Filtered by Topic: Monetary Policy Use setting Monetary Policy
The speech by Governor Tiff Macklem this week suggests that, when the Bank of Canada next tapers its asset purchases, it may do so by less than is commonly assumed. Macklem starts talking about the end of QE The Bank kept policy unchanged at its meeting …
10th September 2021
Norway is a riddle, in a mystery, inside an enigma Norwegians will go the polls in parliamentary elections on Monday in what has been dubbed the “climate election”. The run-up to the vote has been dominated by a debate over the appropriate speed at which …
The future of ECB QE On Thursday, the ECB announced a slight reduction in the pace of its PEPP purchases but delayed more important decisions to December. (See here .) So October’s meeting looks set to be dull, and Christine Lagarde might need to channel …
Virus outbreaks starting to ease Virus outbreaks across South East Asia are in retreat. The biggest improvement has been in Indonesia, where daily cases of COVID-19 are now just over 10% of the level they reached in July. Numbers are also coming down in …
Clouds gather over Brazil’s recovery The disappointing economic data out of Brazil this week has cast some clouds over the economy’s recovery prospects. As it happens, we think that GDP growth will pick up quite strongly in Q3, but we’re increasingly …
3rd September 2021
Korea keeping fiscal policy supportive Korea’s proposed budget for 2022 indicates that fiscal policy will remain supportive. In nominal terms, expenditure in 2022 is set to be roughly in line with this year’s (which has been boosted by two stimulus …
For most of the pandemic period, policymakers have been worrying that there will be too much unemployment. But now the fear is that there aren’t enough workers to fill all the jobs! Admittedly, there are still some lingering concerns that when the …
Poland’s inflation surge splits opinion at the NBP The surge in Polish inflation to a fresh two-decade high in August has shown no sign of prompting a more hawkish shift at the central bank. But with inflation likely to remain stuck above target for some …
Delta undefeatable in Australia Victoria joined New South Wales (NSW) in abandoning the zero-Covid strategy this week, declaring the Delta Variant ‘undefeatable’. Even so, the state government opted not to meaningfully ease restrictions. Instead, the …
Brazil’s institutions take a beating The newsflow out of Brazil this week has made for grim reading, with open disputes between the presidency and supreme court putting the country’s democratic institutions under strain. In such circumstances, it’s hard …
27th August 2021
Delta wave spreads The Delta-variant linked surge in coronavirus cases continues and has now spread well beyond just one or two southern states. (See Chart 1.) Moreover, even in those southern states, particularly Florida, new case numbers remain close to …
Russia dips into the pre-election playbook Russia’s government this week unveiled new lump-sum payments to pensioners and military personnel ahead of September’s election, strengthening our above-consensus views on inflation and rates. The government will …
Do you want the good news or the bad news? Business surveys took centre stage on Wednesday morning, with strong parallels between the August readings of the Swiss Investor Sentiment Index and the German Ifo . Encouragingly, businesses in both countries …
NSW easing a damb squib Yesterday’s announcement by New South Wales (NSW) that it will ease restrictions for fully vaccinated people was disappointing. Sydney residents in areas under a curfew will be allowed to have a picnic from mid-September, but that …
The Fed now looks likely to begin tapering its asset purchases later this year, but the precise timing could depend on the extent of any economic drag from the continued rapid spread of the Delta coronavirus variant. The minutes from the July FOMC meeting …
20th August 2021
Fiscal risks bubbling under the surface in Romania Romania’s new finance minister, Dan Vilceanu, has a tough job ahead to keep the public finances on a sustainable path and this will be made all the harder by suggestions from PM Citu to spend the windfall …
Norges Bank gets its nose in front The Norges Bank’s “interim” August policy announcement on Thursday did not upset the form book, and the Bank left interest rates on hold at a record low of zero once again. (See here .) The Bank said that economic …
South Africa’s “BIG” plans won’t get very far The South African authorities appear to be devoting increased attention to the idea of a permanent basic income grant (“BIG”) but, in practice, such proposals are probably dead on arrival. The government …
Hike still on the cards With new cases of COVID-19 rising, most analysts expect the Bank of Korea (BoK) to leave rates unchanged on Thursday. While it is likely to be a close call, we are sticking with our view that the central bank will raise its main …
Lockdown upends RBNZ’s plans In contrast to what most had expected, the RBNZ didn’t become the first central bank in an advanced economy to hike interest rates after the pandemic at Wednesday’s meeting. The statement made it clear that the Bank was keen …
Normalisation still some way off… We’ve argued for some time that the RBI is in no rush to join several of its emerging market peers in tightening monetary policy. That view was reinforced by the MPC’s relatively dovish communications at this month’s …
BCRP: same Governor, fresh tightening Peru’s central bank (BCRP), under the renewed stewardship of Governor Julio Velarde, fired the starting gun on its tightening cycle yesterday and we think it has much further to run over the next year. There were two …
13th August 2021
NBP’s doves losing their nerve… A slew of comments from policymakers at the National Bank of Poland (NBP) this week suggest that the probability of the central bank delivering a rate hike before the end of this year has increased. Flash July CPI data …
6th August 2021
We learnt three things from this Thursday’s Bank of England policy decision and were left in the dark on two key issues. As a result, some of our forecasts for money market rates and gilt yields have changed. What we learnt First, the Bank of England …
Thailand and Philippines to cut rates soon Whereas several EM central banks are in the middle of aggressive tightening cycles, Thailand and the Philippines are likely to resume rate cutting soon. The Bank of Thailand left its policy rate unchanged at its …
