Filtered by Topic: Monetary Policy Use setting Monetary Policy
Thailand’s reopening Thailand’s tourism sector will remain heavily depressed despite this week’s reopening of Phuket to foreign tourists. Since Thursday, fully-vaccinated foreigners have been allowed to visit the island without needing to quarantine …
2nd July 2021
Vacancies off the chart The Australian Bureau of Statistics’ measure of job vacancies surged 23.4% in Q2 which means they are now more than 50% above their pre-virus level. Job vacancies are now equivalent to 2.62% of the labour force, far higher than the …
Central bank hawkishness sweeping the region Latin American central banks are becoming increasingly hawkish, not just in Mexico but also in Brazil and Chile. Colombia may soon join this club. The biggest hawkish shift this week was in Mexico. After a …
25th June 2021
Ghana: bumper harvest to support recovery Media reports suggest that Ghana may be heading for its biggest cocoa harvest in at least a decade. High rainfall and better farming practices have, according to the same reports, helped push output to its highest …
Virus clouds lift over Turkey’s outlook The sharp improvement in Turkey’s virus situation has brightened the near-term outlook and presents a risk to our view that the central bank will start an aggressive easing cycle in the coming months. The number of …
Global developments driving the Nordic majors After last week’s seemingly counterintuitive drop in the NOK following the hawkish message from the Norges Bank (see here ), it was the turn of the Swedish Krona to apparently defy the laws of the market: the …
Another week, another set of euro-zone survey data highlighting the strength of the region’s economic bounce back as virus restrictions are lifted on the services sector. The flash Composite PMI for the euro-zone rose to its highest level in 15 years and, …
The evolving outlook for monetary policy on the other side of the Atlantic has once again been partly to blame for recent movements in UK markets. Like in the US, the yield curve flattened after the Fed became more hawkish at its May meeting, although …
Korea to hike rates in August We were already more hawkish that the consensus in expecting a rate hike in Korea this year, but recent comments by the central bank and strong economic data mean we are shifting forward our forecast for the first hike to the …
Surge in virus cases casts a dark cloud over Russia A surge in virus infections in Moscow and tightening of restrictions at a time when vaccine coverage is so low threatens to derail Russia’s economic recovery. New daily virus infections in Russia had …
18th June 2021
Bank of Korea closer to pulling the trigger Minutes from the Bank of Korea’s (BoK’s) May meeting, released on Tuesday, support our view that the central bank will tighten policy this year. The minutes were decidedly hawkish, with one of the seven members …
Norges Bank trumped by the US Fed The Norges Bank laid its cards on the table this Thursday, all but confirming that it will start to raise its key interest rate from September. (See here .) In the event, it was overshadowed by the less anticipated news …
Hawkish moves When RBA Governor Lowe stood up to give a speech on Thursday, markets were still digesting the hawkish shift from the US Fed that had come just a few hours before. The Fed’s move to add two rate hikes in 2023 to its projection took it ahead …
The communications from the Bank of Canada this week confirmed that it is not worried about inflation surpassing its forecasts for this year, and that it remains committed to keeping the policy rate unchanged until economic slack is fully absorbed. …
11th June 2021
Peru at a crossroads The victory for left-wing candidate Pedro Castillo in Peru’s presidential election last Sunday caused local markets to tumble. However, if his more moderate post-election comments are borne out by policymaking, history provides …
Russian ruble gains as Biden-Putin summit nears The Russian ruble has appreciated markedly recently and the balance of forces now increasingly favours further gains. But a lot also depends on geopolitics; a positive outcome from the Biden-Putin summit …
Victorian lockdown lifted The two-week lockdown in Victoria has now been lifted, two weeks earlier than we had expected. While social distancing restrictions will remain in place, consumers can now shop again, which will provide a meaningful boost to …
SA lockdown level up, recovery outlook (still) down The recent tightening of containment measures to curb South Africa’s third virus wave is unlikely to be as damaging for the economy as earlier rounds of restrictions. Even so, the prospect of further …
4th June 2021
Inflation likely to surprise on the upside this year May’s inflation data were a little stronger than we or the consensus had expected (see here ), and inflation looks set to keep rising in the second half of the year. There is a laundry list of factors …
Financial support unlikely to trigger baby boom The big news this week was that couples in China will soon be allowed to have three children, up from two currently. We covered the initial announcement here , noting that since the shift from a one-child …
Korea: vaccines to supercharge the recovery Thanks to a fresh batch of supply, Korea has administered nearly three million jabs in the past seven days, covering over 5% of its population. (See Chart 1.) And there are hopeful signs that this pace will be …
Banxico minutes: cautious but not too concerned The minutes to Banxico’s latest meeting revealed that Board members are becoming more wary about the outlook for inflation. Even so, we think that there is a high bar for a tightening cycle to begin. The …
28th May 2021
Renminbi turning point deferred Regulators pledged to squeeze speculation out of domestic commodity markets last week. This week it was the turn of the foreign exchange market. A number of local analysts and researchers in recent weeks have called for …
Investment rebound offset by lockdown The whopping 9.1% rise in machinery and equipment investment in the private capital expenditure survey was more than enough to offset the small decline in non-residential construction in the building works done data. …
Recovery might be more gradual than last year New virus cases in India continue to drop sharply and have almost halved from their peak just a couple of weeks ago. The drop has coincided with an apparent bottoming out in some of the real-time activity …
