Filtered by Topic: Monetary Policy Use setting Monetary Policy
The unexpected contraction in the Israeli economy in Q2 amid the war with Iran should reverse this quarter, and so we think it is unlikely that the Bank of Israel (BoI) will cut interest rates at its meeting this Wednesday in response to weak activity. …
18th August 2025
Many central banks across Sub-Saharan Africa have cut interest rates over the past year or so and Nigeria will soon join the rate-cutting club. With inflation low or falling in most countries, we generally expect more monetary easing than the consensus by …
The recent slowdown in wage growth across CEE is a welcome development for central banks, but we don’t think it will ease much further, limiting how quickly services inflation continues to fall. Meanwhile, other inflation pressures in the region, …
14th August 2025
We think the Riksbank is likely to be in wait-and-see mode when it meets next week and will keep its policy rate at 2%. While some of the economic data were underwhelming in the second quarter, they were not bad enough to justify another rate cut at this …
13th August 2025
The RBA endorsed market expectations of further easing when it lowered the cash today and we think the Bank will ultimately slash rates to 2.85%. The Bank’s decision to lower the cash rate from 3.85% to 3.6% was correctly anticipated by all 40 analysts …
12th August 2025
Next week, we expect Norges Bank to leave the policy rate unchanged at 4.25% but reiterate that it is likely to loosen policy later this year. We forecast two 25bp cuts by year-end. At its last meeting, Norges Bank cut its policy rate by 25bp, to 4.25%, …
7th August 2025
Although the Bank of England cut interest rates today by 25 basis points (bps), from 4.25% to 4.00%, it showed some signs that it may cut rates slower and/or not as far as our forecast of a decline to 3.00% in 2026. We are sticking to our view that …
The high-beta Antipodean currencies had been the worst victims of global trade tensions but have fared better since early April, relative to their G10 peers, as global risk appetite steadily improved. Nevertheless, we think the best days for the Aussie …
The Reserve Bank of India (RBI) kept the repo rate on hold at 5.50% and maintained its “neutral” policy stance today, despite India already being hit by a 25% US tariff with the potential for it to rise further if Trump follows through on his latest …
6th August 2025
Australia’s housing market gained traction in June, and leading indicators suggest the housing rebound has further to run. But with affordability set to remain extremely stretched despite the RBA’s easing cycle, we think the incipient house-price rally …
1st August 2025
The South African Reserve Bank’s decision to continue with its interest easing cycle today, with a 25bp cut to 7.00% was unsurprising, and the highlight of the meeting was Governor Kganyago’s announcement that the SARB will informally target the bottom of …
31st July 2025
While the Bank of Japan turned a touch more optimistic today, it still sees trade tensions as a major headwind. However, we still believe that policymakers are too pessimistic about the inflation outlook and expect the Bank to resume its tightening cycle …
Fed Chair Jerome Powell left open the possibility of a September rate cut in his comments following the FOMC’s July meeting, but put much more emphasis on the still solid labour market and stressed that “modestly restrictive” policy remains appropriate …
30th July 2025
While the Bank of Canada kept interest rates unchanged at 2.75% for a third consecutive meeting today, the communications showed policymakers placing greater emphasis on the downside risks to growth from tariffs than the upside risks to inflation, which …
The readout from today’s Politburo meeting strikes a less dovish tone compared with the previous meeting on economic affairs back in April and stops short of committing to any additional monetary or fiscal support. It did leave the door open to more …
With the euro-zone economy holding up relatively well in the face of tariff uncertainty, inflation likely to stay close to the target and President Lagarde adopting a slightly more hawkish stance at today’s press conference, we think the ECB will leave …
24th July 2025
We held an online Drop-In session yesterday (see here for a recording) to discuss the latest developments in Japan’s economy and financial markets. This Update answers several of the questions that we received . What has the economic impact of higher US …
While higher tariffs will cause some Asian economies to pursue slightly looser monetary policy than otherwise, domestic factors will be the key driving force behind rate decisions in most economies in the coming months. And we think that the risk of …
23rd July 2025
The Q2 Bank Lending Survey, published this morning by the ECB, suggests that the economy is still growing at a decent pace. But this is entirely due to improving prospects for the housing sector. The survey suggests that business investment will remain …
22nd July 2025
Bleak sales and spending intentions captured by the Bank of Canada’s second-quarter business and consumer surveys are consistent with a sharp downturn in GDP growth. However, the surveys were carried out at a time of peak tariff uncertainty. Since then, …
21st July 2025
Taiwan’s gridlocked government could secure a legislative majority and freedom to enact its policy goals if recall votes next week go its way. The immediate implications for the economy are limited – inflation could end up a little lower. But a concerted …
18th July 2025
The market reaction yesterday provided a taste of what might be to come if President Trump followed through his threat to fire Fed Chair Jerome Powell, with the dollar, equities and short rates likely to fall but long rates potentially surging. Whether …
17th July 2025
New Zealand’s housing market is still struggling to recover from its steep post-pandemic downturn. Although we still expect it to turn the corner in the coming months, the risk is that it will remain a drag on the broader economy for longer than we …
15th July 2025
Mexico’s government seems confident that it can negotiate an agreement to stave off President Trump’s threat of a 30% tariff that was delivered over the weekend. And even if the tariff came into force, so long as carve-outs for USMCA-compliant goods as …
14th July 2025
The turmoil in Turkey’s financial markets earlier this year proved to be a blip, and we think the conditions are in place for the central bank to resume its easing cycle this month. But bringing inflation back to single digits and reining in the current …