New Zealand economy running hot New Zealand’s unemployment rate plunged from 4.6% to 4.0% in Q2, matching its pre-virus low. By contrast, the RBNZ had expected the unemployment rate to remain at 4.7% for more than a year. And unlike in Q1, other …
Rising infections in Kerala a big cause for concern Economic activity has been staging a very strong recovery since the second virus wave receded. But we’ve argued for some time that the rapid reopening would increase the risk of new outbreaks, …
The slightly disappointing second-quarter GDP data released this week and another dovish press conference from Chair Jerome Powell strengthen our belief that the Fed is unlikely to begin tapering its asset purchases until early next year. The 6.5% …
30th July 2021
Peru’s President Castillo off to a concerning start The first steps from Peru’s newly-inaugurated President, Pedro Castillo, provide plenty of worrying signs for investors. The president officially took office on Wednesday and his inauguration speech …
Global factors driving Swiss industry and the franc We would not overplay the importance of the second consecutive fall in the Swiss KOF Economic Barometer (July data were released this morning). After all, the indicator is still well above its long-run …
GDP to contract, but recession unlikely As new infections in Sydney have hit fresh highs this week, the lockdown there has been extended until end-August. The blanket ban on construction has been lifted, but construction will remain banned in hotspots. …
A bankruptcy code to aid the COVID recovery The amendments to the Insolvency and Bankruptcy Code (IBC) that were approved in the Lok Sabha (lower house of parliament) this week would, if passed in the Rajya Sabha, provide much-needed support to India’s …
Delta variant unlikely to derail the recovery Concerns have grown over the past week about the spread of the Delta variant of COVID-19 but high vaccine coverage across much of the region has reduced the risk that policymakers will be forced to reimpose …
23rd July 2021
Mexico: Possible fallout from the third virus wave The third virus wave currently underway in Mexico, driven by the contagious Delta variant, will probably weigh on activity this quarter. But, for now, we don’t think that it will derail the economic …
RBA to delay tapering until November With New South Wales today declaring a “national emergency” as virus cases continue to rise, we now expect the Reserve Bank of Australia to reverse the tapering of its bond purchases and leave them unchanged at least …
There are signs that the worst of the violence and unrest that has gripped South Africa this week may be over. Any hit to economic activity is unlikely to be long-lasting but the risk that the government’s austerity plans are watered down has increased. …
16th July 2021
Israel’s virus wave could be a warning for others The experience of Israel in recent weeks serves as a reminder that vaccine campaigns across Emerging Europe still have some way to go and that we are likely to have to learn to live with COVID long term. …
The Bank of Canada expects GDP to move above its pre-pandemic trend in 2023 but, given the potential for oil prices and residential investment to decline, we think its forecasts will prove too optimistic. Alongside its decision to keep the policy rate …
Cyclically healthy, structurally ailing China’s post-lockdown recovery has often been called patchy, with household spending still weak. We’ve never been entirely comfortable with that characterisation. Retail spending on goods has been back near the …
In response to the jump in CPI inflation from 2.1% in May to 2.5% in June (see here ) and yet more signs that the labour market is bouncing back (see here ), two members of the Monetary Policy Committee (MPC) this week indicated that policy will need to …
Virus cases surge in South East Asia The virus situation across South East Asia has gone from bad to worse over the past couple of weeks (see Chart 1), with Indonesia, Thailand, Malaysia and Vietnam all reporting a record high number of daily cases. The …
RBNZ will hike rates next month We forecast at the end of last year that the RBNZ would end its asset purchase scheme by the middle of this year, one year ahead of schedule. While we had expected the Bank to wait until August, the Bank announced this week …
Banxico minutes: surprises and hints of more hikes The minutes to Banxico’s June 24 th meeting , where it delivered a surprise 25bp hike, were fairly hawkish and reaffirm our initial view that more tightening is in the pipeline. We now expect a further …
9th July 2021
Tech crackdown goes to New York… Decoupling has entered a new phase over the past year. Where China previously was trying to temper US efforts to decouple, in key areas it now appears to want the same. The Five-Year Plan’s push for self-sufficiency in …
MNB to stay hawkish for now The surprisingly large rise in Hungarian inflation to 5.3% y/y in June – its highest rate in almost nine years – suggests that the risks to our interest rate forecast are skewed to the upside. The central bank (MNB) took a …
Inflation won’t threaten monetary policy outlook The yield on India’s ten-year government bond this week jumped to its highest since the start of April. (See Chart 1.) Overnight index swap rates have also spiked since mid-June. Taken together, they point …
RBA starts to taper RBA Governor Phillip Lowe has had a hectic week, with two speeches and the RBA’s July Policy decision. While the Governor reiterated that the RBA still believes policy support is likely to be needed for a long time, the stance of …
CBRT unlikely to win the war with dollarisation Turkey’s central bank (CBRT) took steps this week to tackle deposit dollarisation in the banking sector, but these efforts will fail to make headway in the absence of a stronger commitment to rein in high …
2nd July 2021
We aren’t convinced that it will mark the start of a sustained acceleration, but the stronger gain in June payrolls will embolden those Fed officials calling for an earlier end to the Fed’s asset purchases. The 850,000 rise in non-farm payrolls in June …
“Stockholm Street” or “Stockholm-enders”? This week saw the latest instalment of the political soap opera in Sweden. Having lost a “no confidence” vote on the 21 st June (see here ), the resignation of Prime Minister Stefan Löfven on Monday means the …
