Filtered by Topic: Monetary Policy Use setting Monetary Policy
Argentina’s fiscal measures: mission impossible? With Argentina’s economy deep in crisis territory, the new Milei administration wasted no time in announcing a stabilisation plan for the economy this week. This included a steep devaluation of the peso and …
15th December 2023
Fed & markets catching up with inflation reality The Fed’s embrace of interest rate cuts next year is understandable when the latest data suggest that core PCE inflation is rapidly closing in on the 2% target. The plunge in expectations in the aftermath …
If the main objective this week of the Bank of England’s Monetary Policy Committee (MPC) was to keep interest rates unchanged at 5.25% and avoid fuelling even more bets on rate cuts, then it looks like a case of mission accomplished. Even so, the Bank’s …
ECB is not for turning… yet In contrast to the Fed, but similar to the Bank of England, this week the ECB pushed back against expectations that it would start to cut interest rates in early 2024. (See our Drop-in here .) In the ECB press conference, …
Services sector running red-hot The strong Q4 Tankan released this week adds to the case for the Bank of Japan to abandon ultra-loose monetary policy. Of particular importance is that the Tankan shows mounting signs of overheating in the services …
Weak sentiment isn’t the main headwind China’s leadership gathered earlier this week for the Central Economic Work Conference (CEWC), which is held every December to discuss the economic targets and policy settings for the following year. The …
Markets call the Fed’s bluff on higher for longer Markets abandon higher for longer The Fed may not be quite ready to abandon its tightening bias at this week’s FOMC meeting, but the markets are no longer buying its “higher for longer” mantra. Markets …
8th December 2023
The Bank of Canada this week reiterated that strong immigration is putting upward pressure on inflation because housing supply is failing to keep up. Yet the Bank surely can’t be oblivious to the negative impact of high interest rates on construction. …
Kenya jacks up rates to support the shilling Kenya’s central bank (CBK) delivered a chunky 200bp interest rate hike, to 12.50%, on Tuesday with officials making clear that the move was an effort to support to the shilling. The statement said that “there …
The further drop in UK market interest rate expectations this week means that investors now think the first interest rate cut will happen in June next year instead of August. And investors are now pricing in an 80% chance of a cut by May. That has led to …
Note: We’ll be discussing the Fed, ECB and Bank of England December decisions and the policy outlook for 2024 in an online briefing on Thursday, 14 th December . Click here to register for the 20-minute session. Last week we brought forward the timing of …
Sensex surges as BJP wins big in state elections The financial market reaction to the announcement of the BJP’s victory in three state elections is perhaps an indication that investors are confident that next year’s general election will deliver another …
Services inflation continues to accelerate The economic data released this week seem to vindicate the Bank of Japan’s caution when it comes to abandoning ultra-loose monetary policy. For a start, the timely Tokyo CPI showed that inflation slowed from …
Not higher, not longer Earlier today, the Treasury and the RBA published an updated Statement on the Conduct of Monetary Policy. The revised statement clarified that the RBA’s objective is to return inflation to the mid-point of its 2-3% target. That led …
Argentina: signs of more orthodox shock therapy There have been two key developments in Argentina this week that give a sense of what President-elect Javier Milei’s policy agenda will look like. First, the confirmation that Luis Caputo will become economy …
1st December 2023
Investors increased their expectations for interest rate cuts by the ECB after November’s soft euro-zone inflation print this week, but in parts of Central and Eastern Europe (CEE) the latest developments suggest inflation will take a lot longer to fall …
In light of the inflation and activity data released this week we are bringing forward our forecast for the start of the ECB’s rate cuts from September to June next year. And we now think the deposit rate will come down from 4.0% currently to 3.0% by the …
The prospect of earlier interest rate cuts in the US and the euro-zone has led to a sharp fall in US and euro-zone government bond yields this week. 10-year US Treasury and German Bund yields have fallen by 15 and 22 basis points (bps), to 4.32% and 2.43% …
Ramp up in fiscal support yet to be fully felt Government borrowing has been strong ever since the Politburo called for an acceleration in bond issuance at its July meeting. Momentum has been sustained by a rare mid-year increase in the deficit target …
Revising up our GDP forecasts The activity data this week confirm that India’s economy is rude health. The GDP data for Q3 (Q2 of FY23/24) showed a slowdown in both y/y and q/q, but this was very mild and the bigger picture is that the pace of growth …
Consumption falling but labour market tightening The October activity data were a mixed bag. While industrial production rose by 1% m/m, firms’ forecasts for the next couple of months were weak and point to a stagnation in output across Q4 following …
Zambia and Angola hikes, Nigeria resists High inflation is pushing some African economies to return to monetary tightening but Nigeria has resisted so far. We doubt this will last. Inflation rose again in Nigeria, Angola and Zambia last month as currency …
24th November 2023
It would be a stretch to say the government showed fiscal restraint in the Fall Economic Statement , but the announcement of only a few billion dollars in extra spending measures means that Finance Minister Chrystia Freeland did not pour much more fuel on …
CBRT bringing tightening cycle to a close Turkey’s central bank (CBRT) delivered another chunky 500bp rate hike to 40% this week but it also signalled that its tightening cycle was very close to an end. The local elections in March may be playing a part …
Strong Q3 growth Most countries in Emerging Asia have now published GDP figures for the third quarter. Growth slowed in China, was unchanged in Korea, but rebounded strongly everywhere else. (See Chart 1.) To view our various responses click here . …