10th July 2025
Aggregate EM inflation is now at its lowest level in four years, with notable declines this year across Asia. We still think the outlook will be characterised by higher inflation in Latin America and Central Europe than in Asia, but we’ve become less …
The Bank of Korea left interest rates unchanged at its meeting today (at 2.50%), but gave strong hints that the easing cycle still had further to run. With growth set to struggle and inflation contained, we are expecting a further 50bps of cuts before the …
While the Reserve Bank of Australia’s today defied widespread expectations of a rate cut, we still expect the Bank to resume its easing cycle at its August meeting. And with GDP growth still sluggish and inflation back at target, we expect the Bank to …
8th July 2025
Our base case remains that Japan will reach a deal with the US to fend off the threatened 25% US tariff. If that deal is reached soon and includes no or only a modest increase in the US tariff rate, the case for another BoJ rate hike in October remains …
The fact that the RBA isn’t cutting interest rates during a housing downturn won’t limit the rebound in house prices, but the extremely stretched level of affordability will do so. Even though we expect interest rates to fall by more than most expect, the …
3rd July 2025
Our views on the outlook for monetary policy in Latin America have been on the hawkish side for some time, but we now think that there’s scope for interest rates in many countries in the region to come down by more than most expect. The key exception to …
2nd July 2025
The latest batch of monthly activity and inflation data for Korea support the case for further monetary policy easing by the central bank. We are expecting another 50bps of cuts before the end of the year. The monthly activity data for May, which were …
PBOC turns less dovish despite deflation concerns One might have thought that fading concern about the exchange rate and growing concern about deflation would provide the perfect moment for the PBOC to step up monetary easing. But the Bank’s latest …
The latest PMIs suggest that while global industrial activity gained some momentum at the end of Q2, this will probably prove short lived. Meanwhile, the surveys continue to suggest that tariffs are contributing to strong price pressures in the US, while …
1st July 2025
Prices of public services and rents are rising at the fastest pace in years, which supports our view that inflation will remain above the Bank of Japan’s 2% target even as the impact of the post-pandemic import cost shock fades. That underpins our view …
24th June 2025
We’re discussing the outlook for Bank of England, Fed and ECB policy in a 20-minute online Drop-In at 3pm BST today. (Register here .) And a t our in-person Roundtables in London on Tuesday 1 st July, clients can discuss with our economists and their …
19th June 2025
The Fed will remain on the sidelines for some time, waiting to see what impact tariffs will have on price inflation. We suspect that lingering fears of a more persistent impact will persuade the Fed to hold off cutting interest rates until the first half …
18th June 2025
This Update outlines potential outcomes of the Iran-Israel conflict and teases out the implications for the region, the global economy and commodity and financial markets. One point that emerges is that an escalation of the conflict still leaves multiple …
The Bank of Japan decided to taper its bond purchases at a slower pace from next year and retained its pessimistic outlook for the economy. However, we expect that mounting upside risks to the Bank’s inflation forecasts will prompt the Bank to hike rates …
17th June 2025
The Colombian government’s fiscal plans unveiled late on Friday will have dashed any lingering hopes that policymakers would try to stabilise the public debt-to-GDP ratio, at least ahead of next year’s election. This points to further downward pressure on …
16th June 2025
While it will be close call, we think the SNB is most likely to cut its policy rate by 50bp next week, bringing it back below zero. That would leave little room for more rate cuts further ahead. At its last meeting , the SNB reduced its policy rate by …
12th June 2025
We expect Norges Bank to wait a bit longer before it finally starts to cut interest rates. And as the economy is growing at a decent pace and the labour market is still tight, the Bank is likely to cut interest rates quite gradually in the second half of …
On balance, we think the Riksbank is likely to wait until its August meeting before cutting interest rates again in order to get greater clarity on the outlook for the economy. After a 25bp cut in August, we think the Bank will leave its policy rate at 2% …
11th June 2025
The Reserve Bank of India’s (RBI’s) decision to cut the repo rate by a larger-than-expected 50bps (to 5.50%) while also changing its policy stance from “accommodative” to “neutral” today are clear indications that it has frontloaded the remainder of the …
6th June 2025
The ECB’s decision to cut the deposit rate by 25bp to 2.0% was in line with expectations and the messaging in the press conference suggests that a pause at the next meeting in July is most likely. We think the Bank will lower interest rates once more this …
5th June 2025
The Bank of Canada avoided surprising markets by keeping its policy rate at 2.75% today, as it continues to wait to see the full impact of US trade policy on the economy. Nonetheless, the Bank confirmed that its bias remains toward loosening policy …
4th June 2025
Brazil’s monetary tightening cycle is very close to being (or may already be) over, and attention is quickly turning to when and how far Copom will lower interest rates. Historically, the market has tended to underestimate how far rates are lowered – and …
While this year’s minimum wage hike will be only slightly smaller than last year’s, it is unlikely to prevent a further slowdown in wage growth over the coming quarters. That said, with capacity pressures still elevated, we continue to believe that the …
3rd June 2025
Australian house prices edged up a notch in May, and leading indicators suggest they will gather further momentum over the coming months. However, with debt-servicing costs set to remain onerous despite the RBA’s rate cuts, the cyclical upswing is likely …
2nd June 2025
The South African Reserve bank resumed its interest rate easing cycle today, with a 25bp cut to 7.25%, and there was a marked dovish shift among the MPC, suggesting – as we have long thought – that the repo rate will decline further over this year. The …
29th May 2025
