Filtered by Topic: Monetary Policy Use setting Monetary Policy
The Monetary Authority of Singapore (MAS) left policy on hold today as advanced Q1 GDP data showed the economy rebounded further. While GDP is set to continue recovering at a decent pace, a persistent output gap is likely to remain, keeping a lid on …
14th April 2021
The account of March’s ECB meeting showed that the decision to increase asset purchases was agreed by all members, but that some were reluctant to do much more. In practice, purchases haven’t risen very far since then. Given that the Bank could have …
8th April 2021
In recent years, and particularly since the start of the pandemic, the pressure on central banks to address climate change has increased. This Update considers the potential implications for financial markets of some of the changes they have made until …
Turkey’s large external vulnerabilities mean that aggressive rate cuts by the central bank (CBRT) would run the risk of sharp and destabilising falls in the lira. A probable next step by policymakers would be a turn towards capital controls. But we doubt …
The MPC voted to keep the repo and reverse repo rates on hold today amid the surge in COVID-19 cases, and committed to keeping policy “accommodative to support and nurture the recovery”. Given this, we continue to think that markets are too hawkish in …
7th April 2021
The Reserve Bank of Australia stuck to its dovish stance despite the strength in recent data so we reiterate our view that it will expand its bond purchase program by another $100bn in June. The Bank acknowledged the recent improvement in the global …
6th April 2021
Past experience suggests that, with inflation near a peak and the economy slowing (alongside pressure from President Erdogan for lower interest rates), Turkey’s central bank will push ahead and ease monetary conditions in the coming months . Last week we …
31st March 2021
The Fed’s asset purchases are fuelling a continued surge in the narrow money aggregates, but growth in both our M3 measure of broad money and bank lending remain on a downward trend. (See Chart 1.) The Fed’s balance sheet has continued to expand in step …
30th March 2021
Unlike in some emerging markets, central banks across Emerging Asia are in no rush to tighten monetary policy. External factors won’t compel policymakers to tighten, and with inflationary pressures very weak, interest rates are likely to be kept low to …
The raft of EM central bank decisions over the last couple of weeks suggests that the door has largely closed on further rate cuts and that the balance will shift (slightly) towards hikes over the coming months. But this has more to do with domestic …
26th March 2021
The unanimous decision by Banxico’s Board to keep its policy rate at 4.00% is a clear signal that its easing cycle is done and dusted. While this indicates a cautious shift at the central bank, we think that investors have gone too far in expecting that a …
Policymakers in South Africa kept their benchmark rate unchanged at 3.50% today, breaking a recent wave of EM central bank decisions to tighten policy. We suspect that the country’s weak economic recovery and subdued inflation means that policy will stay …
25th March 2021
The central bank in the Philippines (BSP) left its main policy rate on hold at 2.00% today, and while a temporary rise in inflation means interest rates are set to remain on hold for the next few months, the dire economic outlook means the Bank is still …
The Bank of Thailand (BoT) left interest rates on hold at 0.5% today and made clear in its accompanying statement that rates will stay low for the foreseeable future. We think the that the policy rate will remain unchanged until at least the end of next …
24th March 2021
A rise in headline consumer price inflation over the coming months will do little to temper growing market expectations of imminent rate hikes. But it will largely be driven by fuel price inflation, which the RBI should look through. Further ahead, a …
The Bank of Canada seems to have signalled that it will reduce the pace of its government bond purchases at its next meeting in April. We now expect it to bring its net purchases to zero by the end of the year. In a speech today, Deputy Governor Toni …
23rd March 2021
Hungary’s central bank (MNB) left its key interest rates on hold today but the tone of the communications could not have been much more hawkish without raising interest rates. The MNB is defending its view that inflation will settle back to the 3% target …
Policymakers in Nigeria opted to keep their benchmark rate unchanged at 11.50% at today’s MPC meeting in the face of rising inflation and a weak recovery. We don’t think that a hawkish minority will turn into a majority in the coming months and, if …
Commercial banks left the Loan Prime Rate (LPR) unchanged today. We have been forecasting the PBOC to hike rates this year but the likelihood of that is diminishing – the PBOC appears to favour quantitative controls on lending instead. Either way, credit …
22nd March 2021
The shock decision by Turkey’s President Erdogan to sack central bank governor Naci Agbal late on Friday is likely to trigger large falls in the lira when markets open on Monday. It looks like the central bank’s (CBRT’s) efforts to fight the country’s …
20th March 2021
South Africa’s Reserve Bank (SARB) is unlikely to be in a rush to follow other EM central banks in tightening monetary policy. We think the policy rate will be on hold this year and probably in 2022 too. This week has seen central banks in Brazil, Russia …
19th March 2021
The Bank of Japan’s policy review today contained various nudges to policy levers but ultimately marked neither a tightening nor an easing of policy. Governor Kuroda was keen to emphasise in the press conference that widening the target band for 10-year …
We expect inflation to hit 3.5% in April and then to sit at the upper end of the Bank of Canada’s 1% to 3% target range for most of the rest of the year. Given the likelihood that inflation will drop back to less than 2% in 2022, however, we do not expect …
18th March 2021
The Monetary Policy Committee (MPC) did not follow in the ECB’s footsteps by stepping up the pace of its QE purchases. Instead, it echoed the message of the Fed by emphasising that rate hikes are still a long way away. This suggests that rates won’t rise …
Turkey’s central bank didn’t disappoint investors, delivering a larger-than-expected 200bp interest rate hike (to 19.00%) today, and we think that it will keep monetary conditions tighter than most expect over the next couple of years. That will provide a …
