Filtered by Topic: Monetary Policy Use setting Monetary Policy
The threat of a coronavirus outbreak in the US is a significant downside risk to the economic outlook. The Fed can do nothing to halt the spread of the virus, but a further tightening of financial conditions or a slump in business and consumer confidence …
28th February 2020
The 11% fall in UK equity prices this week shows that the situation is changing rapidly and that the financial markets appear to be pricing in the coronavirus triggering a marked weakening in the global and UK economies. At the same time, the markets have …
More countries considering fiscal response to virus Bank Indonesia this week became the latest central bank in the region to cut interest rates in response to the coronavirus outbreak (see here ), and we expect further easing over the coming week with the …
21st February 2020
Activity data disappoint across the board We have long argued that Japan’s economy will shrink this year and the recent string of bad news has only made that outcome more likely. But we still don’t expect the Bank of Japan to respond with more policy …
Unemployment rate jumps to 5.3% The unemployment rate jumped in January from 5.1% at the end of 2019 to 5.3%. And that’s despite the ABS excluding the areas of Australia that were worst hit by the bushfires. It’s possible that the number of unemployed …
Low expectations for Trump visit Progress on trade negotiations (as well as the opening of the world’s largest cricket stadium in Ahmedabad) will be high on the agenda during US President Donald Trump’s visit to India next week. There are suggestions that …
Judy Shelton’s rocky Senate nomination hearing this week means that President Donald Trump’s efforts to reshape the Fed from the outside could yet fail at the first hurdle. But the dovish Christopher Waller should secure Senate approval and, with the …
14th February 2020
Support for the current policy stance Speeches this week by members of the ECB Executive Board, Philip Lane and Isabel Schnabel, were clearly part of a concerted effort to rebuff criticism of the ECB’s ultra-loose monetary policy. Ms Schnabel’s talk was …
Travel ban extended until February 22 nd The ban on travel from China to Australia was set to end this weekend. But given the continued growth in infections of the coronavirus in China it has now been extended to 22 nd February. That’s not particularly …
Bank of Japan will prevent a public debt crisis In its Article IV report, the IMF this week called Japan’s public debt trajectory “unsustainable” and proposed a further increase in the sales tax from 10% to 15% to reduce fiscal risks. Arguing that the …
Growth in Q4 set to remain subdued The decline in retail sales in December is consistent with our view that the surge in sales in November was driven by Black Friday discounts. After adjusting for price effects, real retail sales rose by 0.5% in Q4, the …
7th February 2020
Finance ministry steps up These have been a busy few days for India’s policymakers. The finance ministry on Saturday confirmed in the Union Budget that it had changed tack and was aiming for much looser fiscal policy than it had been. (See here .) That …
Our interest rate call clears the first hurdle While some may raise a glass to the UK leaving the EU tonight, we will be toasting our call that interest rates would not be cut from 0.75%. (See here .) But our view that rates won’t be cut at all this year …
31st January 2020
Next week’s FOMC meeting is likely to be a low-key affair, with the resilience of the recent economic data and the Phase One trade deal justifying the Fed’s decision to bring its recent rate cutting cycle to a halt last October. This week brought …
24th January 2020
There’s been a few U-turns this week with the most striking happening in the markets expectations for interest rates. In early January, the markets were pricing in just a 5% chance of interest rates being cut from 0.75% to 0.50% at next Thursday’s …
The show must go on If it weren’t for constitutional limits on holding snap elections, Norway would be heading to the polls this year after a rift over policy led the far-right Progress Party (PP) to pull out of the current four-party coalition government …
New coronavirus a threat to tourism The Wuhan coronavirus has now spread across China and to most neighbouring countries, including Japan. China has been much more proactive in trying to contain the disease than it was with SARS. But China is also much …
Upbeat labour market may delay rate cut The labour market has remained solid despite subdued economic activity. Employment rose by 28,900 in December, far exceeding analysts’ expectation of a mere 10,000 pick-up. The unemployment rate fell for the second …
A flurry of weak data this week has sent money markets into a tailspin. But we suspect that the MPC will just about look past the Brexit and election related distortions and will probably hold off cutting interest rates. At the start of the year the …
17th January 2020
No easy choices for Swiss policymakers The re-inclusion of Switzerland on the US Treasury’s Monitoring List of potential currency manipulators this week did not come entirely out of the blue. Having only been taken off the list in May 2019, we predicted …
Russia: the taxman cometh (but may giveth) Russia has been gripped by political turbulence this week after President Putin announced a series of proposed constitutional amendments, which are expected to allow him to wield power once his presidential term …
FSA seeks to change behaviour of regional banks The Financial Services Agency’s (FSA) plans to allow regional banks to diversify into a wide range of business areas is another step in the right direction by Japan’s financial regular. FSA chief Endo …
Trade deal not great news for Australia Phase one of the US-China trade deal was signed this week which marks an end to the first phase of the trade war. (See here for detailed coverage.) It removes the downside risk of imminent further escalation which …
Capacity remained tight in Q3 The Bank of Japan has signalled that it would not loosen policy in response to a temporary slowdown in demand as long as capacity shortages remained pronounced. Data released this week show that this was indeed the case on …
10th January 2020
Hukou reform not a gamechanger for property The scrapping of restrictions on residency (hukou) in smaller cities announced last week might give a boost to property markets in some places but it will be small. With urbanisation slowing and population …
