Filtered by Topic: Monetary Policy Use setting Monetary Policy
Bank Indonesia today left its policy rate unchanged at 3.5% and signalled that it is likely to leave rates on hold for a prolonged period of time. With the economy rebounding but inflation set to stay low, we think interest rates will be left on hold …
19th October 2021
The surprisingly large 125bp rate hike delivered by Chile’s central bank yesterday, to 2.75%, suggests that it will continue to front-load its tightening cycle to clamp down on high inflation. We now expect a further 225bp of hikes in this cycle, to …
14th October 2021
The Monetary Authority of Singapore (MAS) tightened policy today, as it looked past the lacklustre rebound in GDP last quarter and looked to curb further rises in inflation. Core inflation is unlikely to rise substantially next year, even as the recovery …
After leaving rates on hold today, the Bank of Korea gave strong signals of its intent to hike again in November. And given the Bank’s hawkish comments, we are adding another rate hike into our forecast for next year, bringing the total to a further 75bps …
12th October 2021
The Reserve Bank kept the repo rate on hold at a record low today and stressed that its latest liquidity-withdrawal measures do not constitute policy tightening. Given our view that the recovery will only be back on more solid footing next year, we …
8th October 2021
The Bank of Israel revised up its forecast for GDP growth at today’s meeting and struck a more hawkish tone on inflation as it announced that it will end its asset purchase programme later this year. This was in line with expectations, but Governor Yaron …
7th October 2021
The National Bank of Poland (NBP) unexpectedly hiked its policy rate by 40bp to 0.50% at today’s MPC meeting, but the accompanying communications were underwhelming and suggest that the rate hike was not as hawkish a move as might have been first …
6th October 2021
The sharp slowdown in economic growth in the past couple of quarters suggests that the probability of the Bank of Canada following other central banks in becoming more hawkish is low. The risk will rise, however, if the September Labour Force Survey shows …
The RBNZ’s decision to begin its hiking cycle while Auckland is still in lockdown highlights that the New Zealand economy is on the brink of overheating. And as restrictions ease, we think the Bank will continue hiking rates in the months ahead. Today’s …
Korean consumer prices saw another strong m/m rise last month, and while we don’t think this is a major cause for concern it still adds weight to our view that the central bank will hike rates again later this year. Data released today show that while the …
The National Bank of Romania (NBR) raised its policy rate by 25bp to 1.50% at today’s meeting, and the backdrop of rising inflation, large twin deficits and currency weakness means that further rate hikes are likely to be delivered over the next 12 …
5th October 2021
The RBA today stuck to its guns by predicting that rates won't rise until 2024, but our view that inflation will remain higher for longer means it will happen in early-2023 already . As universally anticipated, the Bank kept its interest rate and asset …
While the announcement of a 10bp interest rate cut by Denmark’s Nationalbank this afternoon seemingly goes against the grain of the recent hawkish shifts by the US Fed and Bank of England, it is the logical culmination of sustained upward pressure on the …
30th September 2021
The Czech National Bank (CNB) stepped up the pace of its tightening cycle with a 75bp interest rate hike, to 1.50%, at today’s meeting and its hawkish communications signalled that further aggressive hikes will be delivered in the coming months to tackle …
The Bank of Thailand (BoT) left interest rates on hold today at 0.5%, and we have taken out the rate cut we originally had pencilled in for this year. However, rate hikes are still a long way off. Unlike the central bank’s August meeting when two of the …
29th September 2021
Several EM central banks have raised interest rates in the past couple of months on the back of growing inflation concerns (including many in Latin America) and/or strong economic recoveries (parts of Central Europe, Korea). Hiking cycles look set to …
23rd September 2021
Policymakers in South Africa kept their benchmark rate unchanged at 3.50% today and concerns about lasting economic damage from the pandemic and recent unrest appear to be growing. Against a backdrop of a sluggish recovery and weak inflation, we think the …
While rates were left at +0.10% in an 9-0 vote and the Bank of England’s target stock of purchased assets at £895bn, today’s Monetary Policy Committee (MPC) policy statement suggests that the Bank is moving closer to raising interest rates. As such, we …
Turkey’s central bank (CBRT) unexpectedly cut its one-week repo rate by 100bp to 18.00% today, despite the further rise in inflation in August, and we now think that further aggressive easing is likely over the coming year. But this could ultimately sow …
Taiwan’s central bank (CBC) today left interest rates unchanged at 1.125%, and we think policymakers will be in little rush to start tightening policy despite the strong economy. Today’s decision was unanimous and was correctly predicted by all 25 …
This morning’s policy decision double-header played out as planned, with the Swiss National Bank maintaining the status quo and the Norges Bank finally pulling the trigger on its tightening cycle. But while rate hikes in Switzerland are many years away, …
The fact that the central bank in the Philippines (BSP) left its main policy rate on hold at 2.00% today, despite the very weak state of the economy, suggests further easing is unlikely. While we are now taking out the cuts we had pencilled into our …
The statement from yesterday’s Brazilian central bank meeting, at which the Selic rate was raised by 100bp (to 6.25%), made clear that Copom is on the warpath to stop inflation expectations rising. With the inflation outlook worsening, we now think that …
High and rising household debt in Australia and New Zealand will limit central banks’ scope to hike interest rates. The upshot is that we expect the RBNZ to hike rates by a modest 125bp in the tightening cycle set to start next month, while the RBA’s …
Fed officials gave a heavy hint today that the QE taper will be formally announced in November and, presumably in response to concerns that the surge in inflation won't be as transitory as they originally hoped, there were notable increases in the median …
22nd September 2021
