Filtered by Topic: Monetary Policy Use setting Monetary Policy
The December CPI data and the Bank of Canada’s quarterly business and consumer surveys, released next week, could have a big bearing on the policy outlook. For the Bank to pause after one final 25 bp hike this month, as we assume, it will need to see …
13th January 2023
Brazil riots: reflecting on the fallout The riots in Brasília last Sunday thankfully ended quickly. And the country’s financial markets, after losing ground on Monday, have rebounded over the course of this week. Investors have been buoyed by the fact …
At a key policy conference, South Africa’s ruling party officials offered little by way of new ideas to address the country’s mounting economic challenges. And some fresh proposals risk making matters worse. The ruling African National Congress (ANC) …
Higher Swedish GDP forecast We learnt this week that Sweden’s monthly GDP Indicator declined by 0.5% m/m in November as a result of a fall in manufacturing output and “several service producing industries”, suggesting that policy tightening was …
Services inflation on the rise The timely Tokyo CPI showed that inflation jumped from 3.7% to 4.0% in December, twice the BoJ’s 2% target. Our measure of “core” goods inflation accelerated further, but below the surface there are clear signs of a …
Inflation strong, consumption resilient On balance, the economic data released this week are consistent with our view that the RBA has more work to do. For a start, inflation rose back up from 6.9% to 7.3% in November, with trimmed mean inflation reaching …
Has the EGP gone too far once again? The Egyptian pound has pared back its losses after sharp falls against the dollar on Wednesday in a sign that, just like 2016, the currency may have overshot. The authorities may keep the pound weak in a bid to rebuild …
12th January 2023
The resilience of the labour market is a risk to our view that the Bank of Canada will pause its tightening cycle after a final 25 bp hike this month, even as the slump in natural gas prices raises the chance that CPI inflation will fall faster than the …
6th January 2023
Sub-Saharan Africa’s grim year ahead Last year ended with the bang of Ghana’s sovereign default , and 2023 has started with economies bracing for disruptions due to the end of zero-COVID in China and a looming global recession. While these are likely to …
The past few weeks have brought the news that the UK economy is lagging even further behind its G7 counterparts. (See here .) One reason for this relative underperformance is real business investment, which accounts for 9.5% of real GDP and in Q3 was …
A year to write home about 2022 was in many ways a memorable year for Latin America. With Argentina’s World Cup victory the trophy returned to Latin America for the first time in 20 years. And it’s been a good year off the pitch too. GDP growth has …
23rd December 2022
Will policy loosening come onto the agenda? A s we explained in our Outlook for Q1 2023 , the hiking cycle that has dominated the discourse for much of 2022 is likely to come to an end early next year. The question then is, when will thoughts turn to …
Jump in money supply won’t worry the SNB Swiss money supply data for November, released earlier this week, showed that M3 increased at its fastest year-on-year pace since February. (See Chart 1.) This could, at least in theory, encourage policymakers to …
22nd December 2022
Despite the Fed’s continued hawkishness, the further softening in core inflation and weakness of the early activity data in November leave us more convinced that the FOMC will be cutting interest rates again by the end of next year. Fed’s new …
16th December 2022
Hungary strikes last minute deal, but risks remain The EU’s approval of Hungary’s COVID-19 recovery plan this week is a welcome development for Hungary’s economy and financial markets, but it won’t immediately transform the near-term outlook. On Monday, …
Despite action, inflation will stay high It was a big week with for central banks with the Fed, BoE and ECB all raising rates by 50bp. The minnows were also in on the action with 50bp hikes for the SNB and Denmark’s Nationalbank and a 25bp hike by the …
ECB a long way from pivot… Thursday’s ECB meeting has sparked significant turmoil in euro-zone financial markets. Ten-year Bund and BTP yields recorded some of their largest one-day rises in the past decade and are up ~25bp and ~50bp respectively from …
We think the three main economic themes of 2023 will be falling inflation, peaking interest rates and recession. We explained these forecasts in detail in our recent UK Economic Outlook , which carried the title a “A tough year”. (See here .) In short, …
Rise in lending rates has further to run D ata released this week reinforce our view that domestic demand is softening. Industrial production dropped by 4% y/y in October – our in-house adjustment points to a similar-sized drop month-on-month. And …
Revisiting the energy price cap The Australian government revealed details of its energy price cap on Friday and there are two points worth making. First, the $125 cap on coal prices refers to a lower-grade type of coal than we had thought, which means …
Is the CBE eyeing up another surprise meeting? The IMF’s Executive Board meet on Friday to approve Egypt’s deal, and there are rumours the Central Bank of Egypt (CBE) could meet today to deliver a surprise aggressive interest rate hike. The CBE is …
15th December 2022
The Bank of Canada’s 50bp rate hike this week means that variable mortgage rates are now more than 400bp higher than the start of the year. This raises the risk that some will be forced to sell their homes, although there was little evidence of …
9th December 2022
Political chaos rattles Peru It’s been a tumultuous week in Peru that culminated in the ousting of left-wing President Pedro Castillo on Wednesday after he attempted to stage a “self-coup”. He was arrested on charges of rebellion and conspiracy (and …
Fed could be upstaged by CPI data The Fed is used to holding centre stage, but next Wednesday’s policy announcement could end up being overshadowed by the November CPI data, due for release on Tuesday. If we’re right and core prices increased by another …
If you haven’t started your Christmas shopping, you may not be alone. Both the CBI Distributive Trades Survey and the CHAPS spending data point to a fall in retail sales volumes in November. The BRC/KPMG Retail Sales Monitor, which has a somewhat …
