Filtered by Topic: Monetary Policy Use setting Monetary Policy
We think that Swiss policymakers would be prepared to match any small interest rate cut by the ECB, albeit reluctantly. However, if policymakers in the euro-zone opt to ease policy in other ways, as we think is more likely, this may help to reduce …
22nd October 2020
The Central Bank of Sri Lanka (CBSL) left both its deposit and lending rate on hold at 4.50% and 5.50% respectively at its meeting today but, given the poor outlook for the economy, we think the easing cycle has further to run. The decision was correctly …
The RBA’s assets will rise further over the coming months as banks draw down funding under the TFF. But so will the assets of other central banks. If the Bank wanted to catch up with the advanced economies’ most expansionary central banks, it would need …
21st October 2020
While we wouldn’t rule out negative interest rates being used a bit further down the line, over the next 6-12 months we think 10-year gilt yields will be kept close to 0.15% by the Bank of England expanding quantitative easing (QE) by a further £250bn by …
20th October 2020
Commercial banks left the Loan Prime Rate (LPR) on hold today. With the PBOC appearing reluctant to keep monetary policy loose for longer than needed amid a broadening economic recovery, we think the next move in the LPR will be an increase early next …
The Bank of Korea (BoK) left its main policy rate on hold at 0.50% today and, with the economic recovery holding up relatively well, further rate cuts seem unlikely. Instead the focus of the BoK is likely to shift to cushioning the impact of loose fiscal …
14th October 2020
Bank Indonesia (BI) left interest rates on hold at 4.0% today, but it is too soon to call an end to the easing cycle. With the economy in need of further support, we think the central bank will resume its easing before the end of the year. BI left …
13th October 2020
The post-Global Financial Crisis (GFC) experience suggests that the South African Reserve Bank (SARB) is unlikely to raise the repo rate within our near-term forecast horizon (to end-2022). Investors are anticipating that the SARB will hike the policy …
12th October 2020
It came as no surprise that the new MPC voted unanimously to keep the repo and reverse repo rates on hold today. But the relatively dovish tone of the statement, along with the dire growth outlook, mean we remain comfortable with our non-consensus view …
9th October 2020
The account of the last ECB Governing Council meeting suggests that policymakers were in no hurry to increase the size of the PEPP. There has been more disappointing news on the economy since then, but on balance we still think the Bank will leave the …
8th October 2020
The further slowdowns in monthly GDP growth in Norway and Sweden in August support our view that it will take a long time for output to recover to pre-crisis trend levels anywhere in Europe. The 0.6% m/m increase in mainland Norwegian GDP in August was …
After dragging its heels for several weeks, the government has finally appointed three new members to the RBI’s monetary policy committee (MPC). Not a great deal is known about their views on monetary policy but, given that the MPC tends to follow the …
6th October 2020
The RBA kept policy settings unchanged today but signaled that more stimulus is forthcoming. We now expect the Bank to cut the cash rate target, the 3-year yield target and the interest rate on the term funding facility to 0.1% next month. We suspect the …
Consumers appear to be much more miserable than the economic fundamentals would imply. But the prospect of a second wave of unemployment and the risk of future lockdowns are not captured well by the models. As such, consumer confidence is likely to stay …
5th October 2020
The central bank in the Philippines (BSP) left its main policy rate on hold at 2.25% today for a second consecutive meeting, but with the economic recovery proving to be one of the slowest in the region, we doubt the Bank has finished easing yet. The …
1st October 2020
The Central Bank of Egypt (CBE) cut interest rates by 50bps at Thursday’s MPC meeting after a six month pause to the loosening cycle. Policymakers are likely to remain cautious about future easing, but we think rates will be reduced gradually over the …
25th September 2020
The experience from second virus waves in Australia, New Zealand and Japan is that consumer spending falls even if governments don’t impose major restrictions. However, there are three key reasons why second waves may be less damaging to economic activity …
The Turkish central bank’s (CBRT’s) decision to hike its policy rates by 200bp today is a response to the recent lira weakness, and should help to restore the Bank’s battered credibility. The move gives the CBRT more room to tighten monetary conditions …
24th September 2020
Some policymakers at the ECB have hinted recently that further policy loosening could be on the way. There is little to be gained from announcing an expansion to QE at this stage, but we wouldn’t be surprised to see the Bank make its TLTROs more generous, …
The fact that policymakers at the SNB and the Norges Bank left policy settings unchanged this morning came as no surprise. Both banks are likely to leave policy unchanged throughout our forecast horizon and, in the case of the SNB, probably until at least …
Asian central banks have taken their foot off the gas in recent months – no central bank in the region has cut rates since July. But we think this represents a pause rather than an end to the easing cycle. With GDP still well below pre-crisis levels in …
The Turkish lira has continued to weaken in recent weeks and, with the response by policymakers likely to fail to placate investors, we now expect the currency to fall to as low as 9.25/$ by the end of next year. What’s more, the risks lie firmly towards …
23rd September 2020
The Bank of Thailand’s (BoT) decision to leave interest rates unchanged at 0.5% came as no surprise, and rates look set to remain unchanged for some time to come. The central bank hinted at further measures to support demand, but the onus will be on the …
The Reserve Bank of New Zealand (RBNZ) continued to set the stage for negative rates today and we think the OCR will be cut into negative territory early next year. As expected, the Bank did not adjust the overnight cash rate (OCR) or its asset purchase …
