Filtered by Topic: Monetary Policy Region: G10 Use setting G10 Use setting Monetary Policy
After its July policy meeting, we felt the Bank of Canada had moved closer to our view that inflation risks had diminished. The Bank devoted considerable effort explaining why it expects underlying inflation to fall soon , citing the recent appreciation …
15th August 2025
All eyes on Jackson Hole Ahead of the Fed’s annual Jackson Hole Symposium, which kicks off late next week, markets are still wholly convinced that the Fed will cut rates by 25bp at the upcoming FOMC meeting in September and follow that up with at least …
Capacity pressures remain at bay The RBA’s decision to lower its cash rate by 25bp, to 3.60%, at its meeting this Tuesday was widely anticipated. Broadly speaking, the Board’s messaging was little changed from the July meeting. However, there were …
The Bank of England’s hawkish tone at its policy meeting on Thursday has inevitably led to questions about whether interest rates will be cut again this year and whether the Bank’s rate-cutting cycle will soon end. (See here .) In some ways, the Bank’s …
8th August 2025
Strong case for RBNZ to provide more stimulus The Reserve Bank of New Zealand has been bemoaning the weak state of productivity growth for a while now, arguing that it is stifling the speed limit of the economy. Yet, the Bank has quietly been revising up …
Bonus payments coming back to earth The economic data released this week at the margin would support the case for keeping monetary policy unchanged for longer. For one thing, while the Bank of Japan’s consumption activity index rebounded in June, it was …
The Bank of Canada justified its decision to keep interest rates unchanged at 2.75% this week on three factors: persistent uncertainty, signs of economic resilience, and concerns about underlying inflation. In our initial reaction during an online …
1st August 2025
Payrolls shocker The rift among the FOMC, with Governors Christopher Waller and Michelle Bowman this week voting against the decision to leave rates between 4.25% and 4.50% (see here ), will presumably have grown even wider following the July Employment …
Minimum wage set to rise the most on record The Bank of Japan sounded more optimistic about the outlook for inflation when it kept policy settings unchanged at its meeting this week. However, we still think that the Bank is underestimating the strength of …
Bank will cut further than most expect The Reserve Bank of Australia is likely to breathe a sigh of relief that its consternations about lingering price pressures in the economy didn’t come to pass. Indeed, as Deputy RBA Governor Andrew Hauser noted in a …
Public borrowing may have been bang in line with the Office for Budget Responsibility’s forecast for the first three months of the 2025/26 fiscal year. (See here .) But the underlying upward trend looks worrying. Having reached a cumulative total of …
25th July 2025
Slow and steady The minutes of the RBA’s July meeting shed more light on the Bank’s surprise decision to leave rates on hold earlier this month. A majority of the Board believed it would be premature to lower the cash rate for a third time within the span …
Japan plays its hand well in US trade negotiations A turbulent week started with the loss of the ruling LDP/Komeito coalition’s majority in the House of Councillors in Sunday’s election . PM Ishiba pledged to stay on and with the Upper House election out …
We have not changed our view that inflation and interest rates will fall further than most expect. (See here and our UK Data Dashboard .) But the data released over the past week raises the chances that inflation will remain higher for longer and rates …
18th July 2025
But tariff uncertainty could still delay rate hikes The economic data released this week leave the case for tighter monetary policy firmly intact. For one thing, export volumes rebounded in June and were nearly as strong as they were in February. …
RBA can pivot back to an easing bias The ABS’ monthly labour force survey published yesterday increasingly suggests that the Australian labour market is going through something of a soft patch. Indeed, the modest rise in employment in June just barely …
Deadline for trade deal extended to 1 st August The looming deadline for the imposition of reciprocal tariffs earlier this week proved to be a damp squib as Trump has now given Japan and a range of other countries until 1 st August to negotiate a deal. …
11th July 2025
Rates will bottom out in mid-2026 The RBA’s decision to leave its cash rate unchanged at its meeting this Tuesday shocked not only financial markets, which had fully priced in a 25bp cut, but also the overwhelming majority of economists. Setting aside the …
A cut remains more likely than not There is a growing sense amongst most observers that the Reserve Bank of Australia will deliver a 25bp cut at its meeting ending on 8 th July. Indeed, markets are pricing in a whopping 95% chance of that outcome. And …
4th July 2025
Japan back in the doghouse The temporary pause on the 24% “reciprocal” tariff Trump imposed on imports from Japan in April is due to expire next week. As things stand, a deal with Japan looks unlikely and it’s possible that Japan will face even higher …
With activity having rebounded strongly in Q1 and headline inflation firming up, the RBNZ is likely to leave rates unchanged at 3.25% next week. However, we’re not convinced that the economy has turned the corner. And with the output gap set to remain …
2nd July 2025
With the Fed divided between doves calling for a rate cut as early as July and hawks expecting no further easing this year, Fed Chair Jerome Powell struck a careful balance in his semi-annual testimony to Congress this week. He offered no signal that a …
27th June 2025
There were two key developments for the inflation outlook this week. First, some of the upside risk to CPI inflation posed by the conflict in the Middle East and higher energy prices has subsided. After the price of Brent oil ended the UK business day on …
The Summary of Deliberations from the Bank of Canada’s June policy meeting, released on Tuesday, revealed it held rates for three reasons: the economy had slowed but not significantly, uncertainty remained high, and recent inflation data had firmed. …
20th June 2025
Downside risks persist in Australia Australian employment unexpectedly fell by 2,500 last month, as a 38,700 rise in full-time employment was more than offset by a 41,200 fall in part-time employment. However, with the unemployment rate holding steady at …