Wage growth peaking? Policymakers at the ECB will have taken some heart from the latest wage data published by Indeed. The data track pay offered in job adverts and they have shown a rapid acceleration over the past 18 months or so. But at least on …
The end of the cycle is nigh… Next Thursday will see the last scheduled meetings of the year for several European central banks. The ECB and BoE will grab most of the attention, but the SNB and Norges Bank will also be in action and we expect both to …
Inflation still rising in the Philippines The past week has brought mostly good news on the inflation front. Of the nine countries in the region to have reported November inflation figures, the y/y rate dropped or was stable in eight of them. (See Chart …
South Africa’s political turmoil that severely endangered President Cyril Ramaphosa’s position has already shaken the country’s financial markets. In p art, this is related to the prospect of the ruling party attempting to shore up its dwindling support …
2nd December 2022
The national accounts data provided two pieces of good news this week, with revisions to the historical series and stronger-than-expected third-quarter growth leaving GDP higher than expected. While some argue that this will cause the Bank of Canada to …
With weaker growth overseas and the drag from the stronger dollar now pushing exports lower, the resilience of consumption is the only thing keeping the economy from falling into recession. Mixed signals for Q4 GDP Although third-quarter GDP growth was …
This week’s data releases showed that higher interest rates are starting to influence the economy. This means that at some point the Bank of England will have to start to think more about the appropriate level of interest rates rather than the pace of …
Off the peak? The big event this week was the publication of flash inflation data which showed that, after rising for seventeen months in succession, headline inflation fell from 10.6% in October to 10.0% in November. (See here .) This was lower than we …
Valuations may stall equity outperformance India’s Sensex hit a fresh record high of 63,000 this week (see Chart 1), continuing its remarkable performance over the past few months in the context of the sell-off in equities elsewhere in the world. The …
Weak data, slowing inflation, dovish BoK A string of weak activity data, a sharp drop in inflation and dovish comments from the central bank support our view that the Bank of Korea’s tightening cycle is coming to an end soon. The final estimate of third …
Soft data prompt repricing of rate expectations The financial markets this week scaled back their expectations for interest rate hikes by the RBA and are now pricing in a peak in the cash rate of 3.6%, down from 3.9% last week. (See Chart 1.) Chart 1: …
Untangling Ghana’s fiscal mess? Official statements this week by the authorities in Ghana signalled commitment to restoring fiscal and debt sustainability, and left little doubt that this will include a sovereign debt restructuring. Finance Minister Ken …
25th November 2022
ECB officials were out in force again this week, disseminating clues about the size of the next rate hike and their plans on quantitative tightening (QT). Their comments suggest that a slowdown in the pace of tightening, from a 75bp to a 50bp hike, …
RBNZ willing to send New Zealand into recession While the analyst consensus is that New Zealand will generate decent GDP growth of just under 2% next year, we already predicted last month that the economy will enter recession. And with the RBNZ this week …
This week Fed officials pushed back against the market rally in the wake of October’s unexpectedly weak CPI report, but with only limited success. Despite officials reaffirming that they still had “a ways to go” in tightening policy and that they …
18th November 2022
As the dust settles on this week’s Autumn Statement, we take a step back and answer three key questions. (Clients can catch up on our detailed analysis and our Drop In webinar following Thursday’s fiscal event here and here .) With the economy entering …
Lula’s spending cap exemption plans spook markets Brazil’s financial markets remained on the backfoot this week as the Lula team stepped up its fight against the spending cap. And, while officials have since tried to reassure investors, the developments …
Although the data this week showed renewed rises in the annual rates of CPI-trim and CPI-median inflation in October, our calculations show that the timelier 3-month annualised measures both declined. That could persuade the Bank of Canada to drop down …
In next week’s MPC meetings in South Africa and Nigeria, inflation concerns are likely to hold sway over economic woes, and we expect both central banks to keep raising interest rates. South Africa’s tightening cycle is likely to continue for some time, …
Rebound in Asian currencies unlikely to last The rebound in Asian currencies triggered by the weaker-than-expected US CPI data for October already appears to be running out of steam. A number of currencies, including the won and the rupiah, have dropped …
Domestic demand coming off the boil Recent data paint a mixed picture of the state of domestic demand. On the one hand, survey evidence remains relatively upbeat. The PMI readings for India have recently held up much better than in most other EMs and …
Sovereigns tap the dollar bond market Governments in Turkey and Poland made a splash this week as they announced rare dollar bond issues. Turkey appears to be taking advantage of low credit spreads but the decision in Poland follows recent concern among …
11th November 2022
Lula starting to show his true colours? Developments this week poured cold water on the rally in Brazil’s financial markets that followed Lula’s election victory. Comments from Lula himself yesterday suggesting that higher spending should be prioritised …
Bank of Canada Governor Tiff Macklem said this week that the unemployment rate will need to rise to help restore price stability, but he also played down the significance of the strong gains in employment and average earnings in October. That suggests …
The big fiscal tightening set to be unveiled at the Autumn Statement on 17 th November is coming at a time when the economy is probably already in recession. And the fiscal consolidation, rumoured to be worth a total of £54bn (1.9% of GDP), could risk …