Today’s decision by the Central Bank of Nigeria (CBN) to lower the benchmark rate, from 12.50% to 11.50%, shows that policymakers have put aside their concerns about inflation and are increasingly spooked by the weakness of the economy. We think that the …
22nd September 2020
The decision by Hungary’s central bank to leave its base rate on hold at 0.60% today highlights that the central bank is in a bind due to high inflation and concerns about the forint. Further interest rate cuts are likely to remain off the table and the …
The Riksbank’s decision to leave the repo rate on hold at zero this morning was never in doubt, but it left the option of a rate cut firmly on the table, linking it explicitly to moves in inflation expectations. We think it more likely than not that the …
Pakistan’s central bank (SBP) left interest rate unchanged today at 7.0% and appeared to signal the end of its recent easing cycle. With the economy recovering well from the coronavirus crisis and inflation concerns increasing, we expect rates to remain …
21st September 2020
Commercial banks left the Loan Prime Rate (LPR) on hold today. With the economy now largely back to its pre-virus path and the PBOC appearing reluctant to keep monetary policy loose for longer than needed, we think the next move in the LPR will be an …
The decision by Russia’s central bank to leave its policy rate on hold at 4.25% today is likely to mark a pause rather than an end to its easing cycle. The central bank will maintain its cautious approach to policy over the coming months as inflation …
18th September 2020
Today’s decision by South African Reserve Bank’s to keep its benchmark rate unchanged probably means that further easing is unlikely to materialise. Even so, monetary conditions are likely to remain very loose in the coming years and we expect rates to …
17th September 2020
With the economy holding up relatively well, the decision by Taiwan’s central bank (CBC) to leave interest rates on hold came as no surprise. Further rate cuts are unlikely, and we expect interest rates to remain on hold for the foreseeable future. The …
The dovish tone of the Brazilian central bank’s statement from yesterday’s meeting (at which the Selic rate was left at 2.00%) supports our view that the policy rate will remain at its current historic low into 2022. In contrast, most analysts and …
The Bank of Japan’s decision to keep policy settings unchanged today didn’t come as a surprise and we don’t expect incoming PM Suga to push the Bank into policy rate cuts. The Bank kept its policy rate at -0.1% and its target for 10-year government bond …
The FOMC’s updated economic and rate projections show that officials expect to leave the fed funds rate at the current near-zero rate until at least 2023 and probably well beyond that. With the five-year Treasury yield already at less than 0.2%, however, …
16th September 2020
Inflation has been close to the midpoint of the RBA’s 2-3% inflation target since its launch in the 1990s, but this has come at the expense of soaring house prices and household debt. Australia’s experience underlines that central banks need better tools …
15th September 2020
While no policy change was expected today, President Lagarde used the press conference to convey a slightly less gloomy message about the economy. She also dampened expectations for an early increase in the already-substantial PEPP envelope or for any …
10th September 2020
Chile’s economy is recovering more quickly than we had previously expected and, as a result, we are revising up our 2020 GDP growth forecast to -5.5% (previously -7.0%). The stronger rebound has eased pressure on the central bank to loosen monetary policy …
While the euro’s recent appreciation has generated a lot of attention, it is in fact close to its historical average by most measures. So while ECB policymakers may note at today’s press conference that the exchange rate influences their economic …
Bank Negara Malaysia (BNM) left its main policy rate on hold at 1.75% today, but with the economy likely to remain weak for some time to come, we doubt this marks the end of the Bank’s easing cycle. Today’s meeting was always likely to be a close call. …
The experience of the aftermath of the Global Financial Crisis (GFC) chimes with our EM rates view on two counts. The first is that easing cycles in many EMs are now at an end (Brazil) or will draw to a close over the coming months (Mexico, South Africa …
9th September 2020
The use of traditional monetary policy tools alongside financial repression will keep government borrowing costs in India in check over the coming years. That should help to ensure that only modest fiscal tightening will be needed to put the public debt …
While the Bank of England might not follow the Fed and change its inflation remit, we doubt this will stop it from significantly loosening policy and from keeping it loose for a very long time. The Fed announced last week that it will now seek “to achieve …
3rd September 2020
Proposed changes to Bank Indonesia’s mandate, which include a shift to focus more on growth and unemployment, could lead to major changes in how the central bank operates. However, given the country’s high level of foreign currency debt, policymakers …
2nd September 2020
Ongoing virus-related supply disruptions as well as one-off factors such as phone tariff hikes have kept inflation higher than we had anticipated over recent months. But with food inflation set to drop sharply and demand set to remain depressed, we are …
The Fed’s switch to an average inflation targeting regime and revised interpretation of its full employment goal are a response to challenges which are common to many economies, including the euro-zone. We think the ECB will move in a similar direction …
1st September 2020
The 11% q/q drop in GDP in Turkey in Q2 was smaller than we had expected and we now forecast the economy to slump by 3% this year (previously 5.8%). But the recovery over the coming quarters will be held back by weakness in the tourism sector as well as …
The RBA today expanded its Term Funding Facility which should contribute to continued strong growth in the money supply. And while it didn’t indicate that additional stimulus is forthcoming, we still expect it to expand its bond purchases before long . As …
Chair Jerome Powell announced this morning that the Fed will be adopting what he described as a “flexible form of average inflation targeting”, which we expect will trigger additional policy stimulus in the form of stronger forward guidance and possibly …
27th August 2020