The Bank of Japan left policy settings unchanged today and while a new Prime Minister could appoint a more hawkish BoJ Governor, we expect the Bank to keep interest rates unchanged for years. As universally anticipated, the Bank of Japan kept its interest …
Commercial banks left the Loan Prime Rate (LPR) on hold for a 17th consecutive month today. But with the economy losing steam and concerns around the property sector growing, we think policy rate cuts by the PBOC could come as soon as next month. The …
Hungary’s central bank (MNB) slowed the pace of its tightening cycle today, raising its base rate by a smaller-than-expected 15bp to 1.65%, and the post-meeting communications signalled that future rate hikes will remain at the smaller end of the …
21st September 2021
Bank Indonesia today left its policy rate unchanged at 3.5% and signalled that it is likely to leave rates on hold for a prolonged period of time. With the economy rebounding on the back of a fall in virus cases but the rupiah holding up well, we think …
The State Bank of Pakistan (SBP) today raised interest rates by 25bp and made clear further tightening is likely as the central bank shifts its focus away from supporting the recovery and towards boosting the currency. We expect more rate hikes over the …
20th September 2021
Policymakers in Nigeria kept their benchmark rate on hold at 11.50% at today’s MPC meeting and will probably continue to do so over 2021-23. And the central bank’s insistence on maintaining a strong currency using disruptive foreign exchange rules is …
17th September 2021
The Central Bank of Egypt (CBE) kept interest rates unchanged at Thursday’s MPC meeting amid rising price pressures. However, we still think that inflation will slow in the final months of this year and re-open the door for the CBE to resume its easing …
Falling foreign exchange reserves, a declining currency and a high level of foreign currency debt mean the risk of a sovereign default in Sri Lanka is growing. While the country should be able to muddle through for the next few months, it faces a crunch …
16th September 2021
Following a surge in inflation across the region this year, we think that headline rates are at, or close to, a peak in major Latin American economies. But strong underlying price pressures will prevent inflation from falling below central banks’ targets …
15th September 2021
We doubt that any independent review of Australia’s monetary policy framework would result in a change to the RBA’s 2-3% inflation target. But the Bank could be forced to put more emphasis on house prices, reduce the frequency of Board meetings, and …
Measures by the Reserve Bank to drain banking sector liquidity have caught attention over the past few days. But with liquidity still abundant, interbank rates at the very bottom of the rate corridor and financial conditions exceptionally loose, these …
14th September 2021
Our financial conditions indices show that conditions remain loose by historic standards in most EMs. The key exception is Latin America, where conditions have tightened sharply this year due to rising interest rates and fiscal risks. This could pose a …
13th September 2021
Yesterday’s larger 50bp rate hike, to 1.00%, delivered by Peru’s central bank (BCRP) suggests it is becoming increasingly concerned about the inflation outlook. With inflation set to stay above the 1-3% target range over the coming quarters, and GDP …
10th September 2021
The ECB today confirmed that it will slow its asset purchases slightly but this is a long way from a “full taper”. We think inflation will drop even further than the ECB expects over the medium term and expect the Bank to continue with asset purchases of …
9th September 2021
Malaysia’s central bank (BNM) left interest rates unchanged at 1.75%, and won’t be in any rush to adjust rates soon. Although the economy should start to rebound now that virus restrictions are being eased, output is likely to remain below potential for …
Economic activity in New Zealand took a significant hit as the country was plunged into its strictest level of lockdown in August. But New Zealand’s success at taming the virus means output should return to its pre-Delta path by Q1 and the RBNZ will begin …
There are some emerging downside risks to the economic outlook both domestically and globally but, after taking a well-anticipated pause at this meeting, we do not expect those risks to prevent the Bank from tapering its asset purchases at the next …
8th September 2021
The fact that the Swedish GDP indicator was nearly 2% above its pre-virus level in July puts a question mark over the wisdom of the Riksbank’s plan to exhaust its asset purchase envelope by end-2021. We think there is a rising chance that policymakers …
This year’s monsoon has so far been weaker than usual. This won’t have as big an economic impact as it would have a couple of decades ago. But it will harm employment and energy production. Some comfort can be taken from the fact that food inflation is …
7th September 2021
While the RBA pressed ahead with tapering its asset purchases today, the financial markets are too optimistic in pricing in rate hikes as soon as next year . The RBA kept its interest rate targets unchanged at 0.10% as widely anticipated, but the more …
The data released over the northern hemisphere summer break have suggested that economic recoveries in most countries have started to lose some steam. At the same time, while inflation is generally higher now that at the start of the summer, there are …
2nd September 2021
The latest data show that growth in the main monetary aggregates is slowing even before the Fed starts tapering its monthly asset purchases, although it remains strong by historic standards. (See Chart 1.) With the Fed likely to begin reducing its monthly …
1st September 2021
The surprise 75bp interest rate hike by Chile’s central bank late on Tuesday (which took the policy rate to 1.50%) underscores policymakers’ concerns about the inflation outlook. Our forecasts for the policy rate had in any case been on the hawkish side, …
With the Delta-linked resurgence in coronavirus infections adding to the downside risks to economic growth and officials still split on exactly what qualifies as “substantial further progress” toward meeting the full employment goal, we don’t expect Chair …
26th August 2021
The account of the ECB’s July meeting confirms that a minority of Governing Council members objected to the dovish shift in the Bank’s interest rate guidance. Partly because of this, we now think the Bank is more likely to take until December to agree …
