Filtered by Topic: Monetary Policy Use setting Monetary Policy
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
In this Update, we answer several key questions about how the US Court of International Trade (CIT) tariff ruling might affect the US and other economies. The outlook may now rest on the decision of the Republican-stacked Supreme Court. The upside risks …
The dovish tone adopted by the Bank of Korea today, alongside what we think will be continued weakness of the economy suggest that further interest rate cuts are likely in the coming months. The decision to lower the policy rate by 25bps to 2.50% – the …
As was widely expected, the RBNZ cut its Official Cash rate by 25bp, to 3.25%, today. The revelation that the decision to cut was not a unanimous one has been interpreted as a hawkish signal by financial markets. However, we would put more emphasis on the …
28th May 2025
For most of the time since the euro was established, the ECB’s “one size fits all” interest rate policy was a major problem for the single currency area. It contributed to imbalances between countries in the 2000s and to a prolonged downturn in peripheral …
27th May 2025
The latest flash PMIs point to weak activity and a softening of price pressures in advanced economies outside the US. But the surveys suggest that tariffs are already having an inflationary impact in the US. Our estimate of the weighted average of the …
22nd May 2025
With housing affordability still extremely stretched, we expect house price growth to remain muted even as mortgage rates are set to fall further. However, there’s more scope for dwellings prices to rise in the smaller capital cities, while apartment …
Core inflation in India rose to an 18-month high in April, but there are reasons to think that this overstates the extent to which the economy is running into capacity constraints. And with headline inflation at a multi-year low, further policy easing …
21st May 2025
When the Reserve Bank of Australia cut rates by 25bp at its meeting today, it signalled greater confidence that it had brought inflation under control, while sounding increasingly concerned that global developments would bear down the domestic economy. …
20th May 2025
The latest survey data out of Mexico have been woeful and, while high-frequency hard data suggest that activity hasn’t fared as badly as might have been feared, the bigger picture is that the economy is very weak. This is likely to weigh heavily on …
13th May 2025
More UK rate cuts coming, but not as quickly as investors expected The Bank of England predictably cut interest rates from 4.50% to 4.25% today and gave the impression that it will continue to cut rates at the current pace of 25 basis points (bps) every …
8th May 2025
The minimalist statement issued by the Fed at the conclusion of the FOMC meeting gave no hint that it was considering a further cut to the fed funds rate, at least not any time soon. As was almost universally expected, officials voted unanimously to leave …
7th May 2025
Chinese policymakers have announced a raft of new monetary easing measures. These will help to shore up growth at the margin. But any boost to credit demand will be modest and today’s moves are no substitute for an expansion in fiscal support. China’s …
In current circumstances it would take a large strengthening of the yen to push inflation below the Bank of Japan’s 2% target. And with profit margins close to record highs, the hit from a stronger yen to corporate profitability probably won’t result in a …
6th May 2025
The April PMIs for Asia fell sharply, providing the first sign that Trump tariffs are weighing on sentiment in the region. With concerns about growth mounting and inflation worries continuing to ease, we think most central banks in the region will …
2nd May 2025
Headwinds are gathering for the Swedish economy, and we expect the Riksbank to strike a dovish tone in its statement next week. But it will probably stop short of cutting the policy rate as it waits for some of the economic uncertainty to fade. Meanwhile, …
1st May 2025
The Bank of Japan revised down its growth forecasts and sounded more dovish when it left policy settings unchanged today. However, we believe that the Bank has become far too downbeat about the outlook for inflation and we’re sticking to our forecast of …
A robust monsoon this year – as predicted by experts – wouldn’t have as big an impact on India’s economy as it would have had a couple of decades ago. But it could boost employment and energy production. What’s more, it would anchor prices of key crops …
30th April 2025
The IMF’s decision to pause Colombia’s access to its flexible credit line is not particularly concerning given the country’s robust external position, but the Fund has shone the spotlight back onto the country’s fiscal problems. With general elections …
28th April 2025
Saudi Arabia’s economy enjoyed a relatively strong start to the year underpinned by its non-oil sector. But while GDP growth will accelerate this year as oil output rises, the coinciding slip in oil prices is already resulting in a firmer turn to fiscal …
The latest flash PMIs suggest that tariffs and trade policy uncertainty weighed on activity and confidence in most DMs at the start of Q2 and boosted price pressures in the US. Our estimate of the weighted average of the flash composite output PMIs for …
23rd April 2025
Reuters’ latest monthly Tankan survey, which was conducted between 2 nd and 11 th April, showed that business conditions among large manufacturers rose to an eight-month high. Granted, that survey has often lagged behind the manufacturing PMI around …
The Central Bank of Egypt (CBE) decided to cut interest rates on Thursday and we think monetary conditions will be loosened a lot further than most expect over the course of this year. That said, administered price hikes and spillovers of the US-China …
22nd April 2025
If President Donald Trump does fire Fed Chair Jerome Powell, we suspect that the initial market reaction might not be disastrous, as long as Trump quickly lines up a relatively-qualified replacement, like Kevin Hassett or Kevin Warsh. In all likelihood, …
21st April 2025
The ECB’s decision to cut its deposit rate from 2.5% to 2.25% today was expected. And the monetary policy statement sent a clear signal that the Bank will cut rates further to counter the impact of trade policy uncertainty. We are forecasting two more …
17th April 2025
The Bank of Korea today left interest rates unchanged, but the dovish commentary from the press conference and the statement suggest further cuts are coming. We are sticking with our view that rates will end the year at 2.0% (from 2.75% currently). The …
The Bank of Canada’s decision to keep interest rates at 2.75% today was not a big surprise given recent above-target core CPI gains, concerns about tariff-induced price rises and uncertainty about the extent to which the economy requires additional policy …
16th April 2025
The upcoming federal election on 3 rd May appears likely to result in a hung parliament. Although the ruling Labor party’s recent uptick in the polls suggest that it is in pole position to form a minority government, we wouldn’t count out the …
The ECB’s Bank Lending Survey paints a positive picture of the housing market. Conditions for consumer credit and corporate loans were less encouraging, and the tariff chaos of the past two weeks might have made banks more cautious about lending and …
15th April 2025
While the recent drop in crude oil prices would lower inflation a bit, that drag will be more than offset by a boost from the weaker Australian dollar. The upshot is that barring a sharp fall in business confidence, we’re sticking to our forecast that the …
14th April 2025