Case for tighter monetary policy remains strong The Bank of Japan tweaked its bond purchases at this week’s meeting but retained the dovish tone adopted at its May meeting. Indeed, the minutes of the May meeting showed that Board members were worried …
Downside risks growing There are growing signs that economic conditions in Australia have continued to weaken. According to a new NAB business survey, business conditions fell to their lowest point since August 2020 last month. On past form, the data are …
13th June 2025
Lingering inflation risks complicate matters There is no sugarcoating the fact that Australia’s economic recovery is struggling to take off. National accounts data released this week showed that real GDP grew by just 0.2% q/q in Q1, well below the 0.45% …
6th June 2025
Firms upbeat about production outlook The latest activity data suggest that if anything, Japan is benefitting from trade tensions. To be sure, industrial production declined in April, but output of motor vehicles rose despite the 25% US tariff on auto …
30th May 2025
RBNZ will loosen policy further still As virtually everyone had expected, the RBNZ cut its Official Cash Rate from 3.5% to 3.25% at its meeting this Wednesday. However, the revelation that one member voted to leave rates unchanged came as a surprise to …
How concerning is underlying inflation? The removal of the carbon tax pushed headline inflation down to 1.7% in April, comfortably in the bottom half of the Bank of Canada’s 1% to 3% target range. Nonetheless, the acceleration of the Bank’s preferred …
23rd May 2025
Inflation fight isn't over yet While the RBA’s decision to cut rates by 25bp at its meeting on Tuesday was widely expected, the Board’s overtly dovish messaging still caught most observers off guard. Indeed, Governor Bullock made news in her post-meeting …
Inflationary pressures linger on In case you missed it, our RBA Watch explains why we expect the Bank to cut rates by 25bp, to 3.85%, at its meeting next week. However, we suspect that the cut will be a somewhat hawkish one, with the Board reluctant to …
16th May 2025
Lower energy prices will weigh on inflation The truce reached between China and the US over the weekend is a clear positive for Japan’s economy. Even so, we suspect that weak economic activity coupled with an impending plunge in inflation will delay …
UK-US trade announcement is no big deal The “full and comprehensive” trade deal between the US and the UK announced this week by President Donald Trump was none of those things. This rush to demonstrate progress on “deals” reveals a rising desperation …
9th May 2025
Five months ago, we incorporated a 10% tariff on all UK goods exports to the US in our forecast. That has turned out to be a good call. Despite this week’s UK-US trade deal, the 10% “baseline” tariff remains. (See here for our response to the US-UK trade …
Magic Carney The Liberals won 169 seats in the election this week, just missing out on the 172 required for a majority. Nonetheless, that was still a momentous result for the Liberals considering they were, at one point earlier this year, projected to …
2nd May 2025
RBA still on track to deliver shallow easing cycle This week we learnt that Australia’s trimmed mean inflation fell from 3.2% in Q4 to 2.9% in Q1, returning it to the RBA’s 2-3% target band for the first time in over three years. While that outturn was …
Few signs of sharp slowdown in activity With trade tensions clouding prospects for Japan’s economy, the Bank of Japan revised down its GDP growth forecasts sharply at its meeting on Thursday and sounded more dovish than it did in January. One channel …
The fall in market interest rate expectations since ‘Liberation Day’ is striking. On 31 st March, investors were pricing in just two more 25 basis points (bps) interest rate cuts this year from 4.50% now to 4.00%. Now they are fully pricing in three more …
25th April 2025
Case for aggressive easing remains weak Flash PMI data released this Wednesday suggest that ongoing global tensions are doing little to dent business confidence in Australia. Although firms reported a second successive decline in new export business as a …
Underlying inflation set to surpass 3% Inflation excluding fresh food and energy picked up from 2.6% to 2.9% in March. And the big jump in inflation in Tokyo in April at first glance would suggest that the Bank of Japan is starting to fall behind the …
Markets were almost evenly split on what the Bank of Canada would do yesterday, right up until the last minute. In the end, the Bank opted to keep interest rates unchanged at 2.75%, rather than loosen policy by an additional 25bp. In his opening …
17th April 2025
Recession looking even less likely For all the recent anguish about tariff-induced equity selloffs and plunging sentiment, this week served as a valuable reminder that the only true measure of the health of the US economy remains the hard data. On …
RBA will go slow and steady The minutes of the RBA’s April meeting revealed that the Bank’s decision to leave rates unchanged at 4.10% was underpinned by its view that risks to its outlook were two-sided. Granted, that assessment was made prior to Trumps’ …
Tariff impact may not be as big as feared The OIS markets imply that it’s a coin flip whether the Bank of Japan will raise rates again this year. That makes sense because the Bank sent some rather dovish signals this week. Governor Ueda noted in an …
The extraordinary tariff chaos over the past week and associated fallout in the financial markets (see our coverage here ) have increased the chances that the damage to the UK from the US trade war will be larger and that inflation and interest rates will …
11th April 2025
BoJ will stay on sidelines for now The relief that followed the suspension of reciprocal tariffs for all countries except China on Wednesday proved short-lived as bilateral tariffs between China and the US are still being ratcheted up to eye-watering …
With President Trump announcing reciprocal tariffs of 34% and 20% on all US imports from China and the European Union respectively this week, the news that UK goods exports to the US will be subject to the minimum 10% “baseline” tariff from 5 th April …
4th April 2025
More policy support may be forthcoming Although the RBA left rates unchanged on Tuesday, it sounded a lot more dovish than it did in February. Indeed, it significantly toned down its concerns about upside inflation risks and the dangers of prematurely …
