Filtered by Topic: Monetary Policy Use setting Monetary Policy
Credit growth will pick up as lending rates fall Data released this week showing that credit growth to the private sector dropped to a two-year low in September (see Chart 1) have raised concerns that the monetary transmission mechanism is lacking …
18th October 2019
More stimulus on the way in Korea GDP figures due to be released next week are likely to show Korea’s economy remained subdued in Q3 – we have pencilled in growth of just 0.4% q/q. (See our data preview below for more details.) However, with policy …
Underlying inflation set to weaken further The Reserve Bank of Australia will have breathed a sigh of relief after the unemployment rate dipped from 5.3% to 5.2% in September despite the fact that job growth slowed. And the minutes of the Bank’s October …
Bank of Japan’s bond holdings on track to fall The Bank of Japan bought ¥5.2 trillion (¥63 trillion annualised) of Japanese government bonds in September and its purchase plan for October foresees purchases of just ¥4.9 trillion (¥60 trillion annualised). …
Waning confidence Business and consumer confidence data released this week provided yet another signal that economic activity in Australia is set to remain weak in the coming quarters. Following the May election, business confidence surged, probably …
11th October 2019
Nigeria: CBN lending push will have little effect The Central Bank of Nigeria has increased pressure on commercial banks to extend more loans by announcing that the minimum loan-to-deposit ratio will rise from 60% to 65% in December. In aggregate, banks …
4th October 2019
Stimulus running into diminishing returns The RBA cut interest rates to 0.75% on Tuesday as most had anticipated. It put more emphasis than usual on its intention to achieve full employment. In June, the Bank revised down its estimate of the unemployment …
Not bad enough for another rate cut The rush of data released this week was a mixed bag. Overall, there still isn’t a clear-cut case for the Bank of Japan cutting interest rates when it “re-examines” its policy settings at the end of the month. Amidst the …
Three central banks surprised the markets this week with more hawkish-than-expected communications. The Turkish central bank is likely to cut rates further, but above-target inflation will prevent monetary easing in Hungary and the Czech Republic. …
27th September 2019
Interest rates cut around the world The Reserve Bank of New Zealand kept interest rates on hold at 1.0% this week following the dramatic 50 basis point cut in August. The decision to leave rates on hold was in line with market expectations and the analyst …
Yield spreads widen as Kuroda targets short end We expect the Bank of Japan’s “reverse twist” to intensify after the next Board meeting. On balance, we still think that the Bank will refrain from cutting short-term interest rates, but we’ll closely watch …
Fiscal stance still accommodative Government spending contracted in August, leading some to question the strength of fiscal support. But with tax cuts still weighing on revenue growth, the budget deficit remains close to its widest ever. (See Chart 1.) …
20th September 2019
Close but no cigar This week the government revealed that in the 2018/19 fiscal year the budget remained in deficit. The deficit was just $690 mn, rounding to 0.0% of GDP, much smaller than the $4.2 bn or 0.2% of GDP deficit that was forecast in the April …
The Fed is almost certain to cut its policy rate by another 25bp at next week’s FOMC meeting to between 1.75% and 2.00%. But rising core inflation, the still-solid incoming activity data and the temporary thaw in the US-China trade war all support our …
13th September 2019
Stimulus will overcome low confidence This week’s consumer confidence and business confidence releases were disappointing as both dropped in the latest reading. (See Chart 1.) At first glance, that’s a worrying sign given the support from the RBA’s tax …
Yield curve worries ease Long-term government bond yields have rebounded around the globe this week, with 10-year Japanese government bond (JGB) yields climbing to -0.19% today from a recent trough near -0.30%. (See Chart 1.) Chart 1: 10-year JGB Yields …
Neither the Bank of Canada’s policy statement nor the speech that followed the next day by Deputy Governor Lawrence Schembri gave us any obvious hints about the future path of monetary policy. The policy statement highlighted the stronger-than-expected …
6th September 2019
‘When the mountain is low, the valley is low’ We’ve been arguing that the drag from next month’s sales tax hike will be less severe than the one after previous tax hikes. Finance Minister Aso noted earlier this week the absence of a spending rush as …
More mixed signals A few less-closely followed data releases this week presented mixed messages for the Bank of Canada ahead of its meeting next week. The first was new home sales data for Toronto and Vancouver. In Toronto, sales were up by a substantial …
30th August 2019
Dire Swedish data run goes On and On and On The fourth consecutive fall in the Swedish Economic Tendency Indicator continued the recent run of poor data releases. The indicator fell in August to its lowest level since June 2013 and the broad-based …
Bond market rally complicates life for ECB More policy loosening is on the way in the euro-zone, but it will not be supported by all of the ECB Governing Council. After holding his tongue for several months, Bundesbank boss, Jens Weidmann, said this week …
Mozambique: Debt deal is only the first step Even if bondholders agree to the government’s bond restructuring deal – as recent signs suggest they will – Mozambique’s debt problems will be far from over For one thing, the deal only covers the US$727mn …
RBI capital transfer will strengthen fiscal position… The RBI’s announcement this week that it would transfer a record dividend to the finance ministry in the current fiscal year on the recommendation of a panel study has a number of important …
Korea 2020 budget boost Korea’s proposed budget for 2020 includes a large fiscal boost, which should partially offset the external headwinds facing the economy. The draft budget will be submitted to the National Assembly next week and envisages an …
Philippines budget: three key takeaways Earlier this week the government in the Philippines unveiled its budget plans for next year. There are three key points worth highlighting. First, while the government has been touting the boost to economic growth …
