Filtered by Topic: Monetary Policy Use setting Monetary Policy
Golden Week encouraging The strong rebound in mobility over Golden Week suggests that virus fears are waning for many consumers. After stay-at-home spring holiday periods in 2020 and 2021, last week finally saw a seasonal spike in mobility. (See Chart 1.) …
13th May 2022
Inflation at multi-decade highs The past week has shone the spotlight on the region’s inflation problem. April CPI figures showed that inflation rose to its highest level since 2000 in Colombia, since 1998 in Peru and since 1994 in Chile. Data out of …
6th May 2022
Fed moving expeditiously The Fed’s policy statement this week warned that the FOMC is “highly attentive to inflation risks” and, as a result, in his post-meeting press conference Chair Jerome Powell acknowledged that “there is a broad sense on the [FOMC] …
As anticipated, this week’s Monetary Policy Report was the third in a row in which the Bank of England revised up its inflation forecast over the next two years and revised down its GDP forecast. But it was the Bank’s dramatic cuts to its GDP forecast and …
Schlegel won’t rock the boat at the SNB The SNB announced this week that Martin Schlegel will succeed Fritz Zurbrügg as Vice-Chair of the Governing Board after Mr Zurbrügg retires at the end of July. Mr Schlegel is part of the furniture at the SNB, having …
Widening bond spreads a cause for concern We agree with investors that the ECB is likely to raise interest rates by 25bp in July. We first made the call in late March, when even the most hawkish members of the Governing Council were talking about hiking …
Jump in inflation likely to be temporary Interest rates in the Philippines look set to rise soon, but the tightening cycle is likely be gradual. Figures published earlier this week show that headline inflation in the Philippines increased from 4.0% y/y in …
Power shortages pose upside risk to inflation The ongoing heatwave in India is prompting a surge in electricity demand that power companies are struggling to meet. (See Chart 1.) In fact, power shortages at peak times were more widespread in April than in …
RBA starts the climb The RBA finally came around to our long-held view that rate hikes would be needed in the first half of this year and hiked rates at the meeting on Tuesday. Admittedly, we had expected the Bank to hike by 15bp, bringing rates back to …
We doubt that the unexpected 1.4% annualised decline in first-quarter GDP will stop the Fed from hiking its policy rate by a bigger 50bp next week or from launching quantitative tightening. The Fed will stress the ongoing strength of employment growth, …
29th April 2022
Stefan Ingves would struggle to keep a secret Much of the analysis following the start of repo rate hikes by the Riksbank yesterday has pushed a narrative that the Bank’s messaging was more hawkish than expected and its decision to raise rates as a …
Repo rate hike on the horizon MPC members have been in a chatty mood this week, with both Jayanth Varma and Ashima Goyal giving interviews to the press. Despite being at opposite ends of the policy spectrum (Mr Varma is the most hawkish member of the …
Inflation now surging in Australia The 2.1%q/q rise in headline inflation and the 1.4% rise in trimmed mean inflation in Australia in Q1 were much stronger than the RBA was forecasting. Admittedly, the strength in inflation has been largely driven by …
BoJ ups the ante once again The Bank of Japan remained under pressure to defend its 10-year yield target this week and conducted fixed rate auctions offering to buy an unlimited amount of bonds every day. The amounts purchased in the auctions on Tuesday …
The surge in consumer price inflation in March leads us to think that the Bank of Canada will now rapidly raise its policy rate to 2.5% by the end of the year. The jump in inflation to 6.7% in March (see here ) seems to have been an even bigger surprise …
23rd April 2022
With Fed officials seemingly competing to try and sound more hawkish than their peers, a 50bp rate hike next month appears nailed on – even though this week also brought further tentative signs that inflation is set to ease soon. Fed readying …
22nd April 2022
We first said in late March that we thought the ECB was likely to raise rates as soon as July. This was because inflation had been higher than expected for several months in succession and we thought it would continue to surprise on the upside, while the …
Boom time for Salmon prices In an otherwise extremely quiet week for tier-1 macroeconomic data releases, the publication of weekly salmon price data from Statistics Norway stood out. In short, it’s boom time for the fishing industry. The export price of …
Currency slide will continue The renminbi had been defying the gravitational pull of a collapsing interest rate differential with the dollar. In recent days, something seemed to give. The onshore currency lost 1.8% against the dollar this week. The slide …
Softer trade figures a sign of things to come There are growing signs that demand for the region’s exports are starting to soften, a trend we expect to continue over the coming months. Figures published on Wednesday show that Taiwanese export orders …
RBA bringing forward rate hikes The Reserve Bank of Australia is increasingly coming around to our view that rate hikes will be needed before long. The minutes of the RBA’s April meeting revealed that the Bank is becoming concerned about the second-round …
BoJ intervenes again to cap 10-year yields With 10-year yields again at the ceiling of the BoJ’s 0±25bp target band, the Bank launched another fixed rate auction on Wednesday. Then, on Thursday, it announced consecutive fixed rate auctions for a total of …
Egypt looks to tourism to bolster FX revenues Egyptian officials appear to be hoping for a revival of the tourism sector as part of their strategy to improve the external position, but we still think that the currency will need to weaken further. The …
21st April 2022
ECB President Christine Lagarde suggested at today’s post-meeting press conference that the Bank would be sticking to its plans for policy normalisation, despite inflation surprising to the upside since the last meeting. She highlighted the hit to …
14th April 2022
Price pressures building This week brought March inflation releases from Norway, Denmark and Sweden. Norway’s inflation data were a little weaker than expected, with the headline rate at 4.5% and the core rate unchanged at 2.1%. (See here .) Those …