3rd January 2020
Housing market going from strength to strength With bushfires still roaring across large parts of the country, the economic data are naturally taking a backseat. This week we learned that house price growth slowed from 1.9% m/m in November to 1.4% m/m in …
Bank of Korea minutes reveal dovishness Minutes from the Bank of Korea’s (BoK) November rate meeting reveal that while only one of the seven members of its Monetary Policy Board voted for a cut, other members also struck a dovish tone. The member who …
20th December 2019
Consumption weathered tax hike well Assessing the impact of October’s sales tax hike has been complicated by the large number of consumption indicators, each telling a slightly different story. But the most reliable measure, released this week for …
Vegetable price surge will keep RBI on sidelines RBI Governor Shaktikanta Das reiterated in a conference this week that, while the MPC unexpectedly kept rates on hold earlier this month, that didn’t necessarily signal the end of the loosening cycle. Mr …
Australia’s labour market broadly stable The minutes of the RBA’s December meeting noted that “it would be important to reassess the economic outlook in February 2020, when the Bank would prepare updated forecasts”. The Board noted that “it would be …
Indonesia considers relaxing fiscal rule Adopting a more flexible fiscal target would give Indonesia’s government more room to support growth during periods of weak demand without threatening the country’s fiscal position. Under the current fiscal rule, …
13th December 2019
The BoJ has great expectations for fiscal package Revised GDP data released this week show that the economy approached the sales tax hike on 1 st October with more momentum than initially thought as growth was revised up from 0.1% q/q to 0.4% q/q. (See …
RBI waiting for clarity on fiscal loosening The Reserve Bank’s unexpected decision to keep interest rates on hold yesterday was primarily driven by its concerns over the spike in headline inflation above the 4.0% target in October. (Our response to the …
6th December 2019
Household spending remains the Achilles heel The RBA kept interest rates unchanged at the meeting that occurred one day before the release of the Q3 GDP data and reiterated that the economy had reached a “gentle turning point”. At first glance, the …
Turkey: interventionist policy stores up problems Interventionalist policymaking in Turkey has come back on the radar this week. This is likely to lead to a misallocation of resources and adds to the reasons to think that the country’s next crisis could …
29th November 2019
VAT cut a risk to Sri Lanka’s fiscal health In his first major policy move since being elected Sri Lankan president earlier this month, Gotabaya Rajapaksa on Wednesday cut the rate of VAT from 15% to 8% (the cut will take effect on 1 st December). On the …
Nigeria: CBN holds rate, toes government line The governor of the Central Bank of Nigeria (CBN) used this week’s MPC statement to heartily defend the government’s latest round of protectionist policies, which will add to the impression that the bank is …
Higher bar for QE will be reached before long In a much-anticipated speech this week Reserve Bank of Australia Governor Lowe laid out the Bank’s thinking around unconventional monetary policy. For the most part, the speech confirmed our existing views. …
Nigeria: New data underlines struggling economy Economic growth in Nigeria remained very weak in Q3 , with the economy again failing to escape the slow-growth trajectory on which it has been stuck since 2017. (See Chart 1.) Chart 1: Nigeria GDP (% y/y) …
22nd November 2019
Government stimulus underwhelming The government appear to have had a change of heart with PM Scott Morrison this week promising additional stimulus in the Mid-Year Economic and Fiscal Outlook (MYEFO), which is usually released in mid-December. The …
We expect economic growth to slow over the coming quarters, but the fading downside risks from the global backdrop and trade policy, together with new, less dovish language from the Fed means we are no longer forecasting a final 25bp rate cut. We now …
15th November 2019
Spare capacity in the labour market to rise We wouldn’t read too much into October’s largest fall in employment in three years. The data are volatile and a renewed rise in November is likely. Even so, the labour market is clearly deteriorating. The …
Lebanon: bailout wouldn’t be a silver bullet The situation in Lebanon is going from bad to worse and the chances of a combined debt, currency and banking crisis are rising. President Aoun seems to be seeking a bailout package but this would only pave the …
14th November 2019
Philippines: more easing in 2020 Governor Diokno was pretty emphatic earlier this week when he said that the central bank (BSP) had “absolutely” “done more than enough” this year. In response we are taking out the interest rate cut we originally had …
8th November 2019
South Africa: Inflation, growth both weak Figures out this week suggested that South Africa’s economy faltered in Q3 and that both inflation growth will be soft in the last quarter of the year. Manufacturing production figures were even worse than most …
GDP growth to remain subdued This week we got a clear indication there has not been a strong rebound in economic growth in the third quarter as policymakers were hoping. Admittedly, before the release of the September trade data we had pencilled in a 0.4 …
Bank brings output gap to the fore The Bank altered its forward guidance when it left rates unchanged this week. It had previously pledged to maintain the current extremely low levels of short- and long-term interest at least until spring 2020. Now it …
1st November 2019
Goods inflation climbs to 10-year high The inflation data released this week were stronger than we had anticipated. Core market services inflation duly weakened from 1.3% to 1.2% as the looser labour market probably restrained wage growth. But core market …
Australia could have its cake and eat it too The new secretary to the Australian Treasury, Steven Kennedy, has pushed the RBA’s hopes for fiscal stimulus slightly further out of reach by endorsing the government’s current fiscal policy settings. He said …
25th October 2019
Mixed bag of data not weak enough for a cut The upcoming meeting by the Bank of Japan is an important one as the Bank has indicated that “it is becoming necessary to pay closer attention to the possibility that the momentum toward achieving the price …