23rd August 2019
Argentine debt default becoming inevitable The Argentine peso has stabilised over the past few trading days but the collapse earlier this week has made a sovereign debt default highly likely. At the risk of blowing our own trumpet, recent events have left …
16th August 2019
Whereas an inverted yield curve has been a good indicator of US recessions, the UK yield curve is less reliable. The US treasury yield curve has inverted before all five US recessions in the past five decades, with only one false positive. Over the same …
Further loosening still likely in near term In a wide-ranging interview with the Economic Times published this week, Prime Minister Modi commented on several economic issues. Plenty of emphasis was placed on the measures taken to revive economic growth …
Reiwa celebrations or pre-tax spending rush? The preliminary estimate of Q2 GDP showed a strong 0.4% q/q increase in output. One of the drivers was a 0.6% q/q jump in private consumption. Much of the media coverage has attributed this to consumers …
Argentina elections: your primer on the primaries Argentine markets are likely to take their cue from the outcome of Sunday’s primary election when they open next week, but the vote doesn’t always foreshadow the presidential election outcome. Argentina’s …
9th August 2019
No end in sight to the downturn in Sweden The latest data releases for June from Sweden show that the flash estimate of a contraction in the economy in Q2 was no rogue reading. We learned on Tuesday morning that private sector production fell for the …
Escalation of crisis would have limited impact The Indian government this week revoked a long-standing constitutional provision that granted special autonomy to the state of Jammu & Kashmir. The measures will split the state into two separate “union …
8th August 2019
RBNZ cuts while RBA holds In Australia, the RBA kept rates on hold at 1.0% this week, as widely expected. But the Bank acknowledged that the uncertainty generated by the trade war had increased and noted that it would “ease monetary policy further if …
Yen climbs to 17-month high against dollar Two months ago we predicted that the US would eventually impose tariffs on all imports from China. (See here .) Indeed, President Trump announced last week that he will impose an additional 10% on the remainder …
Despite cutting rates by 25bp this week, the Fed gave no indication that it is lining up another cut soon or that this will mark the start of the extended easing cycle investors are hoping for. But with President Donald Trump’s subsequent move to …
2nd August 2019
Swedish economy to flirt with recession… The 0.1% q/q fall in Swedish GDP in Q2 is unlikely to be the final word on the matter given that the data are almost certain to be revised in September. (See here .) Nonetheless, the release adds to signs that the …
MPC living in an alternative reality In our latest UK Economic Outlook , “ An economic multiverse ” (16 th July) , we set out the different paths politics could send the economy down. The MPC took a different approach this week, forecasting an alternative …
Hopes of strong rebound dashed Data released this week provide further evidence that the economy is performing below capacity. Admittedly, house prices appear to be bottoming out. Average house prices in the eight capital cities edged up in July. What’s …
Tariff man strikes again President Trump re-escalated trade tensions overnight by announcing a 10% duty, effective 1 st September, on the $300bn worth of US imports from China yet to be subject to tariffs. We estimate that this will directly knock of …
Fiscal deficit target likely to be exceeded India’s fiscal deficit in Q1 of FY19/20 (April to June) provides little assurance about the government’s ability to meet the 3.3% target that it set in the union budget last month. Data released this week show …
The Fed is likely to cut interest rates by 25bp at next week’s FOMC meeting. New York Fed President John Williams put the markets into a frenzy last week by arguing in a speech that the Fed should move quickly to ease policy at the first signs of a …
26th July 2019
Looser fiscal policy on the way It came as no surprise that Boris Johnson became the UK’s new Prime Minister this week. ( See here .) And in his first speech in Parliament on Thursday there was no sign of him rowing back on his campaign pledges for the UK …
MAS to loosen sooner rather than later The recent deterioration in the economic data from Singapore adds weight to our view that monetary policy will be loosened before the central bank’s (MAS) next scheduled meeting in mid-October. The advanced Q2 GDP …
Hawk’s flight from MPC points to more easing Dr Viral Acharya stepped down this week from his position as one of the six members of the RBI’s MPC, one month after handing in his resignation. Dr Acharya was one of the most hawkish members of the MPC. …
Is the inflation target still fit for purpose? Treasurer Josh Frydenburg revealed this week that he is currently reviewing the RBA’s inflation target in preparation to sign the Statement on the Conduct of Monetary Policy, along with Governor Lowe. The …
Mexican government unwilling to fix Pemex The Mexican government’s underwhelming business plan for Pemex, announced this week, reinforces our view that it is not willing to implement the reforms necessary to stabilise oil production. Against that …
19th July 2019
South Africa: More evidence of Q2 rebound Retail sales figures out this week strengthened our view that South Africa’s economy returned to growth in Q2. Based on the data released so far, we’ve pencilled in growth of 1.6% q/q saar. (See here .) Interest …
Banxico likely to begin cutting rates next month The minutes to the last Mexican central bank meeting, published yesterday, revealed a more dovish shift on the Bank’s Board than we had expected. We now think that an interest rate cut at the next meeting …
12th July 2019
Given the recent run of stronger economic data, we thought the Bank of Canada might sound a cautiously optimistic note following its policy meeting this week, but the statement remained relatively neutral. (See here .) That could be the first sign that …
Despite the rebound in monthly GDP growth from -0.4% m/m in April to +0.3% m/m in May, the economy probably just about contracted in Q2 as a whole. ( See here .) Some of that is just payback from activity being brought forward from Q2 into Q1 ahead of the …
