Officials prefer strengthening forward guidance over yield caps New language in statement might introduce a soft form of average inflation target Fed may eventually need to expand Treasury purchases again The upcoming FOMC meeting, which concludes on 29 …
22nd July 2020
OPEC to increase production quotas as it forecasts faster demand growth OPEC production continued to decline in June, largely due to a contraction in Saudi output. However, with OPEC becoming more optimistic on demand, we think that (new) higher quotas …
14th July 2020
Now that quarantine restrictions are being lifted, mine supply should recover But still-high rates of infection in Latin America may act as a constraint The risks look largest for copper, but iron ore supply could also take a hit In this Metals Watch , we …
10th July 2020
The ECB is very unlikely to change policy next week... … but we think it will reiterate its willingness to do more if needed… … and, later in the year, expand the PEPP even further. We don’t expect any changes to ECB policy next week, but Christine …
9th July 2020
Bank unlikely to announce any major policy changes. May present only partial set of forecasts in its new Monetary Policy Report. Little need for yield curve control at this stage. As the latest high-frequency data and surveys look encouraging, and policy …
8th July 2020
Lending schemes still well below ceilings and appetite for bank lending has declined Strains in foreign currency funding markets subsiding Concerns about financial stability will prevent rate cuts The Bank of Japan is likely to leave policy settings …
Uptake of central bank lending facilities has been mixed But lending is reaching firms, either through governments or central banks… … and central bank backstops are offering important reassurance to investors This month has seen a further shift among the …
2nd July 2020
Activity and labour market exceeding Bank’s expectations But unemployment set to remain far above pre-virus levels, weighing on wage growth Bank may resume bond purchases at some point, perhaps early next year Given that the economy has coped better with …
30th June 2020
Table of Key Forecasts Overview – Over the next few months, inflation will be dominated by oil price effects as the previous slump unwinds and headline rates rise from their current lows. Some components of core inflation, such as airfares and …
25th June 2020
While we still expect the Riksbank to cut its repo rate back into negative territory later this year, it is set to keep its powder dry at its policy announcement next Wednesday (1 st July). Recall that the Riksbank left its repo rate unchanged at zero …
24th June 2020
Relatively high rates of compliance unlikely to last May saw the latest OPEC production cuts come into force, with compliance among members fairly good. That said, a gradual pick-up in oil prices and demand, together with the prospect of some Libyan …
18th June 2020
RBNZ beginning to slow the pace of QE New Zealand economy recovering solidly The RBNZ will hold off until 2021 to launch negative rates to address low inflation The RBNZ has started to reduce the pace of asset purchases as economic activity has recovered. …
The Swiss National Bank and the Norges Bank are all but certain to leave their policy settings unchanged at the scheduled announcements next Thursday (18 th June) and for the foreseeable future. Recall that the SNB left interest rates on hold at -0.75% at …
11th June 2020
MPC likely to announce another £100bn of QE in June… …and that won’t be the last expansion Negative interest rates possible, but far from guaranteed The Bank of England has much more work to do. It will probably start by announcing £100bn more …
Existing lending schemes still well below ceilings But latest supplementary budget foresees additional subsidised lending Bank to secure funding for commercial lenders by further increase in lending schemes The Bank of Japan has already done a lot to …
9th June 2020
Low yields mean there is no rush to adopt yield curve control FOMC could make an impact just by publishing interest rate projections again Fed slow to roll out its 13( 3 ) emergency lending facilities The Fed has several different policy options for …
3rd June 2020
Stimulus announced at China’s NPC is positive for commodities demand and prices But credit growth will be much lower than it was post-GFC Accordingly, the stimulus is unlikely to send prices soaring like in 2009 China’s stimulus spending in 2009 in the …
29th May 2020
The ECB is likely to increase the PEPP by a minimum of €500bn next week. Policymakers may also say the PEPP will run until at least mid-2021. We no longer anticipate a further reduction in the deposit rate. Policymakers have signalled their intention to …
28th May 2020
We estimate that non-farm payroll employment fell by 9 million in May, taking the cumulative decline since February close to 30 million and pushing the unemployment rate above 20%. The loss of 20.5m jobs in April was as expected based on the tsunami of …
First meeting for new governor Tiff Macklem. Some positive signs since last meeting, but some worrying ones as well. Downside risks raise the case for more policy support. We expect the Bank of Canada to announce additional corporate bond purchases next …
27th May 2020
Previous government bond purchases were focused on restoring liquidity Unemployment is rising and inflation set to slump Bank may launch fresh round of purchases focused on lowering long-term rates We suspect that the Reserve Bank of Australia will keep …
26th May 2020
Profitability and production at US shale firms has slumped owing to low oil prices We expect US oil output to remain low throughout the rest of 2020 … … but it could start to bounce back in 2021 Since the outbreak of the coronavirus, oil demand has …
21st May 2020
The silver price has historically been influenced by industrial metals and gold prices As a safe haven, silver has disappointed relative to gold Going forward, we expect the silver price to underperform gold through to end-2020 Silver is often described …
18th May 2020
A last hurrah for OPEC output OPEC production jumped up in April, but this will prove a one-off given the agreed output cuts from May onwards. We expect OPEC compliance with the cuts to be fairly good in the coming months as prevailing low prices and …
13th May 2020
Numerous lending facilities have been either launched, revived, or expanded Many aim to provide liquidity to financial institutions and non-financial firms But the line between liquidity operations and monetary policy is sometimes blurred Traditionally, …
7th May 2020