8.5% inflation marks the peak The news that core prices rose by a more modest 0.3% in March, even as higher energy prices drove headline inflation to a 40-year high of 8.5%, explains why investors pared bets this week on how far interest rates would rise. …
The Bank of Canada embraced a new-found hawkishness this week, hiking its policy rate by 50bp to 1.00% and announcing an almost immediate start to what amounts to a relatively more aggressive quantitative tightening than the Fed is contemplating south of …
N. Africa: some benefits from Europe’s energy war The war in Ukraine has prompted the EU to commit to reducing its dependence on Russian gas and, as we’ve highlighted before , Algeria and Egypt stand to be two key beneficiaries. So far, Italy’s Eni S.p.A …
Upside risks to inflation are materialising We’ve been arguing for several months that both the consensus and the RBI have been underestimating the upside threats to inflation. Consumer price data for March released this week have reinforced our view. The …
Ban on Russian coal won’t lift energy prices Prime Minister Kishida’s decision last Friday to follow the EU in banning imports of Russian coal is unlikely to put much additional upwards pressure on Japanese energy prices. To be sure, Japan is the world’s …
Labour market tightening, inflation surging The Reserve Bank of New Zealand’s 50bp rate hike on Wednesday was in line with our forecast and financial market pricing, but defied the analyst consensus of a 25bp hike. We’ve pencilled in another 50bp hike in …
The government used its 2022 Budget to set out a host of proposals to make housing more affordable for Canadians, but the impact of these measures on house prices will be far overshadowed by the effect of rising interest rates, with the Bank of Canada …
8th April 2022
The age of turbulence all over again As it was with Alan Greenspan, we suspect that, although he still receives favourable reviews now, history will judge Jerome Powell’s tenure as Fed Chair far more harshly. With the benefit of less than 24 months of …
Pressure mounting on India-Russia relations Relations between India and Russia came under fresh scrutiny this week, with US officials warning of “significant and long-term” consequences if India moves towards a “more explicit strategic alignment” with …
Prime Minister loses case in Supreme Court A change of leadership in Pakistan looks likely this weekend, calling the future of the country’s IMF deal into question. Yesterday, the Pakistani Supreme Court ruled unconstitutional the dissolution of the …
Strong inflation to trump sluggish wage growth When we predicted two months ago that the RBA would start to hike rates in June, we were among a small minority of analysts holding that view. But with the RBA this week signalling that it will no longer be …
What now for the Egyptian pound? The Egyptian pound has remained relatively stable since last month’s devaluation , which may suggest it has reached its fair value. But we still think policymakers need to move to a more flexible exchange rate and allow …
7th April 2022
Brazil: high inflation raises wage spiral, strike risks The start of a general strike by workers at Brazil’s central bank today to push for an inflation-busting 26.3% pay rise has mainly been a matter of concern for analysts because of the practical …
1st April 2022
SA officials to give ground on public wages? Public sector wage negotiations will soon kick off in South Africa and there are reasons to think that officials may concede further ground to trade unions. A surging wage bill has been a key driver of the …
Shifting goalposts for Nationalbank and SNB The fact that we now expect the ECB to hike interest rates sooner and faster than we previously anticipated naturally affects our outlooks for policy in Switzerland and the Nordics. Note that we now forecast the …
BoJ back in control for now The Bank of Japan’s Yield Curve Control framework had to battle for survival to an extent never seen since its launch in 2016. 10-year Japanese Government Bonds (JGBs) have fallen back to 0.20% today after briefly breaking the …
What does the end of the Expo mean for Dubai? The World Expo in Dubai closes its doors today and, while it has provided a near-term fillip to the economy, we are concerned that it will leave a legacy of overcapacity in key sectors that reignites the …
31st March 2022
Amlo threatens Mexico’s institutions again Yesterday’s comment by Mexican President López Obrador (Amlo) that Banxico would raise its policy rate by 50bp , four hours before the official decision, is not a big deal in itself. But it adds to the sense that …
25th March 2022
Russia’s financial markets return from the ashes Trading on the Moscow Stock Exchange returned this week, with the central bank allowing trading of sovereign debt from Monday and selected equities from Thursday. Russian markets remain illiquid and there …
Ghana: interest rates up, gov’t spending down The Ghanaian authorities took steps this week to shore up the cedi and tackle the poor public finances but, even though a sovereign default is not imminent, officials may eventually have to back down and turn …
Breman vents to a bunch of 16-19 year olds Riksbank Deputy Governor Anna Breman appeared to take out her hawkish frustrations on a group of secondary students in a speech on Wednesday. One can only speculate as to what the pupils made of the talk; while …
Doves in the ascendency Dovish comments from policymakers over the past week support our view that central banks in South East Asia will buck the trend of global tightening and leave interest rates unchanged over the coming months. The central bank in the …
Inflation picking up even further NAB’s February business survey had already highlighted that purchase costs were rising at a rate consistent with a further pick-up in underlying inflation. And the flash PMIs for March, released this week, provide further …
Kishida considering fresh support measures After a brief fall, the price of Brent crude oil has jumped again over the past week and we expect to remain around current levels of US$120 per barrel across the second quarter. Meanwhile, Japan’s biggest …
While the start of a US Fed tightening cycle has historically sent alarm bells ringing in Latin America, the region generally looks well placed to weather any potential storm this time. Chile may be an outlier, though, given its worrying external …
18th March 2022