Taiwan’s central bank appears in little hurry to raise interest rates despite the strong performance of the economy, and today’s decision to leave the policy rate unchanged at 1.125% came as no surprise. With growth set to ease and inflation low, we …
Recent volatility in financial markets meant Bank Indonesia (BI) was never likely to cut interest rates for a second consecutive month at its meeting today, and further rate cuts look off the agenda for the time being. However, fears of a repeat of the …
Housing finance commitments have surged in recent months pointing to a rise in credit growth before long. But we don’t think lending standards have been eroded so this shouldn’t stop the RBA from announcing an extension to its QE again in June. Household …
17th March 2021
Turkey’s central bank (CBRT) looks set to hike interest rates further this week, and the experience from other EMs suggests that it will need to keep real interest rates elevated for several years to bring inflation down on a sustained basis. Lowering …
15th March 2021
Recent currency falls and rises in inflation have all but guaranteed interest rate hikes in Turkey and Brazil next week, and Russia’s central bank is likely to lay the groundwork for tightening too. More broadly however, low inflation and still-large …
11th March 2021
A series of strong inflation readings in Russia have put the central bank’s ability to meet its inflation target over the next year under threat and brought forward the prospect of monetary tightening. We think the central bank will use its meeting on 19 …
10th March 2021
Today’s dovish speech by RBA Governor Lowe supports our view that the RBA is set to keep monetary policy accommodative for a long time to come. But concerns about the functioning of the bond market may force the RBA to stop QE by the end of the year. …
The annulment of left-wing former President Lula’s criminal convictions has significantly increased the likelihood of a looser fiscal stance, which could put Brazil’s public debt back onto an unsustainable path. The central bank is more likely to hike …
9th March 2021
The reports delivered at today’s opening of the National People’s Congress (NPC) confirm that with the COVID-19 downturn now in the rear-view mirror the focus of China’s leadership has shifted away from shoring up near-term growth towards putting the …
5th March 2021
Bank Negara Malaysia (BNM) left its main policy rate on hold at 1.75% today, and we have taken out the cut we had pencilled in for this year. However, with the economic recovery likely to be slow, policy is set to remain loose for a long time to come . 19 …
4th March 2021
The Central Bank of Sri Lanka (CBSL) left policy on hold today amid continued volatility in global financial markets. Given the poor outlook for the economy, the CBSL will want to resume its easing cycle soon, but that will only happen if pressure on the …
The Polish central bank’s latest forecasts, published this afternoon, tell a story in which the economic recovery will strengthen over the coming years and inflationary pressures will pick up strongly. But we think that policymakers will tolerate higher …
3rd March 2021
The 14 th Five-Year Plan should provide a revealing view of the key challenges that China’s leadership believes it faces. High among them is a more hostile global environment. In the economic sphere, this will be reflected in calls to raise …
The Reserve Bank of Australia today doubled down on its commitment to keep monetary policy settings loose and we reiterate our view that it will expand its bond purchase program by another $100bn in June. The Bank kept its target for the cash rate and the …
2nd March 2021
We doubt that the Reserve Bank of New Zealand’s new obligation to consider house prices will drastically change the outlook for monetary policy. But given that house price growth remains very strong, there is a risk that the Bank tightens policy earlier …
26th February 2021
The Bank of Korea (BoK) left its main policy rate on hold at 0.50% today in a unanimous decision, and while further rate cuts are now very unlikely, we expect more intervention in the government bond market to curb rising long-term yields. The decision to …
25th February 2021
We think market participants are getting ahead of themselves by pricing in an interest rate hike from the Bank of Canada in 2022, particularly as Governor Tiff Macklem again signalled yesterday that the Bank will place greater emphasis on employment …
24th February 2021
The Reserve Bank of New Zealand (RBNZ) sounded dovish when it left policy settings unchanged today, but we still expect the Bank to begin increasing rates next year. As expected, the RBNZ did not adjust the OCR or its asset purchase program at today’s …
The minutes of the Reserve Bank’s February policy meeting – in which interest rates were left unchanged – show that the MPC remains cautious on the inflation outlook but that it is also committed to keeping policy accommodative to ensure that the economic …
23rd February 2021
The Bank of Japan is likely to widen the tolerance band around its 10-year yield target next month. The last time this happened, many saw it – wrongly in our view – as a form of policy tightening. It will be driven more by a desire to steepen the yield …
Commercial banks left the Loan Prime Rate (LPR) unchanged on Saturday. But monetary conditions have tightened in practice since the start of the year. We expect the PBOC to formalise the shift with policy rate increases in the next few months. The …
22nd February 2021
The account of the January ECB monetary policy meeting confirms that there was unanimous support for the policy agreed at the December meeting, when the PEPP envelope was increased to €1.85trn and more TLTROs were announced. We expect the ECB to stick to …
18th February 2021
The Long Run is a new subscription service offering insight into issues that will shape the global economy and financial markets over the next 30 years. This Update outlines our ten key calls for the coming decades. 1. Pandemic won’t permanently weaken …
17th February 2021
We forecast the Norges Bank to be the first advanced central bank to begin raising interest rates, in the second half of this year. This will further bolster the krone, which we expect to be the best-performing G10 currency in 2021, and will drive the …
The continued surge in growth of narrow measures of the money supply underline that the economy is awash with liquidity, but that will not trigger a surge in price inflation when growth in the broader money supply and bank lending are trending lower. (See …
16th February 2021
