Filtered by Topic: Monetary Policy Use setting Monetary Policy
Our new oil price forecasts The price of oil has risen sharply since the turn of the year and, while we still expect it to fall back by year-end, recent supply issues suggest that it will not decrease by as much as we had expected. As a result, the door …
20th January 2022
The continued surge in Omicron infections suggests that the disappointing December activity data will be followed by further weakness in January, but there are no signs that it will delay the Fed’s accelerating plans to tighten policy. This week’s Senate …
14th January 2022
“Dynamic clearing” hasn’t failed yet It is too soon to conclude – as many seem to have – that Omicron will swamp China’s efforts to suppress COVID. Those efforts are far more forceful than anyone else has tried. The country’s first …
Russia-Ukraine tensions hit a new crisis point A tense week of negotiations between Russia, the US and NATO have ended with what now seems to be a more serious ratcheting up in tensions that is likely to weigh on local financial markets for some time. The …
Ha det bra, Governor Olsen You don’t have to be Sherlock Holmes to deduce that next Thursday’s announcement from the Norges Bank will be a non-event in terms of policy action. Having raised interest rates to +0.50% at the last meeting, in December , we …
Economy running hot before Omicron The economic data released this week corroborates our view that GDP surpassed its pre-lockdown level in Q4. For one thing, retail sales values jumped by 7.3% m/m in November and were 6% above their previous peak a year …
Window for Gulf fiscal loosening to close Oil prices have risen to near pre-Omicron highs this week, but we think that is likely to be short lived. As prices drop back the window for governments in the Gulf to loosen fiscal policy will shut. Brent crude …
13th January 2022
Omicron taking hold in Latin America New virus cases have jumped almost five-fold in Latin America over the past two weeks as the contagious Omicron variant is taking hold, but we suspect that the economic fallout will be limited. Caseloads are …
7th January 2022
Omicron tsunami shows few signs of peaking The surge in Omicron infections has quickly developed into a full-blown tsunami, with the seven-day national average now close to 600,000 – three times higher than the previous peak last winter. (See Chart 1.) …
NBP defiant in the face of rising wage growth Poland’s central bank continued its tightening cycle this week, but recent comments from policymakers have made us more concerned that it is failing to appreciate the extent, persistence and possible …
Next stop, rate cut in Denmark? We learnt this week that Denmark’s Nationalbank intervened heavily in the FX market in December to counter upward pressure on the krone. The sale of DKK 47 billion in the month was the biggest intervention in absolute terms …
Philippines won’t start tightening this year Falling inflation and an increasingly uncertain economic outlook add weight to our non-consensus view that the central bank in the Philippines (BSP) will not start tightening in 2022. Figures released earlier …
Omicron probably won’t trigger lockdown In recent weeks new Covid-19 cases have been exploding. More people have tested positive in the past two weeks than in the rest of the pandemic combined. While a lower share of Omicron patients suffer severe …
Our hits and misses from a volatile 2021 2021 was another whirlwind year for Latin America. The economic recovery has been bumpy, financial markets have underperformed, and Lionel Messi finally won the Copa América (sorry Brazil fans). In the final Weekly …
17th December 2021
Poland: overheating fears, but NBP stepping up Concerns that Poland’s economy is overheating will have only been reinforced by figures this week that showed a surge in nominal wage growth and a sharp widening of the current account deficit in October. But …
Market pricing suggests investors remain unconvinced that the now-hawkish Fed will hike interest rates as high as officials are projecting, either because inflation will drop back more quickly or because real economic growth will falter. In this case, we …
African officials keeping virus-fighting gloves off Three weeks after the detection of the Omicron variant in South Africa, the government is showing no signs of changing course from its approach of minimising virus-related restrictions even as COVID-19 …
Twelve months ago we said that 2021 would bring a “quicker and fuller” recovery, still-loose monetary policy and that the pandemic wouldn’t leave a large permanent dent in the economy and the public finances. (See here .) So we have managed to notch a …
The majority of this week’s multiple central bank decisions turned out to be a little more hawkish than most had anticipated, and the ECB was no exception. We commented on its decision here , but a couple of points are worth underlining. First, the ECB …
Fed rate hikes pose little threat to Asia With the start of US monetary tightening drawing near, questions have been asked about whether Asia’s central banks will respond with tightening of their own. Hong Kong and Singapore will: their exchange rate …
Shifting sands at ECB change landscape for the SNB As expected, Thursday morning’s SNB announcement did not throw up any surprises, and the ability of Swiss policymakers to play a straight bat puts England’s openers to shame. However, the mildly hawkish …
The end is coming for QE In a speech this week, RBA Governor Lowe noted that the RBA’s central forecasts were consistent with the Bank tapering its bond purchase programme in February, and ending it altogether in May. But he also acknowledged two other …
A deep-dive into Saudi Arabia’s ‘austere’ budget The Saudi 2022 Budget released earlier this week revealed that the government expects to cut spending to help it run a budget surplus for the first time since 2013. But the true fiscal stance is being …
16th December 2021
QE to end sooner and more rate hikes in forecast Following Chair Jerome Powell’s markedly more hawkish tone at his recent congressional testimony, markets are braced for the Fed to pivot hard at next week’s FOMC meeting. Futures pricing suggests there is …
10th December 2021
The Bank of Canada’s increased concerns about wage and cost pressures suggest it will start to tighten policy in April, especially if the government loosens fiscal policy in next week’s fall fiscal update. Bank to turn more hawkish in January In the …