MNB’s bombshell: a new era of monetary policy? Guidance from Hungary’s central bank (MNB) this week suggests that it is taking the fight against inflation much more seriously and that a monetary tightening cycle will start over the coming months. On …
21st May 2021
The latest Financial System Review (FSR) suggests that the Bank of Canada’s concerns about high house price inflation are a key risk to our view that it will wait until early 2023 before raising interest rates. The FSR highlighted that, despite the fall …
In a week when we found out that employment rose in the three months to March (see here ), CPI inflation doubled to 1.5% in April (see here ), retail sales surged in the same month (see here ) and the flash composite PMI jumped to a record high in May …
In its Q1 Monetary Policy Report published on Tuesday, the People’s Bank (PBOC) argued that inflationary pressures are likely to remain modest within China. The authors acknowledged that strong demand as well as supply shortages are driving rapid gains in …
14th May 2021
RBA signals more support is required The Reserve Bank of Australia noted at this week’s policy meeting that it will decide whether to extend its bond purchases at its July meeting. And Deputy Governor Debelle noted yesterday that the decision will take …
7th May 2021
With the surge in COVID-19 infections showing no signs of abating and containment measures being reimposed, concerns about spill-overs to the real economy are growing. So far, activity is holding up well . But policymakers are likely to be concerned by …
30th April 2021
Restrictions may need further tightening The surge in new COVID-19 cases in India and subsequent tightening of state-level restrictions has started to weigh on activity . (See Chart 1.) Chart 1: CE India Mobility Tracker (% Diff. from Jan.-6 th Feb. 2020, …
23rd April 2021
Households in a good position The RBA’s latest Financial Stability Review painted a rosy picture of financial stability risks. Household debt as a share of disposable income remained at a four-year low in Q4 despite the fall in incomes as stimulus was …
16th April 2021
Populist shifts in Peru & Ecuador? Voters head to the polls in Peru and Ecuador on Sunday which could lead to a populist shift in both. The first round of Peru’s general election is a big unknown. The latest opinion polls suggest that no presidential …
9th April 2021
PBOC moves to slow credit growth The readout from the latest PBOC Monetary Policy Committee meeting struck a dovish tone. In particular, a pledge to lower real lending rates means readers could be forgiven for thinking that the central bank is still in …
Talk of QE misses the bigger picture Much of the commentary following the RBI’s policy meeting this week – in which policy rates were kept on hold – has been on the announcement of a new programme (the so-called G-SAP) through which the central bank will …
Passing the buck House prices are surging in Australia. Prices rose 2.8% in March which translates to an incredible annualised pace of more than 30%. Housing finance commitments in February also point to annual price growth reaching 30% before long. (See …
1st April 2021
More moves to slow house price growth We’ve expressed doubts over the ability of the RBNZ’s loan-to-value ratio (LVR) limits which were implemented at the start of the month to slow the pace of house price growth very much. (See here .) The government …
26th March 2021
Sharp fall in unemployment Australian employment surged in February despite brief localised lockdowns in some states. The 88,700 rise was enough to pull down the unemployment rate from 6.4% to 5.8%. That’s just 0.6 ppts higher than the pre-virus level and …
19th March 2021
Persistent rise in infections could dent the recovery New daily COVID-19 cases in India have been rising over recent weeks, and on Thursday reached their highest level since early December. For now at least, this doesn’t appear to be a major threat to the …
RBA defends yield target The sell-off in government bond markets in recent weeks resulted in a deterioration in liquidity conditions, with bid-ask spreads reaching the highest level since last year’s panic. (See Chart 1.) The Bank responded last Monday by …
12th March 2021
Rate hikes still a long way off Financial markets appear increasingly convinced that the RBI is on the cusp of fairly aggressive monetary tightening. A cumulative 100bp increase in interest rates this year is now being discounted, with the first rate hike …
RBA responding half-heartedly to soaring yields Bond yields declined at the beginning of the week as the RBA on Monday stepped up its purchases of longer-dated bonds for the first time since the launch of quantitative easing in November. The Bank bought …
5th March 2021
The roadmap out of the current COVID-19 lockdown announced by the Prime Minister on Monday was similar to the assumptions we had already built into our economic forecasts. As such, it didn’t reroute our forecast that the recovery will be faster and fuller …
26th February 2021
10-year yields reaching highest level since 2016 The 10-year JGB yield rose to 0.18% today, the highest it has been since the launch of negative interest rates in January 2016. (See Chart 1.) One explanation is that the Bank of Japan is widely expected to …
Should the RBI target core inflation? Under current law, India’s government issues the RBI with an inflation target every five years. The current target of 4% headline CPI inflation, with a “tolerance band” of 2-6%, runs until the end of next month. We’ve …
Bond yields soaring to two-year high The key market theme this month has been the surge in long-term government bond yields. While that rise is partly driven by worries that another large stimulus package in the US will lift inflation, yields have risen …
RBNZ cracks down on the housing market In April 2020, the RBNZ removed its existing LVR restrictions for housing loans which stipulated that banks could not lend more than 80% of loans to owner-occupiers with loan-to-value (LTV) ratios above 80% and no …
11th February 2021
RBI commits to low rates and ramps up OMOs… Indian yields rose significantly in the aftermath of the unexpectedly-accommodative Union Budget announcement but developments since have helped to reduce some of the upward pressure. Admittedly, the RBI kept …
SoE extension not a major worry The government this week extended the state of emergency by a month for ten of Japan’s eleven prefectures. Tochigi was the only prefecture that was excluded as it met all six of the metrics required to lower the status of …
5th February 2021