The virus-led increase in exchange stocks is reminiscent of the GFC But changes in warehouse economics will keep a lid on stocks Nonetheless, we expect stocks to rise and remain high for some time In this Metals Watch , we take a closer look at whether …
6th May 2020
The lockdown hit the New Zealand economy hard RBNZ is supporting the economy with QE and other measures but more is needed The RBNZ will cut the OCR into negative territory, perhaps in August The RBNZ will want to wait to assess the impact of the virus …
Given the toxic combination of Covid-related disruption and precipitous plunge in oil prices, we think that the Norges Bank’s easing cycle has further to run. Whereas financial markets are pricing in only a small chance of further loosening, we have …
1st May 2020
MPC to signal it continues to stand behind gilt market There’s a chance it could extend QE But that’s probably more likely to happen in the coming months The Monetary Policy Committee (MPC) will probably use its policy announcement on Thursday 7 th May to …
30th April 2020
Bank has started to roll back liquidity provision and bond purchases as tensions ease Unemployment set to remain above levels consistent with full employment for years Interest rates will have to remain low for longer than markets anticipate The continued …
28th April 2020
The €750bn Pandemic Emergency Purchase Programme now looks too small. The less EU leaders achieve, the more the ECB will have to do. Further increase in bond purchases very likely, perhaps with explicit yield cap. The ECB has ramped up its asset purchases …
23rd April 2020
Having pulled out all the stops since its last scheduled policy meeting, in February, we suspect that the Riksbank will take stock next week. However, as the focus shifts away from monetary firefighting, we think that the Bank will return to negative …
Fed funds target range will be stuck at zero for foreseeable future Easing financial market stress suggests Treasury purchases will continue to slow But new lending facilities could eventually push balance sheet above $10trn With the Fed having already …
22nd April 2020
Funding strains not severe so major expansion in asset purchases not on the cards But looming slump in activity will derail efforts to reach 2% inflation Bank may also cut policy rate from -0.1% to -0.2% The Bank of Japan will probably take some …
OPEC output surge will not last beyond May OPEC production surged in March after talks between OPEC and its allies broke down. While we expect output to remain relatively high in April, OPEC production should be much lower from May onwards following last …
16th April 2020
April meeting is last scheduled before Poloz’s term expires on 2 nd June Bank to provide guidance on duration of asset purchases, may add corporate bonds Set to slash its forecasts in new Monetary Policy Report The Bank of Canada could announce next week …
8th April 2020
Rates slashed to rock bottom and generosity of lending enhanced Massive asset purchases are intended to boost liquidity and will be reduced in time But radical sustained support seems possible, carrying future inflation risks for some What a difference a …
Tensions in interbank and bond market easing Corporate bond spreads remain high but not high enough for RBA to buy private bonds With inflation set to fall short of its target for years to come, negative rates still an option The recent easing in …
2nd April 2020
We have condensed this edition of the Inflation Watch to focus only on timely data and coronavirus effects. While the coronavirus crisis will have both upward and downward effects on prices, we expect the net impact to be significantly disinflationary, …
31st March 2020
We have developed a new in-house measure of the “fundamental” copper price It suggests that copper was trading at a premium relative to its fundamentals in January And despite the plunge in its price, the premium is likely to have risen since then In this …
30th March 2020
RBI’s response to coronavirus has so far been limited But outbreak and containment measures should prompt aggressive loosening Repo, reverse repo and cash reserve ratios all likely to be trimmed by 50bp The RBI has so far taken only piecemeal steps in its …
26th March 2020
Big stimulus package from BoE has succeeded so far in easing some financial market stresses But with financial conditions still unusually tight, the Bank may need to do more The Bank may need to test out some new, extreme, tools The decisive action taken …
20th March 2020
Domestic demand slumped after sales tax hike and the recovery is being snuffed out Coronavirus outbreak is pushing the economy into recession Bank to follow other major central banks and cut policy rate from -0.1% to -0.2% The Bank of Japan has limited …
12th March 2020
OPEC output to increase from April OPEC production slumped in February owing to supply disruption in Libya. However, given that the current output agreement expires in March and with no replacement deal, we expect OPEC+ oil production to rise from April . …
11th March 2020
Fed to follow last week’s emergency cut with another 50bp reduction next week Fed funds rate likely to return to near-zero bound at April policy meeting Plans to slow pace of balance sheet expansion to be abandoned We expect the Fed to cut interest rates …
Amid a raft of rate cuts by other G10 central banks, and the recent plunge in oil prices, we have pencilled in a 50bp rate cut at the Norges Bank’s meeting next Thursday. We expect policymakers to follow up with a further 50bp of cuts in Q2, and the krone …
We expect OPEC+ to agree to an emergency output cut of an additional 1m bpd for at least three months at its meeting later this week. This should, at a minimum, put a temporary floor under prices . OPEC and its allies, including Russia, are set to meet in …
4th March 2020
The Bank will cut its forecasts for GDP growth and inflation in light of the virus. On balance, we think it will reduce its deposit rate by 10bp next week. We also expect the Bank to tweak the terms of its longer-term financing operations. The ECB will …
3rd March 2020
Risk still modest, but models can’t capture virus fears The recent re-inversion of the Treasury yield curve and the sharp sell-off in equities, due to growing fears that the new coronavirus will develop into a full-blown pandemic, have reignited fears …
27th February 2020
Fourth-quarter GDP growth probably in line with Bank’s forecast But possible coronavirus pandemic a key downside risk to the outlook Bank to issue a very dovish statement while keeping policy unchanged The potential for the coronavirus to develop into a …
26th February 2020
