Filtered by Topic: Monetary Policy Use setting Monetary Policy
Second wave fears ease The recent jump in coronavirus cases in Korea, Hong Kong and Vietnam had a negative impact on each economy, with hospitality sectors bearing the brunt of the damage. But with infection numbers now falling again and restrictions …
11th September 2020
Melbourne lockdown extended Victorian Premier Daniel Andrews confirmed this week that the state would remain in the current lockdown until at least the end of September, in line with our own expectations. (See here .) But the path out of lockdown he …
Brazil & Mexico’s PMIs diverge The manufacturing PMIs for August published this week were surprising, both for the strength they implied in Brazil’s economy and the weakness in Mexico’s. But in both cases, the surveys are painting an exaggerated picture …
4th September 2020
Slow recovery in the Philippines A long and strict lockdown meant the Philippines suffered one of the biggest falls in GDP in the region in the second quarter. (See here .) The most recent data suggest that it is also experiencing one of the slowest …
Pandemic decimating some services sectors The 7.0% q/q plunge in Q2 GDP was larger than we had anticipated and meant that Australia entered its first recession in 29 years. And while we’ve pencilled in a 0.5% q/q rise in Q3, the risks to that forecast are …
Argentina & the IMF: Take 22… Barring any unexpected hiccups, $66.2bn of Argentina’s international sovereign bonds will be restructured next Friday. As will $41.7bn of local-law FX bonds. Now the government wants to tackle the debts owed to its historic …
28th August 2020
Nigeria’s foreign currency woes Fresh measures by Nigeria’s central bank to clamp down on foreign currency transactions underline the severe pressure on the naira. While the currency will probably be allowed to weaken, further restrictions are likely to …
Turkish lira still vulnerable as EU tensions escalate The Turkish central bank’s tightening of monetary conditions has helped to stabilise the lira but the further ratcheting up of tensions with the EU mean that the risks to the currency lie to the …
QE is edging closer The Bank of Korea (BoK) surprised no one by keeping rates on hold at 0.5% this week. (See here .) Less expected was Governor Lee’s assertion that the Bank has “room for a rate cut”. We’ve now pencilled in a further 25bp cut to 0.25% in …
RBI OMOs a sign of things to come The rise in government bond yields over recent weeks appears to have jolted the RBI into action. The central bank this week held an open market operation (OMO) in which it purchased long-dated bonds with the aim of …
Banks hit with co-pay on stimulus bill When the Global Financial Crisis struck, Chinese policymakers leant heavily on the state-owned banks to shore up economic activity. While the 2009 RMB4trn fiscal stimulus package receives much of the credit, the …
21st August 2020
Small dividend makes Fin Min’s job harder The RBI’s annual dividend transfer took place this week and was met with far less fanfare compared to last year. That is in large part because the size of the transfer has reverted to more normal levels after a …
Net trade to provide large boost to Q3 GDP The 7.8% q/q plunge in GDP in Q2 wiped out all the gains since PM Abe returned to power in 2012, but timelier data suggest that a strong rebound is now underway. The 7.4% m/m rise in export volumes in July was …
Demand for trucks rising at fastest pace since 2010 Data published this week showed that vehicle sales expanded 16.4% y/y in July, the fastest pace in over three years. Most of the focus has been on the strength of passenger car sales, which is …
14th August 2020
High savings mean plenty of room to spend more The main event this week was the Q2 GDP release . It beat expectations with growth of 3.2% y/y, fully reversing the contraction in Q1 and taking the level of output above its pre-virus high. This strong …
17th July 2020
Supporting the economy through the crisis The main priority for Singapore’s ruling People’s Action Party (PAP), which is certain to win tomorrow’s general election, is ensuring a strong recovery from the crisis. There are good reasons to expect a rapid …
9th July 2020
May activity data consistent with our views The May activity data were weaker than most had anticipated but broadly consistent with our below-consensus forecast of a 9% q/q drop in Q2 GDP. While consumption soared in the US and many European countries …
3rd July 2020
Shallower downturns forecast in the Nordics Amid increasing signs that the Nordic economies have weathered the Covid crisis better than most (see here ) we have upgraded our forecasts for GDP growth over the coming years. (See Table ) As flagged in an …
19th June 2020
TLTROs raise concerns about the doom loop There was record demand for the ECB’s ultra-cheap Targeted Longer-Term Refinancing Operations this week, at €1.3 trillion. (See here .) This is not surprising given that the interest rate on these loans will be …
Bank lending jumped in Q1, to the highest level relative to trend GDP since 2009. And recent data suggest that it has remained very strong this quarter. But comments yesterday by PBOC Governor Yi Gang suggest that bank lending will drop back in the second …
There is still huge uncertainty over how quickly activity will recover from the pandemic, but it’s clear that the economy is set for an unprecedented period of near-zero interest rates. The Fed sprang no real surprises on the policy front this week, but …
12th June 2020
SNB breathes a sigh of relief as the franc slides The positive policy moves out of Europe – including the ECB’s decision yesterday to increase the size and duration of its Pandemic Emergency Purchase Programme – have reinforced the sense that policymakers …
5th June 2020
The economic data released this week have simply confirmed what we already knew: that April was completely catastrophic for the euro-zone economy but that there has since been a gradual resumption in activity throughout the region. Euro-zone retail sales …
Skingsley leaves the door open to a repo rate cut This morning’s upward revision to Swedish Q1 GDP, from the initial estimate of -0.3% to +0.1%, adds to the evidence that the country has enjoyed some economic benefit from its light-touch lockdown. That …
29th May 2020
While this week’s high frequency data have confirmed that the low point for the economy is behind us, the figures have done little to alleviate our concerns that the recovery will be protracted. The good news is that after giving the green light to some …