Surveys point to renewed slowdown in inflation Following a rather hawkish speech by Reserve Bank of Australia Michele Bullock, the financial markets now price in a 60% chance of another 25bp rate hike at the Bank’s February’s meeting, up from 40% before …
Tensions within OPEC+ rise as threat of cut looms OPEC+ was meant to be in the spotlight this weekend but, in a surprise move, the meeting has been delayed until Thursday. The slide in oil prices and the Israel-Hamas conflict suggest that output quotas …
23rd November 2023
A German constitutional court ruling this week threatens to force the government to cut its planned climate-related expenditure by €60bn or 1.2% of GDP. The decision states that it was not lawful for the government to reallocate this un-used borrowing …
17th November 2023
Back-to-back rate hikes unlikely Bank Indonesia surprised financial markets (and us) by hiking interest rates in October. But we don’t expect it to follow through with another hike at its scheduled meeting on Thursday. The main reason BI hiked last …
The Bank of Canada’s latest Summary of Deliberations was more hawkish than most probably expected, with some members of the Governing Council still seemingly arguing for further rate hikes. That said, the weak GDP data released since the Bank’s last …
10th November 2023
Copom’s inflation and fiscal worries There were two key-takeaways from the minutes to last week’s Brazilian central bank meeting, which were released earlier this week. First, despite the recent falls in inflation, Copom remains concerned about …
Inflation risks stop CEE easing cycles in their tracks Communications from central bankers across Central and Eastern Europe (CEE) this week struck a decisively hawkish tone, suggesting that interest rates could be left on hold across most of the region …
Edging away from ultra-loose policy The “Summary of Opinions” from last week’s Bank of Japan Monetary Policy Meeting released yesterday show a Policy Board increasingly confident that the long-term 2% target is coming into sight. The likelihood of …
BSP on a knife edge The Philippines central bank (BSP) hiked interest rates at an unscheduled monetary policy meeting on 26 th October, and at the time warned the upcoming data on GDP and inflation (both published this week) would be crucial in deciding …
One and done for the RBA The main event this week was the RBA delivering a widely-anticipated 25bp rate hike at its meeting on Tuesday. Our assessment is that the increase in the cash rate is essentially something of an insurance policy, aimed at ensuring …
There is now mounting evidence that the economy is set for a renewed slowdown in the fourth quarter and that inflationary pressures from the labour market continue to ease. Although markets have already moved to price out any real chance of further rate …
3rd November 2023
Copom cuts, but fiscal risks return to the spotlight Fiscal risks are rearing their head again in Brazil after President Lula suggested that the government may no longer aim for a balanced primary budget next year as previously pledged. Finance Minister …
Turkey’s central bank continues to impress Turkey’s central bank (CBRT) governor delivered another convincing message at this week’s Inflation Report briefing and suggested that further policy tightening will be delivered over the coming months. Governor …
ECB policymakers stressed this week that rate cuts are a distant prospect. Dutch central bank governor Knot said that rates should remain at their current “cruising altitude” for some time. And governor of the Bank of France Villeroy de Galhau noted that …
We can understand if the phase “the lady doth protest too much” sprang to mind when listening to the Bank of England after it left interest rates at 5.25% for the second meeting in a row on Thursday. Indeed, the Old Lady of Threadneedle Street stressed so …
Headline inflation rises again Figures published this week for Korea show that headline inflation rose from 3.7% y/y in September to 3.8% last month – a third consecutive monthly rise. Inflation has now been above the BoK’s target for 31 consecutive …
Threat of yen intervention remains As we had expected, the Bank of Japan retained its 1% cap for 10-year yields at this week’s meeting . However, by downgrading that cap to a “reference” and by stopping its daily fixed-rate operations offering to buy an …
The string of central bank meetings across Emerging Europe this week highlighted the unique challenges that policymakers across the region are currently facing, but one common thread in all countries is that inflation risks are persisting and we think …
27th October 2023
Food prices risk delaying Africa interest rate cuts Inflation across Africa has been falling back recently, but persistent food price pressures pose a threat to policymaker’s ambitions to start cutting interest rates. The SARB’s Deputy Governor Fundi …
The Bank of Canada’s insistence that inflationary risks have increased seems at odds with its new forecasts, which show a large degree of economic slack opening up next year. Our view that the Bank is still overestimating the near-term outlook for both …
Argentina: it’s not the economy, stupid? Elections in Argentina rarely fail to surprise and Sunday’s vote was no exception. While it was widely expected that the election would go to a run-off between Peronist and current Economy Minister Sergio Massa …
This week’s data releases provide further evidence that the euro-zone is probably in a mild recession. The euro-zone Composite PMI declined to a level consistent with GDP contracting by 0.2% q/q (see here ) and although the Ifo Business Climate Indicator …
Note: We’ll be discussing the latest Fed, ECB and Bank of England policy decisions in a Drop-In at 3pm GMT on Thursday 2 nd November . (Register here .) In the last few months there has been more concern over the accuracy of key economic data. The recent …
Taiwan’s growth moderated in Q3 Activity data published this week for Taiwan paint a mixed picture of the economy. Consumer demand is coming off the boil but exports have rebounded. More details will be available in the Q3 GDP figures due next week. …
BoJ probably won’t tweak Yield Curve Control Media reports suggest that the Bank of Japan may tweak Yield Curve Control yet again at next week’s Board meeting. That’s certainly possible: 10-year JGB yields have risen sharply since the launch of the new …
