Filtered by Topic: Monetary Policy Use setting Monetary Policy
SARB’s lower inflation target proposal looks close A backdrop of subdued price pressures and declining inflation expectations strengthen the argument that a lower inflation target could bring even deeper interest cuts onto the table. Reserve Bank Governor …
4th July 2025
Chile: communist scores surprise primary win The positive market reaction to the victory for communist candidate, Jeannette Jara, in the Chilean governing coalition’s presidential primary election seems surprising at first sight. The peso is up by c.1% …
Muddled guidance in Poland, but further cuts likely The decision by the National Bank of Poland (NBP) to cut interest rates by 25bp at its meeting on Wednesday was a dovish surprise to most analysts who had expected policy to be left unchanged, although …
A rate cut at the ECB’s meeting on 24 th July seemed off the table only a few weeks ago, as energy prices had spiked due to the Israel-Iran conflict and ECB President Lagarde had stressed after June’s meeting that the Bank was in a “good position” on …
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 …
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 …
Saudi current account deficit widens, FDI struggles Saudi Arabia’s current account deficit widened at the start of the year and is likely to deteriorate further as oil export receipts decline. This won’t cause any major macro problems yet, but it …
3rd July 2025
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
Romania takes a (small) step in the right direction The fiscal tightening measures announced by Romania’s new government, which took office this week, are a welcome development for investors after the political turmoil last month and the alarming widening …
27th June 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 …
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 …
Bank will speed up the pace of easing It’s become increasingly clear that the downside risks the RBA has been worried about are starting to manifest. Our GDP Nowcast suggests that recovery is struggling to gain momentum, prompting us to revise down our …
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
Copom & BCCh: hawks & doves This week's rate decisions in Chile and Brazil showed a stark contrast in messaging. While Chile’s central bank (BCCh) left its policy rate unchanged at 5.00%, its communications were relatively dovish. It sounded less …
Growth boost for Korea More policy support in Korea looks to be on its way soon. According to the minutes of the Bank of Korea’s May meeting (when rates were cut a further 25bps) which were released earlier this week, Board members were united on the need …
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 …
Mexico’s exports holding up well … so far Figures out this week provided further evidence that Mexico's exports have been relatively resilient in the face of US import tariffs. Auto exports (compiled by local trade body AMIA) were down 3% y/y in May …
13th June 2025
BoJ’s pause won’t last as long as most expect The main show in town next week will be the Bank of Japan’s meeting on Tuesday. As we explain in our BoJ Watch , the Board will almost certainly leave its policy rate unchanged, given its concerns about the …
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 …
Nigeria floods: worse to come? The flooding Nigeria has faced in recent weeks has claimed scores of lives and, while the economic hit should be limited, the country’s vulnerability to further climate challenges is worryingly high. We should first note the …
6th June 2025
Colombia: will the government deliver? The Colombian government’s fiscal plans due to be published next Friday will receive particular attention (and scrutiny) given the country’s increasingly fragile public finances – the latest monthly figures show that …
Rapid economic growth ≠ equity outperformance Data released this week suggest the economy has carried its recent momentum into Q2. Although May’s composite PMI output balance fell slightly, it remained firmly in expansionary territory. (See Chart 1.) This …
Tariff scenarios compared Along with its slightly hawkish communications, which we commented on here , the ECB published estimates this week of how US tariffs could affect the economy. In short, they think tariffs of 10% or more would reduce GDP …
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% …
Tinubu’s two-year anniversary in power It’s two years since Bola Tinubu became president of Nigeria and with support waning, he’s announced ambitious spending plans funded by foreign loans. But with borrowing costs high, we suspect these plans won’t …
30th May 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 …
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 …
Over to the Senate The House passed its “One Big Beautiful Bill” budget reconciliation on Thursday, which extends the 2018 Trump tax cuts beyond this year, raises the personal exemption for retirees, and eliminates taxes on tips and overtime pay. To …
23rd May 2025
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 …
Copom: one final hike? Brazil’s Q1 GDP data due next Friday should show that the economy recorded strong growth in Q1, supporting the case for the central bank to deliver one final hike in this cycle. Having slowed sharply at the end of last year, …
Assessing the fallout after a busy election weekend Last Sunday was a busy day of voting in CEE and threw out some surprises. Pro-EU centrist Nicusor Dan won the second round of Romania’s presidential election, even though he’d lagged in the polls. …
ECB account reveals disagreement The account of last month’s ECB meeting, published on Thursday, showed diverging views on the risks to inflation and the appropriate monetary policy stance. It noted that “a few” members of the Governing Council “could …
SA budget merely presses pause on fiscal debate South Africa’s finance minister appears to have succeeded – at the third time of asking – at delivering a 2025 Budget that will make it through parliament. But it seems almost certain that tensions within …
MAS to loosen policy further GDP in Singapore contracted by 0.6% q/q last quarter according to the second estimate of national accounts figures published on Thursday. While this marked a slight improvement from the initial estimate (a 1.0% decline), it …
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 …
Israel readying strikes on Iran’s nuclear facilities? Rumours that Israel could strike Iran’s nuclear facilities suggest that conflict in the region could escalate. But there are reasons to think that the fallout for the oil market, and therefore the Gulf …
22nd May 2025
Copom minutes intensify debate over June meeting The minutes to the Brazilian central bank’s monetary policy meeting last week, at which the Selic rate was hiked by 50bp, have added further fuel to the debate over whether the tightening cycle is already …
16th May 2025
GNU will struggle to fill VAT hike-related hole South Africa’s finance minister takes his third stab at delivering the 2025 Budget on Wednesday. Disputes within the ruling GNU seem to have been resolved but this may come at the cost of slippage on …
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 …
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 …
Fiscal slippage appears more likely across SSA Leaders across Sub-Saharan Africa faced with fiscal strains are increasingly embracing tax reform rather than rises. Banking on the former to quickly raise revenue is ambitious and we think this risks further …
9th May 2025
The strong showing for far-right nationalist, George Simion, in the first round of Romania’s Presidential election on Sunday has deepened the country’s political crisis, and the fallout in Romania’s financial markets could get more messy in the coming …
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 …
Lower oil prices a mixed blessing The announcement from OPEC+ over the weekend that it will increase oil supply further in June briefly caused the price of Brent crude to drop below $60pb. It has since recovered to c.$63pb at the time of writing, but that …
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 …
Asian exporters benefit from front-loading Asia publishes trade data much sooner than other regions which allows us to get an early indication of how Trump tariffs are affecting global trade. While the April data for Korea showed exports to the US …
Hold in Chile, BanRep turns dovish Andean central banks sent very different signals this week. In Chile, the central bank left its policy rate unchanged at 5.00% as expected. And policymakers still sounded somewhat concerned about inflation, highlighting …
2nd May 2025
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 …
A cut more likely than a hold Malaysia is one of the few countries in the region not to have cut interest rates this cycle. Concerns about the inflation outlook and healthy economic growth have meant the central bank has been in no hurry to loosen. …
