April 2022
President Xi has reportedly told officials to ensure that China’s real GDP growth exceeds that of the US this year. This is likely to happen on paper. The published data usually confirm that growth targets have been met and the official target this year …
Tighter global monetary conditions and spillovers from the war in Ukraine have caused public debt problems to worsen in several emerging markets, and the MENA region is not immune to this. Within the region, Tunisia’s public debt position is most fragile …
28th April 2022
The key policy development this month was the introduction of a new Standing Deposit Facility (SDF), through which the RBI will drain excess banking sector liquidity. The SDF now provides the floor for the interest rate corridor, previously set by the …
Surging commodity prices have pushed up inflation across the region and we expect inflation to hit fresh multi-year highs in the coming months. A loss of Russian gas supplies should not lead to rationing in Poland, but it will have a big impact in …
Fiscal positions across Sub-Saharan Africa have been a persistent source of concern since the onset of the pandemic – and in some cases, even before. And the commodity price moves resulting from the war in Ukraine will be unfavourable for public finances …
Inflation continues to march higher in Latin America, most recently driven by surging food prices owing to poor domestic weather conditions and rising global agricultural prices. This has led to unrest in Peru, and there is growing political pressure to …
27th April 2022
The further fall in the unemployment rate in March, to a multi-decade low of 5.3%, raises the risk that a sharp acceleration in wage growth will exacerbate inflationary pressures, at a time when consumer price inflation is already approaching 7%. Business …
The perfect storm of surging commodity prices due to the war in Ukraine and the hawkish shift by major DM central banks has pushed a few frontier markets to the brink of sovereign default . Sri Lanka has already announced the suspension of debt payments …
22nd April 2022
Inflation is surging in both Australia and New Zealand. That is putting pressure on central banks to hike interest rates to slow the economy and curb inflation. But both the RBNZ and the RBA highlighted waning consumer confidence at their April meeting. …
21st April 2022
While we are confident that inflation will fall back sharply in the second half of this year, that will not stop the Fed delivering a series of 50bp rate hikes at its upcoming meetings. Although gasoline prices have stabilised this month, though the surge …
20th April 2022
With all domestic restrictions gone and the booster rollout further severing the link between cases and deaths, the conditions for a reopening bounce are in place. Moreover, consumers have ample room to splash the cash. The household savings rate remained …
19th April 2022
World GDP appears to have expanded at a below-trend pace in Q1 as high inflation limited real consumer spending and supply shortages and Omicron waves continued to disrupt activity. March’s broad-based drop in consumer confidence suggests that consumer …
14th April 2022
Efforts to stabilise China’s financial markets have been a short term success. Although in aggregate March was one of the worst months on record for portfolio outflows from onshore markets, there were signs of a shift after Vice Premier Liu He’s promise …
31st March 2022
High commodity prices caused by the war in Ukraine have driven a rally in Latin American currencies and equities this month, and are causing exports to surge. Weekly trade figures from Brazil and Chile show that exports were up by 25-40% y/y in early …
Spillovers from the war in Ukraine will have a varied impact across Sub-Saharan Africa. Large oil producers such as Nigeria and Angola are benefitting from the surge in global oil prices but, for the rest of the region, it is worsening their terms of …
The war in Ukraine has devasted its economy, while Western sanctions are likely to push Russia into a deep contraction, with GDP set to fall by 12% this year. Immediate fears of a Russian sovereign default have not materialised and Russia’s financial …
30th March 2022
The spillovers from the war in Ukraine in the form of higher commodity prices will have contrasting impacts on the Gulf and the rest of the region. We estimate higher energy prices will boost Gulf hydrocarbon export revenues by around 10% of GDP this year …
Successful vaccination campaigns allowed governments to keep economies open during the recent Omicron waves, and our Mobility Trackers suggest that activity held up much better than we had originally anticipated. Indeed, GDP figures for Vietnam published …
29th March 2022
The war in Ukraine, as well as the hawkish tone adopted by some developed market (DM) central banks, have led us to revise up our end-22 and end-23 forecasts for government bond yields in some DMs and to lower our projections for DM equities generally . …
23rd March 2022
While the war in Ukraine and sanctions on Russian oil mean energy prices will remain elevated and push headline inflation above 8% in March, it will still fall sharply later this year. (See Chart 1.) Energy inflation and inflation in categories that saw …
The surge in interest rate expectations is a key risk to housing. We recently set out how, due to the much larger share of variable rate mortgages than before the pandemic, the Bank of Canada would need to raise its policy rate to 2.5% to achieve the same …
The war in Ukraine will have several economic repercussions for the emerging world. We have lowered our aggregate EM GDP growth forecast for 2022 by 1%-pt, to 3.2%. Russia aside, the biggest downward revisions have been to other Emerging European …
Governor Kuroda admitted last week that inflation could hit the Bank of Japan’s 2% target in April but stressed that “that in no way signifies there will be a revision of our current monetary policy”. Even if rising import costs cause inflation to …
21st March 2022
The surge in commodity prices as a result of the war in Ukraine will have several repercussions for India’s economy. As a major net commodity importer, its terms of trade will deteriorate and we think the current account deficit could reach almost 4% of …
17th March 2022
We warned at the start of the year that global growth would disappoint, while inflation would surprise to the upside in 2022 and recent events have added to those concerns. The surge in commodity prices related to the war in Ukraine means that headline …
15th March 2022
The UK is not as exposed to the economic consequences of the war in Ukraine as the rest of Europe. Even so, in response to the surge in global commodity prices caused by the war we have dramatically revised up our inflation forecasts and modestly revised …
9th March 2022
RBA Governor Lowe noted in a recent speech that the Bank no longer has specific criteria for deciding whether inflation is sustainably in the target range. But he highlighted that along with the actual rate of inflation and the outlook, the breadth of …
7th March 2022
The war in Ukraine has prompted us to revise our forecasts for euro-zone GDP, inflation and monetary policy. Russia’s downturn in 2015 had no obvious impact on euro-zone GDP and Russia has become less important as an export market since then. But we …
4th 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 …