Policymakers have more work to do The account of April’s ECB meeting, published today, shows that the Governing Council has left the door wide open to further monetary policy support. As a reminder, at that meeting the Council made the Targeted …
22nd May 2020
Bank of Korea to get unconventional The Bank of Korea is likely to cut its policy rate to a record low of 0.5% and step up non-conventional support at its meeting on Thursday. At its last meeting in early April, the Bank held rates steady. (See here .) …
Growth target and policy signals After a delay of over two months, the annual meeting of the China’s legislature, the National People’s Congress (NPC), will kick off next Friday. A schedule has yet to be made public but the key events, the annual work …
15th May 2020
BoE scenario too optimistic There can be little doubt about how bad the recession will be now that the Bank of England has joined us and the Office for Budget Responsibility in forecasting that GDP will fall by 25-35%. Indeed, we will get the first glance …
7th May 2020
German court won’t stop the ECB… yet Much ink has already been spilled this week on the German constitutional court, including by us. (See here .) So rather than go through it line by line, picking out the numerous unhelpful and at times bizarre claims …
The government confirmed this week that former Senior Deputy Governor Tiff Macklem will take the helm from Governor Stephen Poloz in June. (See here .) We doubt the change will materially affect the way the Bank approaches monetary policy, but it is clear …
1st May 2020
KOF Barometer is feeling under the weather The unprecedented scale of the Covid-related economic carnage has seen previously reliable relationships between business surveys and output break down in many countries, and Switzerland is no exception. While …
Norwegian economy sideswiped by Covid-19 Statistics Norway took the award for this week’s most irrelevant data release, with the unemployment rate from way back in February, but it more than made amends with the ahead-of-schedule publication of its Q1 GDP …
24th April 2020
Second package is already too late After an underwhelming first attempt, a second fiscal stimulus package in response to the coronavirus and containment measures appears close following reports of a meeting between PM Modi and Finance Minister Nirmala …
The ECB is now buying assets at a record pace, but it is still struggling to keep a lid on bond yields. Last week the Bank bought over €35bn of assets, far more than the previous high of just under €25bn. Nevertheless, peripheral bond yields have begun to …
17th April 2020
Bank Indonesia gets space it needs to cut The value of the rupiah will be at the forefront of Bank Indonesia (BI) policymakers’ minds when they meet on Tuesday. Data published earlier this week show that foreign exchange reserves fell by almost 8% in …
9th April 2020
This week we got an early sight of just how rapidly the euro-zone economy is collapsing. Meanwhile, the ECB has finally ditched the issuer limits on its asset purchases, freeing itself up to support the sovereign bond market whole-heartedly. But EU …
27th March 2020
Better late than never While it’s been a relatively quiet week on the monetary policy front by recent standards, there is still plenty worth recapping here. The regular weekly data-dump from the SNB early on Monday morning indicated that the Bank made its …
While we still expect the economy to rebound strongly after the virus has been contained, the surge in Universal Credit benefit claims this week raises the risk that it won’t get back to “normal” as quickly as we had previously thought. Policymakers throw …
New Zealand in Lockdown, Australia on the brink This week New Zealand entered a near-total lockdown in an effort to contain the spread of the coronavirus. The restrictions are more draconian than in most other countries that have imposed lockdowns. …
Norges Bank opens door to further rate cuts Harold Wilson famously said that a week is a long time in politics, and this week demonstrated that the same can be true for central banks. While policymakers everywhere have not exactly been sitting on their …
20th March 2020
It’s been a long week. Rather than recount every twist and turn, we will highlight a few points that seem particularly worth making. First, the decline in GDP looks set to be even bigger than we had assumed. We now think that economy will shrink by about …
PM Modi, Governor Das take measured steps Both Prime Minister Modi and RBI Governor Das took cautious steps in their responses to the coronavirus outbreak this week. In his address to the nation last night, PM Modi announced a 14-hour self-curfew to take …
Economic outlook grim As measures in place to contain the virus have grown more severe, the economic outlook in Australia has naturally become even bleaker. This week Scott Morrison announced that Australia’s borders are shut to all non-Australians. In …
Norges Bank and Riksbank are ruling nothing out After a bruising week for equities and the Norwegian krone, it is half-encouraging that the Nordic authorities are all singing off the same hymn sheet. Nonetheless, policymakers will not be able to prevent …
13th March 2020
PBOC may revive old policy tool Policymakers have signalled that further monetary loosening is imminent. The State Council is calling for cuts to banks’ required reserve ratio (RRR) and PBOC officials are dropping hints about a possible cut to benchmark …
The Fed’s emergency rate cut this week made it clear that officials are taking the economic risks posed by the coronavirus outbreak seriously. But with the number of new cases rising sharply, we don’t think lower interest rates will prevent activity …
6th March 2020
Economic outlook grim GDP growth slowed a touch to 0.5% q/q in Q4. And with data from January showing signs of weakness even before the impact of the coronavirus, our forecast that GDP contracted by 0.1% in Q1 is now looking optimistic. The trade surplus …
Downside risks to our already bearish forecasts It’s now looking likely that Japan’s economy will contract again this quarter, which would mean the economy is in recession for the first time since 2012. The biggest drag in Q1 is likely to have come from …
Concerns over coronavirus are growing The rapid spread of the coronavirus looks increasingly likely to hamper domestic demand. Admittedly, at the time of writing the number of confirmed cases in India stands at 30, which is low in such a large population. …