Sanctions threat rears its ugly head again The newswires have been abuzz this week with reports of a potential Russian military conflict with Ukraine and a renewed threat of US sanctions. The proposed sanctions are at the more aggressive end of the …
The government’s recently-imposed “Plan B” COVID-19 restrictions mean there is a good chance that the economy contracted in December. If the pressure on the NHS increases, restrictions might be tightened further, implying substantial downside risks to Q1 …
Interview coaching for SNB candidates This week’s announcement that Fritz Zurbrügg – one of the three members of the SNB’s Governing Board – will retire at the end of July 2022 sounded the starting gun to appoint his successor. We are not privy to the …
This week brought yet more bad news for the euro-zone economy. Although German industrial output grew by 2.8% on the month in October, driven by a rebound in the struggling auto sector, this followed months of declines and left production 6.5% below its …
Rates to stay on hold throughout most of next year The central bank of Taiwan (CBC) is likely to leave interest rates unchanged at its meeting on Thursday (both the consensus and ourselves expect no change), but with the economy operating well-above its …
Iran nuclear deal talks hit (another) bump The seventh round of talks to revive the Iran nuclear deal resumed today, having been halted on Friday as both sides failed to make headway. It appears that an agreement is a long way off, which could put upwards …
9th December 2021
More variants more problems? It goes without saying that the emergence of the Omicron variant presents a key risk to economic recoveries. But, for the time being, we think that central banks across the region will continue to focus on tackling high …
3rd December 2021
As the labour market is nearing a full recovery and wages are rising strongly, we now expect the Bank to hike interest rates in April, rather than waiting until July, as we previously expected. Fourth-quarter GDP growth not as strong as it looks …
Powell signals turning point in inflation fight Fed Chair Jerome Powell’s congressional testimony this week was markedly more hawkish. We wouldn’t characterise it as a full-blown Volcker moment. But there could be parallels with former Chair Alan …
CEWC to discuss policy easing amid slowdown China’s leadership will gather soon for the Central Economic Work Conference (CEWC), an annual meeting that sets economic targets and policy priorities for the coming year. The discussions are private but a …
Immunity to high inflation won’t wane While there are still far more questions than answers surrounding the new Omicron variant, in a worst-case scenario we think it would temporarily derail Japan’s economic recovery and cause underlying inflation to …
Omicron is reducing socialising Just one week after the emergence of the Omicron COVID-19 variant there are lots of anecdotal reports of Christmas parties being cancelled and some tentative evidence that activity has softened. In the week before the …
Rising inflation piles pressure on CBSL The economic situation in Sri Lanka is going from bad to worse, with a surge in inflation undermining the credibility of the central bank (CBSL) and making a debt default all the more likely. Data released earlier …
“You shall not pass!” [the CHF 1.04 per euro mark] We were ahead of the curve in arguing that the SNB would wave goodbye to the implicit ceiling of CHF 1.05 per euro that it defended in earnest during the early stages of the pandemic. (See here .) …
In contrast to those at the US Fed, ECB policymakers are not ready to retire their argument that the current bout of high inflation is temporary. Indeed, Vice President Luis de Guindos said this week that “the high rate of inflation we’re experiencing …
A week ago we argued that the reopening of the border was unlikely to ease labour shortages much. Indeed, the government has now delayed the re-entry of the 235,000 visa holders stuck overseas until mid-December to ward off the Omicron variant. However, …
Finance Ministry could respond to new virus wave India reported its first cases of the Omicron variant yesterday. Plenty of uncertainty remains about the new variant, but we outlined some of the key factors that could determine the extent of the economic …
New face but same gradual tightening at Banxico Mexican President López Obrador delivered another (unhappy) surprise to markets this week by unexpectedly changing his nomination for Banxico’s next governor from Arturo Herrera to Victoria Rodríguez. But we …
26th November 2021
Turkey tumult Safe to say that this week has been dominated by the collapse in the Turkish lira and we’ve been helping clients navigate through the crisis and its implications across our services. All of the research that we’ve published can be found here …
It is too early to judge how serious the B.1.1.529 variant will turn out to be (though see our initial thoughts here ) but it has already caused European equities to fall by over 2% as travel and energy stocks in particular have tanked on fears of new …
Recent hikes not the start of Asian tightening cycle Attention over the past week has been on the region’s more hawkish central banks, following rate hikes in Korea and Pakistan . Both countries, along with Sri Lanka (which unexpectedly left rates …
Turkey roasted In a turbulent week for Turkey, we’ve written various pieces on our services looking at the implications so we’ll summarise the key points in this Weekly . We looked at how a sell-off in the lira could damage the economy and financial …
19th November 2021
SARB joining in… This week, the South African Reserve Bank (SARB) joined its EM counterparts in tightening monetary policy, but we don’t think that policymakers in South Africa will hike interest rates as aggressively as those in Emerging Europe and Latin …
“Given these two-sided risks – weaker activity and higher inflation – the labour market story really is the crucial part of it, and we haven’t yet seen enough of that story, post furlough scheme.” ”Don’t forget what our framework is. It’s about inflation. …
RBA still a long way from raising rates RBA Governor Phillip Lowe pushed back once again this week on financial market expectations of a hike in the cash rate in 2022. Lowe reiterated that the economy would need to perform very differently from the RBA’s …
